This article first appeared in The Edge Malaysia Weekly on December 11, 2023 - December 17, 2023

THERE is a lot going on at oil and gas support services player Perdana Petroleum Bhd. For starters, the company is slated to launch a new office in oil and gas town Miri, Sarawak, next month.

Perdana managing director Jamalludin Obeng (Jamal) admits to being busy with tenders, some with oil majors that could be awarded next year. The company is also contemplating a fleet expansion to accommodate potential contract wins.

While Jamal is tight-lipped, it is understood that some of the tenders could involve the large Integrated Logistics Control Tower or ILCT umbrella contracts, and the Jerun and Lang Lebah fields off Sarawak, among others. These tenders and expansion plans are likely to hinge on a better outlook for the oil and gas offshore support services sector.

Perdana’s latest financials released last month reflect that.

Its net profit for the third quarter ended Sept 30 doubled to RM22.76 million from RM11.41 million a year earlier, while revenue rose 49.7% to RM103.92 million. For the first nine months of FY2023, it made a net profit of RM23.15 million on RM215.19 million in sales, in contrast to a net loss of RM9.13 million on revenue of RM141.42 million in the previous corresponding period.

“The significance of our third quarter results is that we doubled our net profit from a year earlier. I don’t see why we can’t do better than last year’s net profit,” says Jamal.

Offshore support vessels or OSVs, which are Perdana’s main assets, generally do not undertake much work during the year end or monsoon season due to the rough seas, but this year has been different.

“Basically, as at the first week of December, we have nine [out of 15] vessels operating. Normally, in the monsoon season, they [ships] don’t operate but this year, the utilisation is not bad compared with the first quarter. So, we are looking at a good year,” he says.

This heightened activity will translate into a better bottom line for OSV players such as Perdana, buoyed further by spot charter rates rising 10% to 20% this year, a similar quantum of increase in 2022.

This heightened activity seems likely to last, says Jamal. The president of the Malaysia OSV Owners’ Association adds that over the past few weeks, there have been several engagements between OSV players and oil majors as well as other large oil and gas players, with all of them presenting a positive outlook for the oil and gas industry, and the OSV sector in particular.

Industry players are waiting for the release of Petroliam Nasional Bhd’s (Petronas) Activity Outlook, which is expected to present the national oil company’s three-year plan, the assets it will require and a ballpark figure of its capital expenditure (capex), which has been about the RM50 billion per annum mark for the past few years.

Jamal says, “To me, oil prices are very much a geopolitical game. But the fact remains that as long as there is tension in the Middle East, as long as there is tension in Ukraine, oil prices will remain strong. The EIA (US-based Energy Information Administration) is saying prices will hover in the high US$80s to US$90s [per barrel].”

Buoyed by the better outlook, Perdana seems ready to invest, undertaking an expansion of its existing fleet of 15 vessels.

“Next year, we are expecting some charter contracts which may be long term in nature. So, if it does happen, it will give us the opportunity to buy new vessels,” says Jamal.

“We want to stay true to our core business. This is what we are good at. There is no point for us to stretch and look at other revenue streams at this time.”

Perdana’s fleet consists of eight Anchor Handling Tug Supply (AHTS) vessels, five accommodation work barges and two accommodation workboats. It is worth noting that in 2022, Petronas agreed to a revision of the vessel age limit of AHTS vessels from 15 years to 20 years subject to certain conditions.

“All offshore oil and gas activities — exploration, drilling, development, production and decommissioning, every aspect of these — need OSVs. In our case, we have a lot of good assets. Accommodation barges, for instance, there are only 14 such vessels in Malaysia and we have five of them. Our AHTS vessels are of the bigger range,” he says.

“My focus is to ensure that we can command good rates. Now is the time, and I don’t see activities slowing down. It has been a situation of underinvestment for the past 10 years in the industry.

“During low oil prices, many projects were [put] on hold, there were no sanctions for greenfields, and even some maintenance was not undertaken. Then, there was Covid-19 for three years. So, I don’t think production will be reduced anytime soon, with oil prices at current levels.

“The outlook is good. I believe Petronas’ capex is still intact. I doubt there will be any major deviation, but what we need to see is Petronas’ Activity Outlook, which will be released at the end of this month.”

As at end-September, Perdana had cash and cash equivalents of RM49.19 million, while its long- and short-term borrowings stood at RM19.61 million and RM12.78 million respectively.

To recap, Brent crude had been trading at US$145 a barrel in mid-July 2008, but gradually tumbled to US$26 a barrel in February 2016. After a number of short-lived rallies, it plunged more than 65% to US$20 a barrel in April 2020. Brent crude has averaged about US$82 a barrel year to date and is now trading in the US$75 a barrel band.

Perdana’s share price is up 48% year to date, having closed at 18.5 sen last Thursday, which translates into a market capitalisation of RM410.75 million. The stock hit a 52-week high of 28.5 sen on Sept 19, just below the company’s net assets per share at end-September. 

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