KUALA LUMPUR: UMW Holdings Bhd is buying more oil rigs as it seeks to grow its oil & gas (O&G) business in Malaysia. In a filing with Bursa Malaysia yesterday, UMW Group said it is buying a drilling company and an oil rig that is under construction for US$214 million (RM683 million). The group also has an option to buy an additional jack-up rig for US$212 million.

“The proposed acquisition is in line with UMW Group’s plan to raise revenue and profit contributions from the O&G division,” it said. In the filing, UMW Group said its wholly-owned subsidiary, UMW Drilling 4 (L) Ltd, had entered into a share purchase agreement to buy SD Standard Drilling plc’s entire stake in Offshore Driller B324 Ltd for US$70 million. With the purchase, UMW Drilling will own Offshore Driller’s rights to buy a mobile offshore drilling rig for US$144 million.

“Upon completion of the proposed acquisition, UMW Drilling shall assume the rights to and ownership of Offshore Driller and the rig,” said UMW Group. Currently, Offshore Driller has not undertaken any business or commitment. UMW Group said Keppel Fels Ltd has been contracted to build the mobile offshore drilling rig and is expecting delivery by February 2013.

In addition to Offshore Driller and the mobile offshore drilling rig, UMW Drilling has the option to purchase the entire stake of a special purpose vehicle (SPV) for US$1. “The SPV holds the rights and interests for the construction of a jack-up rig at a consideration estimated at US$212 million,” it said. UMW Group intends to fund the acquisition via a combination of internal funds and borrowings. The group said the proposed acquisition will facilitate its O&G business expansion in Malaysia.

The acquisition is the group’s latest as it seeks to grow its O&G assets, which consist of drilling rigs, workover rigs and semi-submersible rigs. UMW Group’s O&G business has been posting losses in the last two financial years due to decreasing drilling activities and lower demand for O&G pipes. Nevertheless, the group is expecting the segment to do better this year.

For 1Q ended March 31, UMW Oil & Gas contributed RM430.7 million or 11.6% of total group revenue. In the quarter, profit before tax increased 56-fold to RM29.88 million. “The revenue surge of 122% [from a year earlier] was largely attributed to contributions by Naga 3, a premium jack-up rig and Hakuryu 5, a semi-submersible rig,” it said.

Naga 3 began generating income in March 2011 after securing a US$41 million Petronas contract. The contract was recently extended for another two years. UMW Group rose 29% to an all-time high of RM9.02 on Monday. It closed two sen lower at RM9 yesterday with 3.8 million shares done.