KUALA LUMPUR: Velesto Energy Bhd is aiming for a turnaround by the end of this year based on its projection of better utilisation rate from the recovery in the oil and gas industry, said president and executive director Rohaizad Darus.
Velesto narrowed its losses from RM1.18 billion for the year ended 31 December 2016 to RM20.44 million for the year ended 31 December 2018.
Rohaizad said the utilisation rates for Velesto’s jack-up rigs had improved over the years from a challenging 21 per cent in 2016 up to 73 per cent last year.
“This is a clear sign that the oil and gas industry is recovering from a slowdown in the past two years. If there is no external major shock that could lead to major change in oil price, we will be able to hit more than 80 per cent target of our jack-up rigs’ utilisation rate.
“We would like to also extend our heartfelt thanks to Petroliam Nasional Bhd (Petronas) for its contribution in the domestic oil and gas industry during the slowdown that helps to keep local companies like ourselves to stay afloat,” he told the New Straits Times in an interview on the sidelines of the recently-concluded 2019 Asia Oil & Gas Conference (AOGC) here.
Apart from the lively exchange and vigorous handshakes over trading of business cards at the industry exhibition, Rohaizad also noted that Petronas’ recent capital expenditure guidance was another clear sign that the industry was inching towards a slow but encouraging recovery.
The buzz of recovery is unmistakeable at the exhibition.
Petronas has announced a capex allocation of more than RM50 billion for 2019, compared to RM47 billion in 2018 and according to Petronas Activity Outlook report for 2019-2021, between 16 to 19 jack-up rigs were required each year during the period.
The sentiment has obviously cascaded down in the industry when, in February 2019, Velesto managed to bag a RM155 million contract extension from Hess Exploration and Production Malaysia BV for a high pressure, high temperature jack-up drilling rig, the NAGA 8, for work in offshore Peninsular Malaysia.
In April, Velesto’s unit, Velesto Drilling Sdn Bhd, secured four contracts for its jack-up rigs NAGA 2, NAGA 3, NAGA 5 and NAGA 6, with a combined value of RM432 million for a firm one-year charter.
The contracts came with two one-year extensions each.
The contracts for the NAGA 2, NAGA 3 and NAGA 5 jack-up rigs, with an estimated contract value of RM105 million, RM105 million and RM108 million respectively for the first one year period, will commence in May/June 2019.
The NAGA 6 jack-up rig services contract worth RM114 million also will commence soon after in July/August 2019.
“The continued recovery in the oil and gas industry globally has resulted in increased drilling activities as evidenced by the recent contracts awarded to Velesto. We are seeing more contracts being awarded globally with increased daily charter rates.
“The widely higher utilisation of drilling rigs helps to reduce the number of idling rigs. This augurs well for drilling companies such as Velesto, as it results in higher revenue and the opportunity to return to profitability,” he said.
Rohaizad said the company will continue to defend its leading position in Malaysia while progressively pursuing opportunities for global expansion by bidding for US$548 million worth of contracts domestically and around the Asean region, as well as in the Middle East.
He added that the company’s orderbook was healthy at RM1.5 billion.