KUALA LUMPUR (Oct 25): UMW Oil & Gas Corp Bhd (UMW O&G) shares saw active trading after its rights issue shares began trading today.

At 3pm, the share price was up 0.5 sen or 1.8% at 28 sen, with some 37.63 million shares traded. The stock was among the top 10 actively traded on Bursa Malaysia.

Newly listed UMW O&G's Warrant A, meanwhile, surged by 11.5 sen or 2,300% to 12 sen. After opening at 10 sen, the shares traded between 9.5 sen and 13.5 sen.

On May 4, UMW O&G had announced a 14-for-5 rights issue on May 4 to raise up to RM1.8 billion to repay bank borrowings and for working capital purposes.

The group issued close to 4.84 billion new shares and slightly more than 1.22 billion Islamic redeemable convertible preference shares.

TA Securities, in a note today, said it is still largely positive on the funding exercise as UMW O&G's net gearing is reduced to 0.4x from 1.4x, and the exercise alleviates the group's funding issues, provides cash for its working capital management and reduces finance costs significantly (about RM50 million according to TA Securities' estimates).

The research house is of the opinion that UMW O&G is poised for a turnaround as utilisation rates for its rigs have improved drastically and daily charter rates remain stable, while stable crude oil price may motivate oil and gas majors to resume drilling activities.

"Lastly, UMW O&G is positioned as the sole local jack-up rig service provider and we opine that all local drilling contracts will be awarded to UMW O&G," said TA Securities analyst Abel Goon.