UMW Oil and Gas Naga 1 rig
KUALA LUMPUR: UMW Oil and Gas Corp Bhd has secured a charter for its Naga 8 jackup rig, says Maybank Investment Bank Research.
The research house said on Monday the daily charter rate for the jackup rig could be under US$100,000, comparable to the current market rate of US$80,000 to US$100,000.
The contract is from Oct 2015 until 2017, with a break of six to seven months in between.
“This is positive but not unexpected,” said the brokerage, adding that compromising daily charter rates for utilisation is of greater priority now for a jackup under financing. That will ensure cashflows to part cover interest payments and operating expenditure.
The jackup is now on location to carry out its multi-year drilling campaigns at SapuraKencana’s operated SK 408 field, according to Maybank IB Research.
Maybank Research has a “sell” call on UMW Oil and Gas with a target price of 80 sen as the operating outlook remained turbulent.
“75% of its rigs are off-hire. It would be a tough act to secure charter for six idle rigs in the fourth quarter as drilling programs enter the monsoon period.”
It expected overall jackup utilisation in Southeast Asia to remain weak till the third quarter next year.
“We expect a core net loss in the second half versus first half’s RM36mil core net profit with second quarter profit having weakened to just RM4mil. Forex gain from stronger USD will mask weak headline results with jackup contracts are denominated in USD.”
Maybank Research did not rule out UMW Oil and Gas impairing its rig assets come end-2015 as the asset value, daily charter rates and utilisation for jackup rigs had fallen considerably.
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