Handal will be affected by Petronas capex cut

KUALA LUMPUR: Handal Resources Bhd expects Petroliam Nasional Bhd’s (Petronas) capital expenditure (capex) cut and consolidation within the oil and gas industry to affect its net profit and order book.
“Yes, it would (affect our net profit and order book). As I said, we are more or less mitigated by the effect because of our long term service contract that we have now. But of course, procurement of significant capex will have to be slowed down,” group managing director and CEO Mallek Rizal Mohsin told reporters at the signing ceremony of a memorandum of understanding (MoU) with Nabors Drilling International Ltd yesterday.
Handal has an order book of RM290 million which will last the company until 2018. Some 80% of the order book is from local contracts while the remaining is from overseas contracts.
Mallek said locally, most companies including Handal are looking at housekeeping factors such as cost and operational efficiencies, in order to be more efficient at executing jobs when the oil price and overall industry improves.
“Local industries should see more consolidation and complement each other’s strengths. There are too many companies that are doing duplication of services. That does not lead to optimal working efficiency,” he said.
Mallek said he hopes the oil price will recover to a logical and reasonable level of US$75 to US$80 (RM322 to RM343) per barrel by the end of 2016.
On merger and acquisition (M&A) opportunities, he said Handal is talking to a few parties in the upstream sector.
The company is still finalising a fund raising exercise plan it has already announced.
“We want to build up a war chest so that when times are down we have something to rely on,” Mallek said.
Yesterday, Handal’s subsidiary Handrill Sdn Bhd signed an MoU with Nabors Drilling. Incorporated in Bermuda, Nabors Drilling is a subsidiary of Nabors Industries Ltd.
Under the MoU, Handrill and Nabors Drilling will work together to secure new businesses comprising workover projects, fabrication of offshore pedestal cranes and related overhaul and maintenance services as well as offshore crane rentals.
It will also collaborate in the development and marketing of conventional workover rigs, which are primarily used for workover operations on production oil wells.
“The purpose of this collaboration is to position both companies, in light of current market sentiment, where hopefully when the oil price or industry recovers, we’ll be in the position to look for bigger market. As you know, Nabors Drilling has been in Malaysia for quite some time now with ExxonMobil being their major client and with their expertise of technical support, we’ll be able to get ourselves together to look for markets in this region and Malaysia specifically,” said Mallek.
Nabors Industries senior vice-president Subodh Saxena said the technical collaboration is intended to grow the business which comes from services that are complementary to each other.