Reservoir Link reports RM2.72m net profit for 1Q

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KUALA LUMPUR (July 13): Oil and gas well services provider Reservoir Link Energy Bhd has recorded RM2.72 million net profit for its first quarter ended March 31, 2020 (1QFY20), in the group’s first quarterly results announcement on Bursa Malaysia.

In a filing today, the ACE Market-bound group also reported revenue of RM22.86 million for the period under review, of which 90.6% was derived from well perforation services, wash and cement services and well leak repair services segments.

Earnings per share stood at 1.19 sen.

On its prospects, Reservoir Link said economic uncertainties arising from the Covid-19 pandemic and low oil prices have forced many global oil majors to cut back on their capital expenditure and operating expenses.

In Malaysia, the group said the movement control order caused operational issues due to the 14-day quarantine requirement for works at certain locations in addition to the reduced flight frequency between East and West Malaysia due to travel restriction.

Meanwhile, Petronas announced in May 2020 that it planned to reduce its capital expenditure by 21% compared to what it had previously budgeted for 2020.

Against these backdrops, Reservoir Link said lower spending could reduce demand for its services and consequently may have an adverse effect on its financial performance.

Meanwhile, Mauritania closed its borders to travel into and out of the country, effective from March 17, 2020, to contain the spread of Covid-19. This rendered crew changes impossible to be carried out.

“Consequently, our client, PC Mauritania 1 Pty Ltd (PCM1PL), declared force majeure on our contract on March 29, 2020 followed by the suspension of the contract from April 28, 2020 until further notice. The contract was approximately 20% completed at the time of suspension.

“This suspension will adversely affect our business activities and financial performance in Mauritania in the current financial year as we do not have any indication as to when travel restrictions will be lifted by the authority,” it added.

However, it noted that the suspension was offset by PCM1PL paying upfront US$2.27 million — which is 40% of the remaining value of one of the subsisting work order excluding manpower — in May, as well as US$10,000 per month as rental payment for a warehouse and explosive bunker the group is renting in Mauratania.

The group had also received a mobilisation fee of RM19.86 million to be recognised as revenue progressively against the work done, of which RM3.51 million has been recognised, while the remainder will be recognised once work resumes.

Up until May, it has also secured four new call out contracts, which include two call out contracts for well perforation from Vestigo Petroleum Sdn Bhd and Repsol Oil and Gas Malaysia Ltd, one call out contract for wireline services from Vestigo and one for well leak repair with Japan Vietnam Petroleum Company Ltd.

It had also secured extensions for three call-out contracts.

The well leak repair contracts from ExxonMobil Exploration & Production Malaysia Inc and Repsol were extended for two years and one year to expire in April 2022 and May 2021 respectively, while its well perforation contract with Roc Oil (Sarawak) Sdn Bhd was extended for another year until August 2021.

“Although we were not materially affected in this reporting quarter, we are cautious of the challenges ahead posed by the Covid-19 pandemic. The group is committed to take proactive and appropriate measures to remain resilient during this unprecedented time and at the same time implementing our business strategies cautiously to sustain our growth.”

On June 25, 2020 the group issued its prospectus in relation to the public issue of 57.13 million new ordinary shares at an issue price of 41 sen per share in conjunction with its listing on the ACE Market which is scheduled to take place on July 15.