KUALA LUMPUR: Marine & General Bhd returned to the black with a net profit of RM16.67 million in its second quarter (Q2) ended Oct 31, 2022 (FY23) versus a net loss of RM10.03 million a year ago on the back of lower depreciation expenses and higher revenue.

Revenue for the quarter stood at RM82.09 million, up 51.7 per cent year-on-year from RM54.11 million in Q2FY22 due to increase in operating level during the current quarter. 

The company said this was because exploration and drilling activities resumed in the second half of 2021.

Accordingly, the fleet utilisation for both upstream and downstream divisions increased to 74 per cent and 86 per cent respectively from 69 per cent  and 76 per cent recorded in the preceding year's corresponding quarter.

The upstream division continued as the main revenue contributor, generating 74 per cent of the company's revenue, while the downstream division generated the balance of 26 per cent.

During the current quarter, M&G increased the economic useful life of its offshore support vessel's (OSV) fleet from 15 years to 20 years effective from  this financial year to be more aligned with the internal practice within the industry and Petroliam Nasional Bhd's decision to extend service period for such vessels to 20 years. 

The company said the impact to both current and the preceding quarters amounting to RM18.6 million had been recorded in the current quarter. 

As a result, M&G incurred lower vessel and equipment depreciation expenses in the current quarter than the preceding year corresponding quarter.

For the cumulative six months, M&G recorded a net profit of RM15.72 million from a net loss of RM27.2 million in the same period last year. 

Revenue rose 59 per cent to RM157.43 million from RM98.77 million a year ago mainly due to higher charter activities and charter rates recorded by the upstream division in line with the resumption of drilling activities by the oil majors.

"The upstream division looks forward to a more active year in line with Petronas' positive outlook in its drilling and exploration activities as highlighted in its activity outlook for 2022-2024. 

"The board expects the vessel utilisation and charter rate increase to continue in the remaining period of the financial year, although at a slower rate than in the past 12 months. 

"In addition, the extension of the useful economic life for OSVs from 15 years to 20 years will have a positive impact on the bottom line from lower annual depreciation charges," said executive chairman Tan Sri Mohammed Azlan Hashim. 

He added that the board was cautious about the potential for economic disruption brought about by the geo-political instability in Europe that could affect the regional and domestic economic climate. 

"In view of the foregoing, the board is cautiously optimistic on the prospects for the current financial year and expects further improvement in vessel utilisation and charter rates," he said.