This article first appeared in The Edge Financial Daily on May 30, 2019

KUALA LUMPUR: After incurring losses for the past four consecutive years, Velesto Energy Bhd is confident it will post “better numbers” in the second half (2H) of this year, on expectation of higher utilisation rate for its seven drilling rigs.

President and executive director Rohaizad Darus said the group is currently focusing on ensuring higher utilisation rate through expanding its market coverage.

“Despite the volatility in oil prices, the oil and gas (O&G) industry has seen significant improvements in activities not only in Malaysia, but also regionally and globally,” he told reporters after Velesto’s annual general meeting here yesterday.

“Moving forward, I believe the industry will continue to grow despite the volatility. Velesto will continue to ride on this industry’s recovery and we hope to be able to improve our bottom line soon.”

For the financial year ended Dec 31, 2018 (FY18), the group’s utilisation rate improved to 73% from 70% in FY17.

Together with cost-saving initiatives and other efficiency improvements, Rohaizad said FY18’s core net loss, excluding impairment provisions, narrowed 94% to RM9.1 million from RM147.1 million.

Rohaizad said the continued recovery in the O&G industry globally has resulted in increased drilling activities, as evidenced by the four long-term contracts recently awarded to Velesto by Petronas Carigali Sdn Bhd. The contracts, worth a combined US$104.68 million (RM433.07 million), are on a firm duration of one year, plus two extension options of one year each.

Rohaizad, however, expects the group to see significantly better utilisation rate during the second half of the year as the contracts will only commence by the end of this month and early next month. The utilisation rate of its drilling rigs will then go up to 95%, he said.

“From next week, all seven rigs will be working and then after that the only gap [it] will have is if there is any downtime or change of equipment,” he said.

Although Petronas Carigali had announced that it might require up to 19 drilling rigs until 2020 in its activities outlook, Rohaizad said Velesto is mindful that the demand may not be steady.