Friday 29 Mar 2024
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KUALA LUMPUR (Nov 8): Velesto Energy Bhd rose in active trade on Tuesday morning (Nov 8), after the offshore drilling service provider bagged a US$135 million (RM640 million) contract from Hess Exploration and Production Malaysia BV for the provision of integrated rig, drilling and completion services for Hess' North Malay Basin full field development campaign.

At the time of writing, Velesto's volume was at a high of 26.25 million shares, with the buy volume at 30.58 million and sell volume at 10.14 million.

The group’s 200-day average volume was recorded at 19.17 million, indicating that it was traded more than usual on Tuesday.

Additionally, the counter rose by half a sen or 3.85% to 13.5 sen in the morning.

According to Kenanga Research, the contract, being an “integrated” arrangement, has value coming from the integrated works, “with the jack-up rig charter portion estimated to be one-third of the total value”.

“Based on the job scope, we estimate the contract duration to be about 18 months, ending in the first half ending June 30, 2024 (1HFY2024), with daily charter rates for the rig lease to be roughly US$75,000 to US$80,000, well within current local average market rates,” according to Kenanga analyst Steven Chan.

“We expect the rig leasing portion of the job to fetch about 45% to 50% earnings before interest, tax, depreciation and amortisation margins in line with Velesto’s historical average.”

The research house made no changes in its FY2022-23 earnings forecasts, while maintaining its "outperform" call on Velesto, with an unchanged target price of 16 sen.

Edited BySurin Murugiah
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