Maybank Investment Bank (Maybank IB) expects a strong quarter for Velesto Energy Berhad and they lifted its FY25E earnings by +5% (FY24/26E unchanged) to match Velesto’s guidance on its rig schedule during its recent analyst briefing.
Maybank IB’s renewed FY24-26E assumptions are: i) utilisation rates of 83%/88%/83%; and ii) blended average DCRs of USD112k/130k/132k respectively.
Malaybank IB maintains BUY with a trimmed TP to MYR0.34 (from MYR0.35).
Saudi Aramco suspended about 20 JU rig contracts
Upstream Online (link) reported that Saudi Aramco has “temporary suspended” about 20 JU rig contracts for about 12 months, following the country’s decision to pause further expansion of its oil production capacity beyond 12mbpd.
Concerns are lingering on the possibility of some of these new rigs entering the SE Asia region, which may put downward pressure on future DCRs beyond 2026-2027E.
Velesto pretty much shielded at least until end 2025E
Recall that Velesto announced in late Mar 2024 that it secured contract extensions from PCSB for N2, N4 and N6 (link) for the next 2 years.
Also, N8 is fully contracted with Carigali-Hess under a LT contract till Oct 2025. This leaves only N3 (which ends its current work order in Dec 2024 before going into SPS) and N5 (which ends its current job in July 2024), which according to management, are in bids and negotiations for charter contracts till end-2025E.
With that, Maybank IB concludes that Velesto is pretty much shielded until then, as all of its rigs will be fully utilised for the next 18 months (except for SPS).
Maybank IB expects the upcoming 1Q24E to be strong
Velesto’s 1Q24 results will be released on 23 May 2024. Maybank IB expect its 1Q24 utilisation rate to be flat QoQ at 94% (with all JU rigs utilised) and an average blended DCR of USD98k (4Q23: 94% with DCR @ USD99k). They estimate Velesto to be raking in a 1Q24E CNP of about MYR45-50m (4Q23: MYR57.7m), barring any unforeseen cost swings.
