Reservoir Link Energy confident of strong growth despite uncertain O&G market

by SHAZNI ONG/ pic credit:

RESERVOIR Link Energy Bhd expects strong growth moving forward and is confident of maintaining a 25% profit margin, despite lingering uncertainty in the oil and gas (O&G) market.

The upstream O&G services provider’s ED Thien Chiet-Chai said this comes after the global oil market and oil prices have stabilised over the last few weeks.

“Our services are in production and end-of-life wells, not exploration or development. Right now, the operators will slow down on their drilling of new wells, but all the existing oil wells need to be maintained. So, we are actively participating in contracts.

“We foresee Petroliam Nasional Bhd and other Pan Malaysia Petroleum Arrangement Contractors operators still needing to maintain their wells,” he told reporters after the group’s listing on the ACE Market of Bursa Malaysia in Kuala Lumpur yesterday.

The upstream O&G player was the first company to list on ||the local bourse since Malaysia’s Movement Control Order began on March 18.

It debuted on the ACE Market at 72 sen a minute after the opening bell yesterday, marking a 75.61% or 31 sen premium over its offer price of 41 sen.

The stock later closed its maiden trading day at 51.5 sen or a premium of 10.5 sen.

The exercise saw Reservoir Link Energy raise RM23.42 million, of which RM10 million will go towards purchasing well-testing equipment, RM5 million is for repaying bank borrowings, RM4.92 million has been earmarked for working capital and the remaining RM3.5 million will defray listing expenses.

The bulk of its business is in the maintenance of the wells and not drilling new wells, Thien noted, adding that a projected 25% profit margin is “realistic”, given the group has been in the production wells business since it began operations.

“The pandemic actually delayed our jobs, (but) none of our contracts have been cancelled. They are just postponed, pushed back by a month or two. The longest suspension is in Mauritania, where we should resume by early next year, once the borders open up,” he said.

“We continue to deliver the current contracts that we have. We won a work order two weeks ago. We still see a lot of tenders, market surveys coming in and we are participating in them.”

For now, the group should be able to at least maintain its net profit at current levels, based on its financial year ended Dec 31, 2019 (FY19) results. It was reported to have made a profit after tax of RM9.68 million in FY19, backed by revenue of RM80.03 million, with a profit after tax margin of 12.09%.

On the group’s current orderbook, Thien said all of its contracts are call-up umbrella contracts which have no fixed value.

Nevertheless, the contracts should be able to tide the group over the next 12 to 18 months at least, Thien said.

He added that the O&G industry is seen slowly recovering towards the end of the year once the Covid-19 pandemic subsides.

“The demand side will improve and as far as the impact goes, I believe we are still intact on our margin,” Thien said.

The group also intends to expand beyond its current market reach and secure more jobs, its CEO/MD Datuk Wan Hassan Mohd Jamil added.

It’s looking forward to positioning itself on the Main Market of Bursa Malaysia in the future, Wan Hassan said, without elaborating on the timeline.