Quick take: New contract wins boost Velesto shares

KUALA LUMPUR: Shares in Velesto Energy Bhd rose over 2.7% in early trade after the company secured a US$30mil contract from Mubadala Petroleum LLC.

The oil and gas company added 2.74%, or one sen to 37.5 sen. Velesto-WA added 3.7%, or 0.5 sen to 14 sen.

Velesto has bagged a US$30mil contract from Abu Dhabi’s Mubadala Petroleum LLC to provide

jack-up drilling rig to undertake drilling services for the Pegaga development drilling programme.

Velesto said its indirect wholly-owned subsidiary Velesto Drilling Sdn Bhd has received a letter of award from Mubadala Petroleum’s entity MDC Oil & Gas (SK 320) Ltd for the proposed services.

“The contract is to drill seven firm wells with an expected commencement date envisaged for the second quarter of 2020,” it said.

Velesto said it will use its NAGA 4 rig, which has a drilling depth capability of 30,000ft and an operating water depth of 400ft, to undertake the works.

BIMB Securities Research has reiterated “buy” on Velesto with unchanged target price of 43 sen which implies 1.2x FY20F P/B.

“We believe this is fair in view of sustained recovery in the jack-up rig market, as well as its dominant position as the largest local rig operator, ” it said.

BIMB estimated the average daily charter rate (DCR) is worth US$80,000 per day which is circa 15% higher than its current average DCR of US$70,000 per day.

“We are optimistic with Velesto’s turnaround as most of its rigs are occupied with jobs until 1H22, ” it added.

Source: TheStar