Malaysian jack-up rig owner UMW Oil and Gas (UMW-OG) saw first quarter revenue plunge 72% to MYR87.7m ($21.5m) from the MYR312.5m posted in the same quarter of 2015, resulting in a MYR65.1m loss compared to a MYR32.2m profit previously, the company said in a stock market announcement.

Both UMW-OG's main business units, the Drilling Services and Oilfield Services segments contributed lower revenue in the first quarter due to much lower levels of exploration, development and production activities in the oil and gas industry and both divisions turned in losses.

The key Drilling Services segment which contributed 93% of overall revenue, saw revenue fall 73% to MYR81.3m from the MYR300m recorded in the same quarter of 2015. The drop in revenue was principally due to low utilisation of some of the assets in the group during the first quarter of 2016 as a result of significant cuts in capital and operating expenditures by oil majors due to low oil prices, UMW-OG said.

It added that however, the additional revenue contributions from two new jack-up rigs, UMW NAGA 8 and UMW NAGA 7, which commenced operations in September 2015 and November 2015, respectively, mitigated the revenue reduction.

The Drilling Services segment incurred a pre-tax loss of MYR93.4m in the first quarter of 2016 compared to a pre-tax profit of MYR38.6m in the first quarter of 2015.

Meanwhile the smaller Oilfield Services segment saw revenue fall 49% to MYR6.4m from the MYR12.5m registered in the same quarter of 2015 and a pre-tax loss of MYR1.4m compared to a to a profit of MYR2.7m in the previous corresponding quarter.

Lower revenue recorded by the group’s operations in Labuan, Thailand, China and Turkmenistan caused the revenue decrease. Similarly, the business of Oilfield Services segment was also adversely affected by the cut in operating and capital expenditures by oil majors.

Looking ahead UMW-OG expects the oil price to continue to be volatile in the near future. "Offshore drilling activities remain low but are showing minor signs of recovery with increased tendering activities. However, present rig utilisation remains challenging as oil and gas companies are taking a cautious approach with regards to their exploration and development programmes," it noted.

"As some of our existing contracts are expiring this year, we are expecting lower drilling and workover activities in the near future. While the day rates remain lower in line with global market, the reduction in utilisation is being cushioned with the support of Petronas and other regular clients," UMW-OG concluded.