KUALA LUMPUR: Velesto Energy Bhd is expected to be the beneficiary from the current upward trend in charter rates and future improvements, according to Hong Leong Investment Bank (HLIB).
This is after Velesto announced that it had bagged a job for the provision of one jack-up drilling rig from Thailand's PTT Exploration and Production Public Co Ltd (PTTEP) with contract value of US$13.0 million.
Under the contract, Velesto's Naga 3 drilling rig is expected to drill two firm wells from February 2023 for about 100 days.
HLIB is optimistic about the contract, but it points out that the outcome of the contract bid is well expected.
The firm has included the utilisation rate assumptions into its forecast which remained unchanged.
HLIB remains cautious about the potential cost hikes in the oil and gas, services and equipment industry.
"This concern arises from the combination of cost inflation challenges, intensified by increased demand for oil and gas, and disruptions in the global supply chain, which have impacted the availability of oilfield equipment and spares.
"Our assessments suggest that oil majors will proactively allocate upstream capex as long as oil prices remain above US$65 per barrel for a sustained period," it said.
HLIB maintains its call "Sell" on Velesto with the target price of 19 sen.