MPRC: OGSE industry in recovery mode, but risks remain
KUALA LUMPUR, 8 MARCH 2023 – Malaysia’s oil & 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 Corporation (MPRC) said that the local OGSE industry returned to the black in fiscal year 2021 (FY2021), recording profit before tax (PBT) of RM4.2 billion after posting a loss before tax of RM3.7 billion the year before.
68% of the OGSE industry reported profits in FY2021, with the OGSE100, consisting of Malaysia’s top OGSE companies by revenue, accounting for 90% of industry profits. For FY2021, the OGSE100 reported PBT of RM3.7 billion from losses of RM3.5 billion in FY2020.
In a statement, Mohd Yazid Ja’afar, President/CEO of MPRC said, “Findings from the FY2021 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.”
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 FY2021, against a population of 1,328 in FY2020. The lower population in FY2020 was mainly due to the exclusion of companies that submitted their FY2020 accounts late following the COVID-19 crisis.
Notwithstanding the larger industry population, financial results of public-listed OGSE companies for FY2022 as reported in filings to Bursa Malaysia Securities Berhad 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 FY2021 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 (y-o-y) growth in industry TFA was contributed by small and medium-sized enterprises which accounted for a 121% y-o-y 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 with tackling the industry’s legacy structural issues and enabling higher value-add for sustainable growth.
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The OGSE100 is MPRC’s flagship publication which provides information on consolidated industry performance of revenue, profit before tax (PBT), PBT margin and total fixed assets (TFA) for oil and gas services and equipment (OGSE) companies registered in Malaysia. The companies are then ranked according to the top 100 by revenue. The purpose of OGSE100 is to show the size and performance of OGSE companies and serve as a reference point for industry players, potential investors and relevant stakeholders. The publication also contains forward-looking statements based on assumptions, information and various perspectives provided to MPRC to give a holistic picture of the industry.
Established in April 2011, Malaysia Petroleum Resources Corporation (MPRC) is an agency of the Ministry of Economy tasked with advancing Malaysia's Oil and Gas Services and Equipment (OGSE) sector. MPRC also provides policy recommendations to the Government in the oil, gas, and energy industries. As countries the world over, including Malaysia, embark on the energy transition, MPRC further advocates for OGSE companies to pivot towards cleaner and sustainable renewable energy as new areas for business growth.
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