Dagang NeXchange Berhad Annual Report 2018

13 Annual Report 2018 Management Discussion & Analysis KEY MESSAGES The Group has been in involved in energy segment since 2014 with a portfolio mix of upstream and downstream as follows: i) Equipment Trading and Maintenance Services operated by OGPC Sdn. Bhd. (“OGPC”) ii) Drilling & Oilfield Services by DNeX Oilfield Services Sdn. Bhd. (“DOSB”) iii) Upstream Exploration and Production via investment in Ping Petroleum Limited (“Ping”) with asset in North Sea United Kingdom iv) Power via a minor stake in a Bangladesh power plant Equipment Trading and Maintenance Services OGPC continues to face the effects of industry slowdown in local greenfield projects and heightening price competition. To improve business position, OGPC accepted a contract by Petro Teguh (M) Sdn. Bhd. to supply Portable Container Systems (“PCS”) for design, engineering, procurement, construction, installation and commissioning of up to 100 units of PCS for two (2) years. The progress of PCS has been behind targets with slow take up of PCS and approval from local authorities. OGPC is looking to change the business model with Petro Teguh to expedite the implementation of 100 PCS. With decline in revenue by 17% to RM49.2 million in 2018, OGPC’s profits plunged 40% at PAT of RM6.2million from RM10.4 million in 2017. OGPC contributes 17% of Group’s revenue and 12% PAT. Drilling andOilfield Services DOSB completed contract consisting 4 wells in Tukau Timur and F12 Umbrella Contracts for the Provision of Directional Drilling/ Measurement While Drilling/Logging While Drilling (“DD/MWD/LWD”) Equipment and Services for Petronas Carigali Sdn. Bhd. (“PCSB”) in 2017. DOSB was not involved in similar projects in 2018. With anticipated slowdown in activities, DOSB, signed a contract agreement to provide directional drilling equipment to Baker Hughes (M) Sdn. Bhd. (“BHGE”) where DOSB will serve as an equipment support provider to BHGE for its directional drilling operations in Asia Pacific and Middle East countries. Upstream Exploration and Production Drilling & Oilfield Services Trading and Services (i) 30% stake in Ping Petroleum Limited (ii) 10% stake in Bangladesh Power Plant Book Value RM200.9 million Investment USD10.0 million in 2016 54 MWHFO Fired Power Plant Started construction Early 2016 Commercial Operation Date 11 November 2017 Book Value RM3.6 million Revenue PAT Business Segment (RM’ million) (RM’ million) Trading & Services 49.2 6.2 Drilling & Oilfield Services 2.7 (3.7) Upstream Exploration & Production - 22.0 Power & Others - 0.1 Sub total 51.9 24.6 Less: Amortisation of Intangible assets arising from consolidation (net of tax) - (6.7) Less: One off impairment of Goodwill - (3.6) Total 51.9 14.3 ENERGY