OGSE industry in recovery mode, but risks remain, says MPRC

MALAYSIA’S oil and gas services and equipment (OGSE) industry is showing a gradual recovery following headwinds of recent years, but efforts are needed to ensure OGSE companies are positioned for long-term growth.

In its eighth annual OGSE100 publication released today, Malaysia Petroleum Resources Corp (MPRC) said the local OGSE industry returned to the black in the fiscal year 2021 (FY21), recording profit before tax (PBT) of RM4.2 billion after posting a loss before tax of RM3.7 billion the year before.

In a statement today, MPRC said 68% of the OGSE industry reported profits in FY21, with the OGSE100, consisting of Malaysia’s top OGSE companies by revenue, accounting for 90% of industry profits.

For FY21, it said, the OGSE100 reported PBT of RM3.7 billion from losses of RM3.5 billion in FY20.

“Findings from the FY21 OGSE100, which typically lag by one year due to the availability of private company information from the Companies Commission of Malaysia, show that the performance of the OGSE industry reached a turning point in 2021.

“This was in tandem with improving economic and business conditions following the recovery from the Covid-19 crisis,” MPRC president/CEO Mohd Yazid Ja’afar said.

He also explained that some of the improved performance in the OGSE industry could be attributed to a larger population of 2,376 companies accounted for in FY21, against a population of 1,328 in FY20.

The lower population in FY20, he explained, was mainly due to the exclusion of companies that submitted their FY2020 accounts late following the COVID-19 crisis.

Notwithstanding the larger industry population, MPRC said, financial results of public-listed OGSE companies for FY22 as reported in filings to Bursa Malaysia Securities Bhd also indicated business recovery as the reason for their improved earnings.

“Positive newsflow has also emerged on the award of new contracts and expectations for higher rates, which augur well for OGSE companies,” added Mohd Yazid.

He also said OGSE100 FY21 showed other positive indicators on the health of the OGSE industry.

These include growth in industry total fixed assets (TFA) to RM112 billion, which ended a downtrend that started in 2016.

However, while the OGSE100 owned 96% of industry TFA in FY2021, the highest year-on-year (YoY) growth in industry TFA was contributed by small and medium-sized enterprises (SMEs) which accounted for a 121% YoY growth in TFA to RM2.7 billion.

Nonetheless, the industry remains braced for new developments which could disrupt its recovery. “Emerging opportunities and lingering risks, such as the ongoing energy transition, stricter sustainability requirements and sustained economic uncertainty due to the continuing Russia-Ukraine conflict, could weigh down the OGSE industry’s recovery going forward,” said Mohd Yazid.

Against this backdrop, MPRC continues to urge OGSE companies to leverage on initiatives of the National OGSE Industry Blueprint (OGSE Blueprint) 2021-2030 to aid them in achieving long-term stability, said Mohd Yazid.

MPRC serves as the custodian of the OGSE Blueprint, designed to support OGSE companies in tackling the industry’s legacy structural issues and enabling higher value-add for sustainable growth.

The OGSE100 is MPRC’s flagship publication to show the size and performance of OGSE companies and serve as a reference point for industry players, potential investors and relevant stakeholders. — TMR/pic by Bloomberg