KUALA LUMPUR (April 22): Velesto Energy Bhd’s earnings prospects are expected to turn rosier after having secured fresh contracts for its four jack up drilling rigs.
The rig operator announced this evening that it has bagged four jack up drilling contracts from Petronas Carigali Sdn Bhd with an estimated combined value of US$104.68 million (about RM433.07 million).
In a Bursa Malaysia filing, Velesto, formerly known as UMW Oil & Gas Corp Bhd, said its wholly-owned subsidiary Velesto Drilling Sdn Bhd has received four Letters of Awards for the provision of jack-up drilling rig services for its jack-up rigs, namely NAGA 2, NAGA 3, NAGA 5 and NAGA 6 respectively.
Velesto said the first three contracts, which start April/May, will involve its jack-up drilling rigs known as NAGA 2, NAGA 3 and NAGA 5 respectively. The fourth contract will start in June/July and Velesto will assign NAGA 6.
NAGA 2 and NAGA 3 are premium independent-leg cantilever jack-up drilling rigs that have a drilling depth capability of 30,000 feet and have a rated operating water depth of 350 feet.
NAGA 5 has a drilling depth capability of 30,000 feet and a rated operating water depth of 400 feet whereas NAGA 6 has a drilling depth capability of 30,000 feet and a rated operating water depth of 375 feet.
The provision of the above-mentioned services is expected to contribute positively to the earnings and net assets of the group during the contract period for the financial period ending Dec 31, 2019.
The rig operator has managed to make it back on analysts’ recommendation lists. According to Bloomberg data, five out of seven analysts tracking the counter have a “buy” rating on Velesto.
Velesto’s share price has staged a strong rebound from its all-time low of 17.5 sen in late December last year to a high of 31 sen last month. Year to date, the stock has gained 69.4%. However, its current share price is very near to the average target price of 31 sen.
It will be interesting to watch if the four contracts are good enough to lift its target price to a higher level.