PETALING JAYA: Velesto Energy Bhd
’s latest drilling contract for its Naga 8 jack-up rig is expected to strengthen the group’s earnings visibility through financial year 2028 (FY28), while ensuring uninterrupted fleet utilisation, according to analysts.
On Wednesday, Velesto secured a US$51mil contract award from Hess Exploration and Production Malaysia BV for integrated rig, drilling and completion services under Chevron Malaysia’s 2026 to 2028 North Malay Basin Full Field Development campaign.
Morover, the 16 to 18-month contract is scheduled to commence in August 2026.
According to TA Research, the contract marks the first redeployment of Naga 8 following the mutual termination of its previous long-term drilling contract.
This contract also allows the rig to move directly into its next campaign after completing work for Jadestone Energy in July 2026, supporting earnings visibility through FY28 and sustaining the group’s utilisation.
Velesto’s shares rose 3.85% to 27 sen at the time of writing as investors responded positively to the contract win.
Based on the disclosed contract value, TA Research estimated the contract’s implied day charter rate (DCR) at approximately US$94,000 per day, slightly above the estimated US$90,000 per day under the previous contract of Naga 8.
“We understand the modest increase in DCR is primarily attributable to the shorter contract tenure, with the implied rate broadly in line with prevailing market rates for premium jack-up rigs in South-East Asia.
“Post-completion, we believe the rig is well positioned to secure a new contract at higher DCRs, supported by continued improvement in South-East Asia exploration and production activity,” the research firm said in a report.
To reflect the higher-than-expected implied DCR, TA Research marginally raised Velesto’s FY26 and FY27 earnings forecasts and increased its target price to 36 sen from 35 sen previously.
The research house has maintained a “buy” call on the stock.
Over at Kenanga Research, it maintained an “outperform” call on the stock with a 32 sen target price, based on an unchanged 1.2 times FY27 forecast price-to-book valuation.
It said the valuation was supported by confidence in the company’s ability to maintain dividend payments, backed by operating cash flows estimated at approximately RM300mil annually.
Meanwhile, Hong Leong Investment Bank (HLIB) Research maintained its “hold” call on Velesto, with a slightly higher target price of 28 sen (from 27 sen previously), pegged to 12 times FY27 forecast price-to-earnings.
While it views the Naga 8 contract win positively, the research house said the development was largely anticipated and that much of the near-term catalysts had already been reflected in the share price, leaving limited upside from the current levels.
On the sector outlook, HLIB Research said rising energy security concerns and efforts to diversify energy supplies away from the Middle East should continue to support offshore capital spending, particularly in South-East Asia.
It noted that the region’s jack-up rig market is gradually tightening, although a meaningful recovery in DCRs is expected to take time due to the longer contract renewal and repricing cycles.
The research house added that Velesto is currently pursuing two additional third- party rig contracts, which would further support its asset-light expansion strategy.
