Velesto could secure more long-term contracts which will boost Velesto’s overall rig utilisation rate to CGSI Research’s estimate of 85% for FY26.
PETALING JAYA: Stakeholders of Velesto Energy Bhd
will likely see a special dividend announcement in May, deriving from the sale of Naga 3 valued at US$63mil.
CGS International (CGSI) Research said this was possible as the multinational provider of drilling and oilfield services already had a comfortable cash pile of RM169mil and net current assets of RM263mil as of September last year.
Velesto also has no asset acquisition plans, no special period survey (SPS) scheduled for financial year 2026 (FY26) to FY27 with only one SPS scheduled for FY28 and it has already fully repaid its rig-linked project debt by October 2024.
“In short, Velesto will likely focus on rewarding shareholders via dividends, we believe. The sale of Naga 3 is also fortuitous as the rig has been unemployed since November 2024 – they will no longer depreciate the asset or incur cash costs to keep the rig on warm layup, resulting in a boost to our earnings per share forecasts from FY26 onwards,” the research firm said.
In addition to that, Velesto could secure more long-term contracts which will boost Velesto’s overall rig utilisation rate to CGSI Research’s estimate of 85% for FY26.
“We forecast, based on our channel checks, that Naga 2 will be locked in for a five-year contract from forecast May 2026 lasting into 2030, albeit at a low rate of about US$85,000 per day.
“Naga 6 will secure a few back-to-back jobs in Malaysia for more than two years commencing in the second quarter of FY26 (2Q26) and Naga 8 will clinch jobs in Malaysia for about two years from 2Q26,” the research firm noted.
On another note, CGSI Research said Velesto is securing the use of a third-party rig, and will offer it as a replacement for Naga 8 which is currently drilling for Petroliam Nasional Bhd or PETRONAS Indonesia.
“We estimate a spread of US$15,000 per day between the charter-out rates and daily operating expenses, which includes the charter-in rates; this two-year work contributes almost five sen per share to our discounted cash flow valuation,” CGSI Research said.
With that, the research firm said it will reiterate an “add” call on the group with a higher target price of 31.5 sen from 29 sen previously.
CGSI Research said, however, downside risks include the delays in the award of contracts, lower-than-expected daily charter rates for the new contracts, and lower-than-expected dividends.
