Dagang NeXchange Berhad Annual Report 2019

MANAGEMENT DISCUSSION & ANALYSIS DAGANG NeXCHANGE BERHAD 14 ENERGY The Group’s portfolio in energy is a mix of upstream and downstream as follows: i) Equipment supply and maintenance operated by OGPC Sdn. Bhd. (“OGPC”); ii) Oilfield services by DNeX Drilling Tech & Oilfield Services Sdn. Bhd. (“DDTOS”); iii) Upstream oil and gas via investment in Ping with asset in the North Sea United Kingdom; and iv) Power via a minor stake in a power plant in Bangladesh. Equipment Supply and Maintenance OGPC continues to face the effects of industry slowdown in local greenfield projects and heightening price competition. To improve business position, OGPC targets to penetrate niche oil & gas industries and corresponding general industries, as well as power and palm oil industries that require similar expertise. During the year, OGPC an secured order book of RM68 million, notably for the supply of marine loading arms for Johor Ports Berhad, and automatic tank gauging system installation and maintenance for Petronas Dagangan Berhad. Equipment supply and maintenance services contributes 20% of the Group’s revenue and 22% of the Group’s profits. Oilfield Services DDTOS is involved with directional drilling for the upstream oil and gas industry. As an asset owner, DDTOS leases its asset to an international player in the industry. In January 2020, DDTOS has secured a five (5) year Umbrella Contract for Provision of Directional Drilling/Measurement While Drilling/Logging While Drilling (DD/MWD/LWD) Equipment and Services for Petronas Carigali Sdn. Bhd. However, DDTOS did not secure any drilling work orders in 2019. Oilfield services contribute less than 1% of Group’s revenue. UpstreamOil and Gas DNeX owns 30% in associate company Ping operating in the Anasuria cluster, a fully operating oilfield in North Sea, United Kingdom. Through Ping, DNeX also has interests in Avalon, Ranger, Block 22/14c, 15/17c and 15/18c oilfields in the Central United Kingdom sector of the North Sea which are in various stages of oilfield development and exploration. This investment continues to appealingly contribute to DNeX results at RM18.3 million in 2019 in comparison to previous year results of RM22.0 million. The reduced annual result was due to reduction in net sale margin in 2019. Ping continues to invest in new oilfields, expanding its oil reserves and consequentially making it an attractive investment.