KUALA LUMPUR (Aug 20): Velesto Energy Bhd, formerly known as UMW Oil & Gas Corp Bhd, has halved its net loss in the second quarter of financial year 2018 (2QFY18) on lower operating cost, interest as well as depreciation.

The group's net loss for the 2QFY18 ended June 30, 2018 narrowed to RM24.1 million or 0.3 sen per share from RM51 million or 2.36 sen per share in the year-ago quarter, though revenue fell 20% year-on-year (y-o-y) to RM111.8 million from RM139.9 million.

The group's quarterly results note indicates that both its drilling services and oilfield services reported lower revenue due to lower rig utilization and reduced threading activities in Labuan and China.

Drilling services posted a 20% y-o-y decline in turnover to RM107.5 million from RM134 million. "Out of the seven jack-up rigs, while six were income-generating, only two of them contributed a full-quarter revenue in the second quarter of 2018. The average asset utilization rate was 59% as compared to 68% in the same period of 2017," said Velesto.

Nevertheless, the segment saw a lower loss before tax (LBT) of RM29 million in 2QFY18 as compared to an LBT of RM42.3 million recorded in 2QFY17 amidst lower operating cost, interest and depreciation charged during the current quarter.

Its oilfield services segment's revenue also declined by 31% y-o-y to RM4 million from RM5.8 million, mainly due to lower demand from its subsidiaries in Labuan and Tianjin, China. This resulted in the segment's LBT expanding y-o-y to RM2 million from RM500,000.

For the first six months ended June 30, (1HFY18), Velesto's net loss shrank y-o-y to RM19.1 million or 0.24 sen per share from RM155.1 million or 7.17 sen per share, as revenue grew by 9% to RM233.6 million from RM214.2 million.

Velesto noted that Brent crude oil price has been stabilising to US$70-US$80 per barrel over the last few months despite supply-demand and geopolitical issues.

"The higher and stable oil price will result in more exploration and development activities, especially in drilling. The current price range is sufficient to sustain and encourage continued activities in the near and medium term," it said.

Velesto also shared that all seven of the group's jack-up drilling rigs are contracted, with five working currently. The remaining two are scheduled to be mobilised before the end of August.

"Based on present schedule, an almost full utilisation is expected at least until year end, with some spilling over into 2019 and beyond. For the hydraulic workover units (HWU), one is currently working while another will be mobilised before the end of August," it noted.

The group said it is "aggressively bidding and negotiating for new contracts to replace expiring ones" although time charter rates remain challenging due to the global oversupply of rigs.

Velesto's share price closed unchanged at 29 sen after about 18.3 million shares traded, giving it a market capitalisation of RM2.38 billion.