Velesto’s cancelled rig sale highlights oil volatility

OIL and gas (O&G) drilling services provider Velesto Energy Bhd’s failed sale of its 16-year-old jack-up rig Naga 3 highlights the volatile conditions that continues to buffet the offshore and maritime industries, with conflict in the Middle East disrupting medium- to longer-term plans.

While the sale to an Indonesian O&G services firm was cancelled because the transaction was not completed by the due date of June 30, 2026, uncertainty over crude oil prices stemming from renewed hostilities between the United States and Iran, along with the rupiah’s weakness, may also have played a role, as the deal was denominated in US dollars.

Analysts viewed the failed sale as a temporary setback to the company’s asset-light transformation roadmap, under which it aims to focus on premium assets while gradually letting go of older, lower-specification rigs.

This strategy would also mitigate the risk of having obsolete assets as newer jack-up rigs enter the market.

Velesto’s share price is now on a downtrend as investors unwind their positions, signalling their disappointment that the estimated RM251.1mil in sale proceeds will no longer be available for shareholder returns, working capital and other corporate purposes.

A special dividend of three sen per share had been expected for the financial year ending Dec 31, 2026, with the company having paid out three sen so far.

Analysts are divided on the company’s near-term outlook, as there is no certainty to when the roadmap can move forward, despite confidence that the capital expenditure upcycle driven by Petroliam Nasional Bhd or PETRONAS will continue to support Velesto, given the tight supply of jack-up rigs.

On that basis, the company’s outlook remains intact unless weaker oil prices make upstream investments less financially feasible.