Analysts are bullish that the company would be able to rake in higher earnings for the fourth quarter of financial year 2023.
PETALING JAYA: Things are looking bright for oil and gas services provider Velesto Energy Bhd
, with more potential contracts in hand.
Analysts are bullish that the company would be able to rake in higher earnings for the fourth quarter of financial year 2023 (4Q23) when its results are out on Feb 27. Hong Leong Investment Bank (HLIB) Research said that in a recent company’s management meeting, Velesto expects the Petroliam Nasional Bhd (PETRONAS) umbrella contract to firm up in 1Q24.
It said although Naga 2, 3 and 4 remain uncontracted in the second half of 2024, Velesto is confident that these three rigs would be chartered out, especially following the renewal of an umbrella contract with the national oil company in 1Q24.
“We opine that PETRONAS has already indicated its intention to secure these available rigs for their drilling programmes for the remainder of the year, especially amidst an ongoing tight market, although details such as daily charter rates (DCRs) have yet to be ironed out.
“Management is expecting a better rig fleet utilisation rate in 2024 at around 85% (versus 80% in 2023),” it noted.
“Our current forecast blended DCR for financial year 2024 stood at about US$120,000, which we think is too conservative following the contract extension with Carigali Hess Operating Co for 18 months at a day rate of US$135,000 for Naga 8.”
The research house said this development would serve as a benchmark for contract wins and renewals in the near future.
“We think the day rates of contract renewal with PETRONAS will likely exceed US$125,000, as we understand that Velesto is now bidding for new jobs with day rates at the range of US$125,000 to US$140,000, in line with market rates,” the research house said.
Consultant Westwood Global Energy is projecting the global offshore rig marketed utilisation to reach to 96% in 2024 (versus 93%), indicating a continued increase in drilling activities but with very few new-builds in the market.
In tune with Westwood, it said management opines that there would not be a rig newbuilding cycle anytime soon, given the exorbitant investments required as drillers stay focused on financial prudence.
HLIB Research, which is maintaining its “buy” call on Velesto Energy with a target price (TP) of RM0.29, said it expects 4Q23 earnings to come in between RM28mil and RM35mil.
Meanwhile, Maybank Investment Bank, which is maintaining its “buy” call on the stock with a higher TP of 34 sen, said it expects the company’s 4Q23 utilisation rate to be high at 89%, with all jack-up rigs up and running against 62% in 3Q23.
