News Release

DELEUM PRE-TAX PROFIT UP 20.5% IN 1st QUARTER 2018

21 May 2018

Deleum Berhad (“Deleum” or the Group”), a provider of diverse range of supporting specialised products and services to the oil and gas industry, reported a 20.5% hike in pre-tax profit to RM4.7 million for its first quarter ended 31 March 2018 (Q1FY2018), compared to RM3.9 million reported in the corresponding period.

The quarter, in which the oil and gas business registering signs of growth in related products and services, also saw the Group’s revenue climbing 20.6% or RM18.5 million to RM108.5 million on the back of higher revenue contribution across all operating segments.

Pre-tax profit for the Group’s Power and Machinery segment rose 21.1% to RM5.1 million against RM4.2 million in the last corresponding period while its revenue lifted 11.7%, or RM6.8 million to RM65.0 million in Q1FY2018. This is attributed to increase in work order level for exchange engine, third-party and other ancillary services.

The Oilfield Services segment recorded a 14.2% hike, or RM3.4 million increase, in revenue compared to the corresponding quarter ended 31 March 2017 due to higher utilisation of slickline assets. The higher revenue from slickline activities, equipment rental and crew call outs contributed significantly to the higher reported result on the back of higher profit margins, lower cost to serve and financing cost.

The Group’s Integrated Corrosion Solution segment recorded a sizeable rise of RM8.3 million in revenue, up 107.2%, to RM16.1 million compared to RM7.8 million in the corresponding quarter. This was driven by additional revenue earned from the maintenance, construction and modification (MCM) contract from PETRONAS. However, pre-tax profit declined by RM3.6 million affected by higher costs incurred from the Pan Malaysia Painting and Blasting Contract and to support the mobilisation and fulfillment of the MCM contract.

Looking ahead, Deleum expects its Power and Machinery segment to continue to face a challenging environment despite better oil prices. It expects the capital and cost reduction measures taken by the major oil companies following the collapse in oil prices in 2014 to roll into 2018. The Group will continue to focus efforts to support the existing installed turbine base and work with customers to provide cost effective solutions. It will also maintain its efforts to enhance operational efficiencies and strict costs discipline to optimise margins.

While its Oilfield Services segment is expected to enjoy positive contribution from its upstream activities, the Group recognises that the business is underpinned by the Pan Malaysian Slickline Contracts which expires in third quarter 2018 and first quarter 2019. Initiatives are underway to extend or re-secure the contracts through open bidding.

The Group’s Integrated Corrosion Solution segment is expected to pick up in the coming months once start-up and capacity building costs to service the MCM contract gets underway. The segment also receives a boost from successfully securing a one-year extension of the painting and alternative blasting contract from Petronas Carigali thus ensuring a continued flow of revenue from this activity.

While Deleum expects average oil prices in 2018 to be higher, downside risks remain with the potential weakening of the production cuts and rising US shale production. Overall, the Group remains cautious on the year’s prospect and will continue to enhance integration efforts across its core businesses by leveraging on the financial strengths and resources.