KUALA LUMPUR (March 14): Velesto Energy Bhd rose half a sen or 4.55% to 11.5 sen on Monday morning (March 14) after it announced last Friday that it had received a two-year contract to provide jack-up drilling rigs to Petronas Carigali Sdn Bhd. The project is expected to commence in the first quarter of this year, with an extension option of one year plus one year.
The counter, which was among the most actively traded stocks, saw 19.89 million shares traded.
Hong Leong Investment Bank Research analyst Jeremie Yap said in a note on Monday he is slightly positive on this development as ground indications are leading to a pickup in Petronas' upstream capital expenditure (capex) in 2022 amid the current high crude oil price environment.
Yap is forecasting Velesto to turn profitable in the financial year ending Dec 31, 2022 (FY22) to FY23 as he expects to see a pickup in drilling rig tenders this year amid high crude oil prices, which will lead to increased activity in the oil and gas space.
“We believe that Velesto would not use the Naga 7 insurance proceeds to acquire a new rig as it will continue to optimise its assets and continue improving its balance sheet.
“We also highlight notable balance sheet improvements — i.e. net debt and net gearing stood at RM289 million and 0.13 times as at end-December 2021 (versus net debt and net gearing of RM793 million and 0.35 times a year ago),” he said.
He, however, made no changes to his FY22 and FY23 earnings estimates.
“While blended utilisation levels in 1Q22 (the first quarter of 2022) is expected to remain lukewarm due to the annual timeline of clients’ capex planning cycle, we expect Velesto to perform better in FY22 on a full-year basis (as compared to FY20 to FY21),” he said.
He maintained "buy" on Velesto, with an unchanged target price of 18 sen.