Malaysian TH Heavy Engineering Berhad (THHE), building offshore structures for the offshore oil and gas industry, is parting ways with McDermott, the U.S. engineering and construction firm.
Namely, the companies are, by mutual agreement, terminating several joint venture firms they had established in 2013 to provide various services for the offshore oil and gas industry.
According to THHE, when completed in October 2013, the intent of the joint ventures was to enhance THHE’s service offerings from the existing fabrication construction services to create a fully integrated EPCI services company.
THHE, in collaboration with McDermott, would be able to offer a one-stop end-to-end EPCI service solution, enter into a higher value added business sector, cross-selling of additional services to existing customer base and embark on higher margin integrated EPCI jobs with PETRONAS and other oil majors and thus elevate THHE into a Tier 1 player on the oil and gas sector in Malaysia.
However, THHE said last week, with the dampening crude oil price and persistent supply overhang, THHE and McDermott had decided to pursue different business paths.
“THHE has begun diversifying away from the upstream sector of the oil into downstream and other non-oil and gas businesses such as marine vessel construction and repairs. THHE’s immediate plan of diversifying into non-oil gas business such as marine vessel construction and repairs will mitigate the recurring volatility of the upstream sector of the oil and gas industry and provide a more recurring income,” the Malaysian company said.
As at August 30, 2016, the THHE and its subsidiaries has an outstanding main fabrication order book of RM132.5 million and outstanding minor fabrication, crane manufacturing & repairs and supply of equipment order books of RM9.4 million.
Also, the Group is exploring various ways to raise funds required to complete the FPSO Layang conversion works and to monetize and unlock the value of the group’s assets to generate cash flows and improve its working capital.
Moving forward, the THHE expects the fabrication business to remain challenging in view of the present competitive environment and capital expenditure cut as announced by oil majors.
The group plans to expand into the refurbishment and maintenance works and non-oil and gas related fabrication works and had on July 28, 2016, received a non-binding letter of intent dated 27 July 2016 for the Supply, Delivery, Testing and Commissioning of three Offshore Patrol Vessels complete with Fittings and Accessories (OPV) for Agensi Penguatkuasaan Maritim Malaysia (“APMM”) or Malaysian Maritime Enforcement Agency. The venture into non-oil and gas fabrication works is expected to provide a more stable and recurring income to the Group and will counter the cyclicality of opportunity from the oil & gas business, the company added.
Offshore Energy Today Staff