Lower utilisation, charter rates to weigh on Velesto

Velesto had recently disclosed that, in 2020, its jack-up (JU) rigs delivered 65% utilisation, with an average daily charter rate (DCR) of US$70,000 per day. This is slightly lower than CGS-CIMB Research’s assumption of 67% utilisation and an average DCR of US$71,755 per day because during Q4’20, the Naga 6 JU rig’s contract ended a bit earlier than expected.

PETALING JAYA: Velesto Energy Bhd’s core net loss for the financial year ended Dec 31,2020 (FY20) may be more than previously estimated, due to lower-than-expected utilisation and daily charter rates in last year’s fourth quarter (Q420), said a CGS-CIMB Research report.

Velesto had recently disclosed that, in 2020, its jack-up (JU) rigs delivered 65% utilisation, with an average daily charter rate (DCR) of US$70,000 per day.

This is slightly lower than CGS-CIMB Research’s assumption of 67% utilisation and an average DCR of US$71,755 per day because during Q4’20, the Naga 6 JU rig’s contract ended a bit earlier than expected.

Although this was partially compensated for by the unexpected employment of the Naga 7 as a floating hotel, the DCR as a floating hotel is lower than the rate of a full-fledged working drilling rig.

As a result, Velesto only achieved a utilisation rate of 51% in Q4’20 (versus a forecast of 52%) and an average DCR of US$66,000 per day (versus a forecast of US$72,000 per day, and against the first nine months of 2020 (9M20) average of also US$72,000 per day.

Incorporating a wider Q4’20 estimated core net loss, CGS-CIMB Research’s estimate of Velesto’s full-year FY20 estimated core net loss has been widened.

CGS-CIMB Research said Velesto might be able to deliver rig utilisation of 60% in 2021 as the company had contracted the Naga 8 to Carigali Hess Operating Company that will drill in the joint development area between Malaysia and Thailand for three years starting from April 1,2021.

“Utilisation of only 28.6% is expected in Q1’21; hence to achieve FY21 rig utilisation of 60%, Velesto will need to secure jobs for four of its six JU rigs (excluding the Naga 8), ” said CGS-CIMB Research.

The research unit retained its hold call on Velesto, with a lower target price of 13 sen from 14 sen previously.