May 4, 2017 / 11:55 AM / 7 months ago

Malaysian drilling firm UMW-OG scraps purchase of Icon Offshore

KUALA LUMPUR, May 4 (Reuters) - Malaysian offshore drilling services firm UMW Oil & Gas Corp Bhd (UMW-OG) scrapped plans on Thursday to acquire offshore support vessel provider Icon Offshore Bhd, citing capital constraints and uncertainties in the industry.

UMW-OG said in January it planned to buy Icon in a deal valuing the target at 588.6 million ringgit ($136.06 million).

It had also said it planned to buy 95.5 percent of Orkim Sdn Bhd, an operator of clean petroleum product transport vessels which it then valued at 495 million ringgit.

But UMW-OG said it was terminating the deal “after considering the significant capital requirements of UMW-OG and upon taking into account the need to have greater clarity on the industry consolidation framework and certainty of the industry environment before any such consolidation can be pursued.”

The firm said in a statement it would explore opportunities to collaborate in the future as it continued to believe that the creation of a major integrated oil and gas service provider was the right strategic approach for the longer term.

UMW-OG said it would now pursue a plan to recapitalise.

Last year, analysts had raised concern about UMW-OG’s high gearing levels. The company has since restructured a large portion of its short-term debt into long-term debt and has received a 308 million ringgit cash injection from its parent.

The Malaysia’s energy sector and the industry worldwide has been hit by a slide in oil prices.

$1 = 4.3260 ringgit Reporting by Liz Lee; Editing by Edmund Blair

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