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Velesto Energy expects stronger earnings in H2

KUALA LUMPUR, May 29 (Bernama) — Velesto Energy Bhd expects to record stronger earnings in the second half (H2) of this year, leveraging on a better utilisation of its jack up rigs.

President Rohaizad Darus said despite the prevailing volatility in oil and gas prices, there had been a significant improvement in activities locally and globally, hence, the company was also seeing an increase in utilisation rate.

He said the company saw a lower utilisation rate of about 66 per cent in the first quarter of this year compared with 73 per cent in the last quarter of 2018 as it was finishing a lot of contracts last year.

“With the new contracts and existing two contracts which is still valid until end of the year and first quarter of next year, all the seven rigs would be almost fully utilised in the second half of this year, “ he told reporters after the company’s annual general meeting here, today.

Velesto recently secured four contracts from Petronas Carigali Sdn Bhd worth US$105 million (US$1=RM4.19) which have tenures of one year with two annual extension options.

As the contract will only start in May and June, the significant increase in utilisation could only be seen in the third and fourth quarters of this year until 2020 onwards, Rohaizad said.

Commenting on rigs utilisation, chairman Datuk Abdul Rahman Ahmad added that the company’s business was seasonal in nature whereby Q1 are usually slower than Q4 due to the monsoon season, thus historically, the former always had lower utilisation rate.

By securing four long-term contracts from Petronas Carigali, the outlook of utilisation was solid for 2019 and 2020, he added.

Moving forward, Rohaizad said with the oil price expected to be around US$60-US$80 a barrel this year, the company was cautiously positive that the industry activities would continue as the price is still higher than cost at about US$35 a barrel for offshore and around US$8-US$10 a barrel for onshore.

On local demand, he said Petronas alone required 16 to 17 rigs this year and 17 to 19 rigs next year. 

However, expansion in assets would have to wait for the real recovery in the industry, he said.

Although, the company currently owns only seven rigs, which is not sufficient to accommodate the demand, the number is still ideal considering the demand is not steady due to market volatility.

Velesto’s order book currently stands at RM1.54 billion and its tender book was at RM2.29 billion, he said adding the company had submitted bids in 39 tenders.

“We have only three rigs available by year-end and first quarter next year, as four have already being awarded. If we get three tenders out of 39, it would mean full utilisation of the assets,” he said.

Rohaizad said the company was also allocating about US$60 million in capital expenditure this year which would be utilised for normal replacements of fixed assets of the rigs as well as to send four rigs for re-certification.

Velesto had reduced its losses for the past two years and was on track to recovery and hoped to improve further, he said.

The implementation of various cost optimisation and efficiency improvement initiatives had resulted in RM30.3 million in savings last year and the company would retain the low-cost structure moving forward to be more resilient and to improve its margins, he added.

— BERNAMA

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