KUALA LUMPUR (Nov 29): Velesto Energy Bhd's (KL:VELESTO) shares fell to their lowest in close to two years on Friday, despite reporting a more than 30-fold jump in its third quarter (3Q) net profit, as it flagged a challenging outlook amid slower demand after announcing that a client had suspended the contract of its Naga 8 jack-up rig.
Its share price dropped as much as 18.92% or 3.5 sen to its intraday low of 14.5 sen, before paring some losses to close at 16 sen — its lowest since November 2023 — still down by 2.5 sen or 13.51%.
Over 236.51 million shares changed hands, making it the most active counter of the day on Bursa Malaysia. At 16 sen, the jack-up rig operator, in which Amanah Saham Bumiputera (ASB) holds a 34.63% stake, was valued at RM1.28 billion. The stock is down 33.33% year-to-date.
Velesto is expecting a decline in the utilisation rates of its jack-up rigs for the fourth quarter this year and throughout 2025, due to the scheduling of special periodical surveys (SPS) and maintenance for three of its rigs — Naga 5, 8 and 3.
Naga 8 has already received a notice of suspension from Carigali Hess Operating Company Sdn Bhd, which will take effect on Feb 10 next year, or upon the completion of contract demobilisation — whichever occurs later — due to the early completion of the client's drilling programme. “We are taking this window of opportunity to expedite the SPS for Naga 8 to March 2025, to prepare Naga 8 for upcoming opportunities, which we are currently bidding for,” it said in a bourse filing announcing its latest 3Q results.
Velesto also noted that oil consumption is expected to grow slower to 104.4 million barrels per day amid the geopolitical risk, based on a forecast by the US Energy Information Administration (EIA).
"Global and regional demand for jack-up rigs is expected to slow down in 2025, putting downward pressure on utilisation and daily charter rates. Drilling activity in Malaysia is also expected to decline due to a reduction in exploration activities," it added.
Velesto made a net profit of RM42.93 million for its third quarter ended Sept 30, 2024 (3QFY2024), up from RM1.22 million in 3QFY2023, raising earnings per share to 0.52 sen from 0.01 sen. No dividend was declared.
Revenue for the quarter grew 21.83% to RM352.36 million from RM289.24 million, thanks to higher utilisation and average daily charter rates for jack-up rigs under its drilling services and an extension of its integrated rig, drilling, and completion (i-RDC) project in the quarter.
The utilisation rate for its jack-up rigs increased to 73% from 62%, while average daily charter rate rose to US$127,000 (RM907,597) per day from US$97,000 per day.
For the first nine months ended Sept 30, 2024 (9MFY2024), the group’s net profit jumped over four times to RM152.55 million from RM32.84 million in 9MFY2023, as cumulative revenue rose 26.71% to RM1.08 billion from RM855.8 million.