Velesto tells analysts drilling exploration programmes would likely increase in 2023 to 2024, particularly at the Malaysia-Thailand Joint Development Authority gas development area in the Gulf of Thailand.
PETALING JAYA: The prospects for Velesto Energy Bhd
are expected to improve further amid higher drilling activities and rig utilisation rates.
The oil and gas offshore drilling services provider told analysts at a recent briefing that drilling exploration programmes would likely increase in 2023 to 2024, particularly at the Malaysia-Thailand Joint Development Authority (JDA) gas development area in the Gulf of Thailand.
The rig market, on the other hand, continued to tighten, with marketed rig utilisation rate at 91% in South-East Asia and 92% in Malaysia.
The latest rig counts in South-East Asia comprised 42 contracted, four idle and three cold stacked, while in Malaysia (including Malaysia-Thai JDA), there were 11 contracted rigs, and one rig each that was idle and cold stacked, TA Research wrote in a report, citing Velesto’s management.
It noted that current daily charter rates in South-East Asia ranged from US$58,000 to US$120,000 (RM255,560 to RM528,710), while that in Malaysia continued to lag behind, ranging from US$58,000 to US$88,000 (RM255,542 to RM387,730).
“This was because the existing contracts were awarded earlier before the ensuing spike in oil prices. As such, Velesto expects Malaysian rates to eventually catch up as legacy contracts are replaced with new ones.”
It pointed out that there was likely limited upside for Velesto’s shares, given the fact that the counter had rallied about 71% over the past three months, as investors priced in the expected earnings turnaround for the company as well as new long-term charters and higher daily charter rates.
As such, it downgraded Velesto to “sell” from its previous “buy” call, with an unchanged target price of 14 sen.
