Malaysian OGSE Companies Should Remain Focused On Raising Competitiveness
KUALA LUMPUR, Jan 23, 2018 — In order to be relevant in an increasingly challenging oil and gas industry, Malaysian oil and gas services and equipment (OGSE) companies should not lose focus on raising their competitiveness.
Whilst oil prices have strengthened since the start of 2018, these are unlikely to revert to the heady days of USD100 per barrel as evident from the cautious response of global oil companies thus far, Malaysia Petroleum Resources Corporation chief executive officer Datuk Shahrol Halmi said. “To be more competitive, Malaysian OGSE companies should focus on providing economies of scale and integrated solutions, own technologies, employ quality talent, and possess export capabilities,” he said.
As part of MPRC’s industry development efforts, the agency will continue to work with all relevant stakeholders including PETRONAS, fellow Government agencies and OGSE companies to facilitate innovation and technology development, access to finance, human capital development, market access and internationalisation, and information transparency, he said at a media briefing in Kuala Lumpur to share the latest MPRC100 rankings and industry analysis for the financial year ended 2016 (FY2016).
In the latest MPRC100 ranking 1 , Sapura Energy Bhd regained the top spot of the top 100 oil and gas services and equipment (OGSE) companies in Malaysia. MISC Bhd eased to the second spot while Dialog Bhd held onto to the third place.
The list also saw several companies making their debut in FY2016, including Onesubsea Malaysia Systems Sdn Bhd, Cekap Technical Services Sdn Bhd and E&P O&M Services Sdn Bhd. According to Shahrol, the MPRC100 initiative is part of the agency’s effort to track the Malaysian OGSE sector’s performance and increase transparency for potential investors, financial institutions and stakeholders.
The list also provides an opportunity for OGSE industry players to gain clarity on their positions against peers in the industry, he added.
“The FY2016 findings provide useful insights on how Malaysian OGSE companies performed as the global oil and gas industry, especially the upstream portion, adjusted to a very steep correction in oil prices since late 2014,” he said.
MPRC100 data showed that overall revenue for the OGSE sector fell 10.1% to RM66.6 billion while total OGSE profit before tax (PBT) declined significantly to RM146 million in FY2016 compared with RM5.3 billion in 2015.
This decline was largely due to asset impairment charges by capital intensive players, MPRC’s senior vice president for Industry Development Syed Azlan Syed Ibrahim pointed out.
With companies such as Sapura Energy, Bumi Armada and UMW Oil & Gas impairing their Floaters, Drilling Rigs, Marine Vessels and Exploration & Production (E&P) assets, total impairment charges recorded by MPRC100 companies during the year amounted to approximately RM5 billion. Excluding impairment, total PBT and average PBT margin for MPRC100 in 2016 would have been approximately RM4.9 billion and 9% respectively.
“Given the significant drop in the OGSE industry’s PBT for FY2016, we drilled in deeper by breaking down each category’s PBT results for the year and found that the that overall a majority of Malaysian OGSE companies recorded positive PBT margins in 2016. Interestingly, 31% of MPRC100 companies, 22% of Non-MPRC100 Mid-Tier companies and 12% of SMEs recorded double-digit PBT margins despite the tough period,” he said.
Highlighting additional analysis from MPRC100 FY2016, Syed Azlan pointed out that Malaysian players also demonstrated greater resilience compared to international counterparts in Bloomberg’s Top-100 OGSE companies ranked by revenue, he said.
“Specifically, MPRC100 companies’ median PBT margin was significantly higher at 3.4% compared to Bloomberg’s Top 100 median PBT of -6.8% (Chart 3). This was because domestic jobs continued to be available and Malaysian players are relatively diversified across the breadth of the supply chain.”
“Moving into 2017, the performance of listed players between Q1 to Q3 2017 as well as new project announcements point to prospects of a gradual recovery. We also saw OGSE companies diversifying towards downstream opportunities due to PETRONAS’ focus on this segment,” Syed Azlan said.