This article first appeared in The Edge Financial Daily on January 24, 2018
KUALA LUMPUR: The challenge faced by certain oil and gas (O&G) players in securing financing is part of an overall market adjustment process, said Malaysia Petroleum Resources Corp Bhd (MPRC) president Datuk Shahrol Halmi.
Fewer jobs have caused bankers to shy away from the industry but this is being addressed through the 2018-2020 Petronas Activity Outlook, Shahrol told the press at the launch of MPRC100, a report on Malaysian O&G services and equipment (OGSE) companies for financial year 2016 (FY16), yesterday.
“Good companies that have contracts and the right balance sheet are still getting loans from banks. We have not heard of cases where companies or projects that have realistic prospects that are not getting funding.
“In terms of access to finance, we are working very closely with trade associations, players and relevant authorities to figure out if there are such cases, [if so,] why it happened and how to get it resolved,” he added.
Late last year, The Edge Malaysia weekly in its cover story for the Dec 11-17 week highlighted that O&G companies were facing difficulties in getting financing from Malaysian banks to execute new projects secured, citing industry players in such situations.
Meanwhile, the MPRC100 report, released annually, lists the top 100 OGSE companies in Malaysia by revenue, with financial performance analysis of all 4,144 Petroliam Nasional Bhd-registered OGSE companies.
Sapura Energy Bhd regained the top spot in the latest MPRC100 ranking, followed by FY15 leader MISC Bhd, while Dialog Group Bhd held onto the third place. The FY16 list also featured new names like equipment and machinery manufacturer Onesubsea Malaysia Systems Sdn Bhd, as well as project management and engineering firm Cekap Technical Services Sdn Bhd.
Overall, the Malaysian OGSE sector saw total profit before tax (PBT) slump 97.25% to RM146 million in FY16 from RM5.3 billion in FY15, mainly due to large asset impairments incurred in the year by asset-heavy players.
Revenue, which analysts use as an indicator to assess the overall sector recovery, declined 10.1% to RM66.6 billion from RM74.1 billion.
This brought the average PBT margin in FY16 to 0.2%, from 7.1% in FY15, said MPRC senior vice-president Syed Azlan Syed Ibrahim.
“Interestingly, 31% of MPRC100 companies, 22% of non-MPRC mid-tier companies and 12% small and medium enterprises (SMEs) recorded double-digit PBT margins despite the tough period,” pointed Syed Azlan.
To reduce costs while protecting margins, Syed Azlan again urged companies to look into using new technologies and integrated solutions to reduce operating costs.
“Some of the companies have never been into technology,” he conceded. “They will not only need to sort out their financing, but also need to find the right partners, and to secure facilities to work on the incoming technology.
“We are mindful these barriers are there when companies shift, but we do have platforms to facilitate the transformation journey, such as the O&G Innovation Technology Collaboration,” he added, but pointed to a lack of awareness among companies — especially the SMEs — about government facilities and assistance for those keen to innovate.
Additionally, Syed Azlan said OGSE players must continue the measures taken to weather the last downturn. “Our OGSE companies should not keep their foot off the pedal just because things are looking a bit brighter … continue to focus on these areas (technology and integrated solutions),” said Syed Azlan.