U M W O il & G a s C o rp o ra tio n B e rh a d (878786-H) RESILIENCE THROUGH STRATEGIC AGILITY UMW Oil & Gas Corporation Berhad (878786-H) Level 18, Block 3A, Plaza Sentral, Jalan Stesen Sentral 5, 50470 Kuala Lumpur, Malaysia. Tel +603 – 2096 8788 | Fax +603 – 2274 7787 A N N www.umw-oilgas.com U A L R E P O R T 2 0 15 ANNUAL REPORT 2015 STRATEGY FOR CONSOLIDATING OUR STRENGTHS OPERATIONS ASSETS PEOPLE • Streamlining and • M anaging day rates to • T raining and development reshaping processes be market-competitive to to upskill our employees and procedures to maximise rig utilisation to build a strong optimise and reduce knowledge foundation • M aintaining the high operating costs operating efficiency • O ur drilling academy • Improving operational rates of more than continues in providing efficiency while 95% of our rigs high quality education maintaining high and training, both locally safety standards and internationally Staying LEAN to Remain Resilient Resilience UMW-OG is resolute in facing the current challenges. We are agile in adapting our strategy to the changing market dynamics, focusing on strengthening our internal through capabilities, optimising costs, and maximising our asset utilisation to ensure our Strategic Agility resilience. Our long-term strategic plan gives us the resilience and agility to go the distance in our journey towards becoming a leading player in the oil and gas industry. CONTENTS OUR CORPORATE OVERVIEW ACCOUNTABILITY 2 Corporate Profile 32 Statement on Corporate Governance 2 Vision, Mission and Core Values 48 Statement on Risk Management & Internal Control 3 Our Assets 53 Board Audit Committee Report 4 Corporate Structure 56 Additional Compliance Information 5 Corporate Information 6 5-Year Group Summary Results 6 Summary of Group Results 57 FINANCIAL STATEMENTS 6 Financial Calendar 7 Statistics on Shareholdings ADDITIONAL INFORMATION 144 List of Properties OUR PERSPECTIVE 10 Chairman’s Statement 14 President’s Review of Operations NOTICE AND FORM 145 Notice of Annual General Meeting OUR LEADERSHIP 18 Board of Directors PROXY FORM 19 Profile of Board of Directors 24 Key Management 25 CALENDAR OF SIGNIFICANT EVENTS CORPORATE SUSTAINABILITY STATEMENT 26 Corporate Social Responsibility 28 Quality, Health, Safety & Environment 30 Human Capital and People Development 2 ANNUAL REPORT 2015 UMW OIL & GAS BEYOND BOUNDARIES UMW OIL & GAS CORPORATION BERHAD (“UMW-OG” or “the Company”) is a Malaysia-based multinational provider of drilling and oilfield services for the upstream sector of the oil and gas industry. We provide drilling and workover services for exploration, development and production wells in Malaysia and Southeast Asia with our fleet of offshore drilling rigs and hydraulic workover units. Our Oilfield Services business offers threading, inspection and repair services for Oil Country Tubular Goods (“OCTG”) in Malaysia and overseas, with a focus on premium connections used in high-end and complex wells. UMW Holdings Berhad (“UMWH”), our parent company and single largest shareholder, is a leading industrial conglomerate in Malaysia, with diverse and global businesses in the automotive, equipment, manufacturing and engineering, and oil and gas industries. Developing a Malaysian-owned company that provides quality To be a leading player in the oil and gas industry, operating both services to the oil and gas industry domestically and globally supported by proven track records, true and maintaining standards by spirit, quality services and healthy growth potential. matching – if not surpassing – other international companies providing similar global services. VISION MISSION CORE VALUES Going Beyond Boundaries® is not only about crossing geographical or physical borders. It is about redefining the boundaries of our minds and doing new things in a better way. In short, it is about eliminating all barriers and scaling new heights. UMW-OG is built on the foundation of four core beliefs in being: HONOURABLE VIBRANT Our continual efforts in building trusted relationships and Our energetic and open-minded approach to new ideas that behaving with the utmost integrity, resulting in quality inspire fresh solutions for our partners and businesses. products and services that stand the test of time. UNSHAKEABLE PIONEERING Our commitment to our customers, partners, employees as We lead the way with bold ideas that shape the future of well as the community at large, and to persevere and strive our industries. for excellence in all our undertakings. 3 OUR ASSETS OFFSHORE DRILLING RIGS NAGA 1 UMW NAGA 2 UMW NAGA 3 UMW NAGA 4 UMW NAGA 5 UMW NAGA 6 UMW NAGA 7 UMW NAGA 8 HYDRAULIC WORKOVER UNITS UMW GAIT 1 UMW GAIT 2 UMW GAIT 3 UMW GAIT 5 UMW GAIT 6 OILFIELD SERVICES OPERATIONS MALAYSIA - Labuan West plant MALAYSIA - Labuan East plant THAILAND - Sattahip plant THAILAND - Songkhla plant CHINA - Tianjin plant TURKMENISTAN - Turkmenbashy plant 4 ANNUAL REPORT 2015 UMW OIL & GAS CORPORATE STRUCTURE UMW OIL & GAS CORPORATION BERHAD 100% 85% 100% 100% UMW Rig Asset (L) Ltd. UMW JDC Drilling UMW Malaysian UMW Singapore Sdn. Bhd. Ventures Sdn. Bhd. Ventures Pte. Ltd. 100% 100% 100% UMW Drilling Co. Ltd. UMW Offshore Drilling UMW Oilfield Services Sdn. Bhd. (Tianjin) Co., Limited 100% UMW Drilling 2 (L) Ltd. 100% UMW Drilling 100% Academy Sdn. Bhd. UMW Standard 1 Pte. Ltd. 100% UMW Offshore 100% Drilling Ltd. UMW Drilling 3 (L) Ltd. 100% 100% UMW Workover Sdn. Bhd. UMW Standard 3 Pte. Ltd. 100% UMW Oilpipe Services 100% Sdn. Bhd. UMW Drilling 4 (L) Ltd. 20% 100% Oil-Tex (Thailand) Offshore Driller Company Limited B324 Ltd. 49% 100% Offshore Driller 4 Ltd. 49% UOT (Thailand) 100% Limited UMW Drilling 5 (L) Ltd. 51% 100% UMW Oilpipe Services UMW Drilling 6 (L) Ltd. (Turkmenistan) Ltd. 100% UMW Drilling 7 (L) Ltd. 100% UMW Drilling 8 (L) Ltd. 5 CORPORATE INFORMATION BOARD OF DIRECTORS BOARD NOMINATION COMMITTEE REGISTRAR Tan Sri Asmat bin Kamaludin • Dato’ Afifuddin bin Abdul Kadir Securities Services (Holdings) (Chairman) (Chairman) Sdn. Bhd. (36869-T) Non-Independent • Dr. Leong Chik Weng Level 7, Menara Milenium Non-Executive Director • Razalee bin Amin Jalan Damanlela Date of appointment : 2 May 2013 • Fina Norhizah binti Hj Baharu Zaman Pusat Bandar Damansara Damansara Heights Rohaizad bin Darus 50490 Kuala Lumpur President BOARD REMUNERATION COMMITTEE Malaysia Non-Independent Telephone : +603-2084 9000 Executive Director • Dr. Leong Chik Weng Facsimile : +603-2094 9940 (Chairman) Date of appointment : 31 January 2012 • Dato’ Afifuddin bin Abdul Kadir Badrul Feisal bin Abdul Rahim • Cheah Tek Kuang AUDITORS Non-Independent • Dato’ Ibrahim bin Marsidi Non-Executive Director Ernst & Young (AF: 0039) Date of appointment : 1 October 2015 Level 23A, Menara Milenium BOARD INVESTMENT & RISK Jalan Damanlela Datuk Syed Hisham bin Syed Wazir MANAGEMENT COMMITTEE Pusat Bandar Damansara Non-Independent 50490 Kuala Lumpur Non-Executive Director • Dr. Leong Chik Weng Malaysia (Chairman) Date of appointment : 1 October 2010 Telephone : +603-7495 8000 • Badrul Feisal bin Abdul Rahim Date of resignation : 30 September 2015 Facsimile : +603-2095 5332 • Cheah Tek Kuang Dr. Leong Chik Weng • Dato’ Ibrahim bin Marsidi Non-Independent • Fina Norhizah binti Hj Baharu Zaman STOCK EXCHANGE LISTING Non-Executive Director • Rohaizad bin Darus Date of appointment : 21 April 2011 Main Market of Bursa Malaysia Securities Berhad Razalee bin Amin BOARD WHISTLE-BLOWING Stock Name : UMWOG Independent COMMITTEE Stock Code : 5243 Non-Executive Director Date of appointment : 2 May 2013 • Fina Norhizah binti Hj Baharu Zaman (Chairman) PRINCIPAL BANKERS Dato’ Afifuddin bin Abdul Kadir • Badrul Feisal bin Abdul Rahim Independent • Razalee bin Amin • Affin Bank Berhad Non-Executive Director • Dato’ Afifuddin bin Abdul Kadir • AmBank (M) Berhad Date of appointment : 2 May 2013 • Asian Finance Bank Berhad • BNP Paribas Malaysia Berhad Cheah Tek Kuang COMPANY SECRETARY • CIMB Bank Berhad Independent • HSBC Amanah Malaysia Berhad Non-Executive Director Lee Mi Ryoung • Malayan Banking Berhad Group (MAICSA 7058423) Date of appointment : 2 May 2013 • Sumitomo Mitsui Banking Corporation Malaysia Berhad Dato’ Ibrahim bin Marsidi Independent REGISTERED OFFICE Non-Executive Director WEBSITE Level 18, Block 3A Date of appointment : 2 May 2013 Plaza Sentral http://www.umw-oilgas.com Fina Norhizah binti Hj Baharu Zaman Jalan Stesen Sentral 5 Independent 50470 Kuala Lumpur Non-Executive Director Malaysia E-MAIL ADDRESS Telephone : +603-2096 8788 Date of appointment : 15 August 2013 Facsimile : +603-2274 7787 [email protected] BOARD AUDIT COMMITTEE • Razalee bin Amin (Chairman) • Badrul Feisal bin Abdul Rahim • Cheah Tek Kuang • Dato’ Ibrahim bin Marsidi 6 ANNUAL REPORT 2015 UMW OIL & GAS 5-YEAR GROUP SUMMARY RESULTS Financial Year Ended 31 December 2011 2012 2013 2014 2015 Revenue RM million 550 724 738 1,015 840 Profit/(Loss) Before Taxation RM million 102 74 207 284 (348) Profit/(Loss) Attributable to Equity Holders of the Company RM million 78 73 189 252 (369) Shareholders’ Funds RM million 168 244 2,833 3,200 3,333 Return on Shareholders’ Funds % 73 35 12 8 (11) Return on Total Assets % 6 4 5 5 (5) Basic Earnings/(Loss) Per Share sen 5.1 4.7 11.5 11.7 (17.1) Share Price at Year End RM N/A N/A 4.01 2.35 1.07 Market Capitalisation at Year End RM million N/A N/A 8,670 5,081 2,313 Revenue Profit/(Loss) before Profit/(Loss) Attributable to Shareholders’ Funds (RM million) Taxation (RM million) Equity Holders of the Company (RM million) (RM million) 00 33 2 3 5 3 3, 3, 724 738 1,01 840 207 284 252 2,83 0 9 5 8 5 1 102 74 348) 78 73 369) 168 244 ( ( 2015 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 2015 SUMMARY OF GROUP RESULTS Financial Year Ended 31 December 2015 2014 Revenue RM million 840 1,015 Profit/(Loss) Before Taxation RM million (348) 284 Profit/(Loss) After Taxation RM million (368) 254 Share Capital RM million 1,081 1,081 Reserves RM million 2,252 2,119 Basic Earnings/(Loss) Per Share sen (17.1) 11.7 Net Assets Per Share RM 1.5 1.5 FINANCIAL CALENDAR Announcements of Unaudited Consolidated Results: 23 February 2015 - for the financial year ended 31 December 2014 14 May 2015 - for the quarter ended 31 March 2015 25 August 2015 - for the quarter ended 30 June 2015 24 November 2015 - for the quarter ended 30 September 2015 23 February 2016 - for the financial year ended 31 December 2015 25 April 2016 - Notice of 6th Annual General Meeting and Issuance of Annual Report 2015 17 May 2016 - 6th Annual General Meeting 7 STATISTICS ON SHAREHOLDINGS AS AT 31 MARCH 2016 Authorised Share Capital : RM2,500,000,000 (comprising 5,000,000,000 ordinary shares of RM0.50 each) Issued and Paid-up Share Capital : RM1,081,000,000 (comprising 2,162,000,000 ordinary shares of RM0.50 each) Class of Shares : Ordinary shares of RM0.50 each Voting Rights : One vote per one ordinary share ANALYSIS BY SIZE OF SHAREHOLDINGS No. of Total No. No. of Total No. Size of Shareholdings Shareholders of Shareholders Issued Shares of Issued Shares Malaysian Foreigner No. % Malaysian Foreigner No. % Less than 100 82 3 85 0.42 1,132 8 1,140 0.00 100 - 1,000 3,038 39 3,077 14.99 2,381,705 27,700 2,409,405 0.11 1,001 - 10,000 12,641 113 12,754 62.13 58,536,188 537,419 59,073,607 2.73 10,001 - 100,000 4,086 91 4,177 20.35 121,380,800 3,248,797 124,629,597 5.77 100,001 to less than 367 64 431 2.10 416,705,034 45,743,217 462,448,251 21.39 5% of issued shares 5% and above of 3 0 3 0.01 1,513,438,000 0 1,513,438,000 70.00 issued shares TOTAL 20,217 310 20,527 100.00 2,112,442,859 49,557,141 2,162,000,000 100.00 CATEGORY OF SHAREHOLDERS No.of No. of % of Category Shareholders Issued Shares Issued Shares Malaysian Foreigner Malaysian Foreigner Malaysian Foreigner 1 Individual 16,253 133 187,832,037 2,200,802 8.69 0.10 2 Body Corporate A) Banks / Finance Companies 53 0 444,811,700 0 20.57 0.00 B) Investment Trusts / 4 0 144,500 0 0.01 0.00 Foundations / Charities C) I ndustrial and Commercial 165 1 1,217,280,800 3,100 56.30 0.00 Companies 3 Government Agencies / Institutions 2 0 15,086,800 0 0.70 0.00 4 Nominees 3,738 176 247,284,918 47,353,239 11.44 2.19 5 Others 2 0 2,104 0 0.00 0.00 TOTAL 20,217 310 2,112,442,859 49,557,141 97.71 2.29 30 LARGEST SHAREHOLDERS (Without aggregating securities from different securities accounts belonging to the same person) No. Shareholders No. of Shares % 1 UMW Holdings Berhad 1,204,777,400 55.73 2 Amanahraya Trustees Berhad 175,000,000 8.09 Amanah Saham Bumiputera 3 Citigroup Nominees (Tempatan) Sdn. Bhd. 133,660,600 6.18 Employees Provident Fund Board 4 Kumpulan Wang Persaraan (Diperbadankan) 62,053,300 2.87 5 Lembaga Tabung Haji 59,796,700 2.77 8 ANNUAL REPORT 2015 UMW OIL & GAS STATISTICS ON SHAREHOLDINGS AS AT 31 MARCH 2016 30 LARGEST SHAREHOLDERS (CONT’D.) (Without aggregating securities from different securities accounts belonging to the same person) No. Shareholders No. of Shares % 6 Amanahraya Trustees Berhad 30,112,700 1.39 Amanah Saham Wawasan 2020 7 Amanahraya Trustees Berhad 26,000,000 1.20 Amanah Saham Malaysia 8 Amanahraya Trustees Berhad 17,336,000 0.80 Public Islamic Dividend Fund 9 Lembaga Tabung Angkatan Tentera 14,952,300 0.69 10 CIMB Group Nominees (Tempatan) Sdn. Bhd. 13,096,000 0.61 CIMB Bank Berhad (EDP 2) 11 Permodalan Nasional Berhad 12,854,544 0.59 12 Amanahraya Trustees Berhad 11,913,800 0.55 Amanah Saham Didik 13 Amanahraya Trustees Berhad 11,511,500 0.53 Public Islamic Equity Fund 14 HSBC Nominees (Asing) Sdn. Bhd. 7,008,200 0.32 Exempt AN For JPMorgan Chase Bank, National Association (U.S.A.) 15 Amanahraya Trustees Berhad 6,355,700 0.29 Amanah Saham Nasional 16 Citigroup Nominees (Tempatan) Sdn. Bhd. 6,338,200 0.29 Kumpulan Wang Persaraan (Diperbadankan) (I-VCAP) 17 Rahmah binti Abdul Rahim 5,628,100 0.26 18 Amanahraya Trustees Berhad 5,549,456 0.26 Amanah Saham Nasional 2 19 Amanahraya Trustees Berhad 4,500,000 0.21 Amanah Saham Bumiputera 2 20 Amanahraya Trustees Berhad 3,708,100 0.17 Amanah Saham Gemilang For Amanah Saham Kesihatan 21 Assets Nominees (Asing) Sdn. Bhd. 3,670,000 0.17 Guoline Capital Limited 22 HLIB Nominees (Asing) Sdn. Bhd. 3,400,000 0.16 Hong Leong Fund Management Sdn. Bhd. For Asia Fountain Investment Company Limited 23 PM Nominees (Tempatan) Sdn. Bhd. 3,043,700 0.14 For Bank Kerjasama Rakyat Malaysia Berhad 24 DB (Malaysia) Nominee (Tempatan) Sendirian Berhad 2,587,000 0.12 Deutsche Trustees Malaysia Berhad For Eastspring Investments Growth Fund 25 Pertubuhan Keselamatan Sosial 2,525,000 0.12 Bahagian Pelaburan 26 Hong Leong Assurance Berhad 2,500,000 0.12 As Beneficial Owner (LIFE PAR)