UMW Oil & Gas (UMWOG MK; BUY; TP: MYR5.15): From regional to global

UMW Oil & Gas (UMWOG MK; BUY; TP: MYR5.15): From regional to global

• What's New? We visited UMWOG’s Naga 6 jack-up rig in Vung Tau, Vietnam and met up with management for a company update.
• Whats Our View? The fact that UMWOG’s most recent newbuild; Naga 6 jack-up (JU) rig: (i) met the delivery schedule and (ii) secured a charter contract from national oil companies (NOCs), vindicates its move to purchase this China-built rig. Naga 6, built by China Merchants Heavy Industry (Shenzen) Co. Ltd., did not face any delay setback or cost overruns. It shares similar specifications with Naga 2 and Naga 3 rigs (i.e. CJ46-X100-D), which ensures a more equitable cost management for its fleet of rigs. 

Similarly, Naga 7, built also by China Merchant, is on track to meeting its delivery deadline (i.e. Dec 2014) and has secured a contract (commencing in Jan 2014) prior to delivery. Meanwhile, Naga 8, built at Keppel’s yard, is 57% complete and should be ready for delivery in Sep 2015. Elsewhere, it has also successfully secured charter extensions for Naga 2 and Naga 3 to 2015 at similar rates. All in, its rigs (1 semi-sub, 6 JUs) order backlog stood at MYR1.48b as at Aug 2014.

We laud UMWOG’s strategy to penetrate new markets and develop new client base as it will aid its diversification quest without being heavily reliant on a few major customers. It is hoped that the relationship developed with existing customers would lead to further collaborations.