Wah Seong Corporation Berhad Annual Report 2019

24 WAH SEONG CORPORATION BERHAD OIL AND GAS (“WASCO”) Discussion of strategies, operational capabilities to achieve the desired business objectives and results WASCO delivered another strong financial performance in 2019. The company is on track to meet its aspiration of being a world-class oil and gas services company. Earlier in the year, the Group announced that it would be setting up a new coating facility in the Kingdom of Qatar after signing an MOU with Qatar Petroleum and Qatar Gas under the Tawteen Program. The joint venture Qatar facility is expected to come on stream in the second half of 2020 and it would be the Group’s state of the art facility, equipped with high tech, intelligent machinery and equipment that is expected to boost efficiency and effectiveness in the application of anti-corrosion and concrete weight coating for oil and gas pipelines. During the year, WASCO also established its regional European headquarters in Utrecht, Netherlands, as part of its globalisation initiative. Its research and development applications engineering center also reside in the Netherlands, with four coating sites across Europe, namely in Greece, Germany, Finland and Norway. In 2019, the Group’s earnings were driven by its European pipe coating operations. WASCO’s pipe coating operations in Kotka, Finland and Mukran, Germany completed the entire scope of coatings for the Nord Stream 2 (“NS2”) project at year-end. The NS2 project is the largest pipeline infrastructure project in the world today. The execution of the project took three years and it entailed the coating of 2,400km of pipelines and included the logistics of coated pipes to four storage sites. The successful completion of this project has led to WASCO’s strong brand positioning as an international oil and gas services provider. During the year, Greece coatings operation also successfully delivered two projects, namely the MIDIA Gas Development Project and Tolmount Area Development Project, which contributed positively to the segment. 2019 remains challenging for WASCO’s coating operations in Malaysia, a result of a lower volume of coatings projects available in the Asia and Asia Pacific region. Nonetheless, during the year, its pipe manufacturing plant in Sabah secured a project to supply and deliver coated steel piling pipes to Pengerang Deepwater Terminal, and local JKR Sarawak project to supply and deliver coated steel case for the Muara Lassa Bridge Project that contributed positively to the segment. MANAGEMENT DISCUSSION AND ANALYSIS During the year under review, WASCO’s Engineering Services fabrication business in Batam, Indonesia were busy with the execution of few notable contracts, namely Tengizchevroil (TCO) Project for Schneider, France. The seven substations were delivered in stages with the final load out in August 2019. During the course of the project, 3,000,000 Man-hours were recorded with impressive safety performance in line with Schneider’s target of Zero Loss Time Incident, Zero Carry Over Work and Zero Punch List. During the year, WASCO’s Engineering Fabrication yard in Batam also completed the RUCHE Field Development Gabon Project for West Africa. It’s Dubai Operations also successfully delivered the NCS5 for Basrah Gas Company, a third award after the successful delivery of previous projects to the same client. Discussion on Key Financial and Operational Indicators for the segment For the year under review, the oil and gas segment recorded revenue of RM1.5 billion and segment profit of RM10.9 million which was mainly contributed by WASCO’s Pipeline Services. The oil and gas segment had an order backlog of RM774.2 million at the beginning of 2019, contributed mainly by NS2 contract worth RM3.3 billion secured in 2016. The order backlog at the end of 2019 dropped to RM576.6 million due to lower replenishment for order book and the smaller project awards available in 2019.