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Quick take: Velesto shares lifted by Carigali Hess contract win

KUALA LUMPUR: Shares in Velesto Energy Bhd traded up almost 7% in early trade Wednesday after the company secured a RM541mil from Carigali Hess Operating Company Sdn Bhd.

The oil and gas company rose 6.94%, or 2.5 sen to 38.5 sen. It is currently the most active counter on Bursa Malaysia with 25 million shares done.

Velesto Energy said its unit has bagged a contract worth US$131mil (RM541.17mil) from Carigali Hess, an oil and gas joint venture between PCJDA Ltd and Hess Oil Company of Thailand Ltd, is involved in gas production in the joint development area administered by the Malaysian-Thailand Joint Authority.

Velesto said the contract, awarded to its indirect wholly-owned unit Velesto Drilling Sdn Bhd, is for the provision of a 10K jack up drilling rig.

The contract is expected to commence in the second half of 2020, for a duration of three years with three extension options of six months each.

Affin Hwang Capital Research is positive on this new contract, but said Velesto will need to secure further extensions and another new winfor Naga 4to lock in 2H20 utilisation rates.

“Given the recent run up in share price, we downgrade the stock to a ‘hold’ with an unchanged target price at 37 sen, ” it said.

“We make no changes to our earnings forecasts although the renewed DCR for Naga 8 is higher than our current assumption.

“With this new contract secured, Velesto now needs to negotiate an extension for 4 of its rigs with Petronas Carigali, and also a new contract for Naga 4 to secure utilisation rate for 2H20, ” Affin said.

Source: TheStar