KUALA LUMPUR (July 20): Velesto Energy Bhd (KL:VELESTO) said its four-year drilling contract worth over US$90 million (RM368.41 million) for the Naga 8 jack-up rig has been mutually terminated after the rig completed only three of the 12 committed wells.
The oil and gas services provider said its indirect wholly owned subsidiary Velesto Drilling Sdn Bhd and clients PC Ketapang II Ltd, PC North Madura II Ltd and Petronas North Ketapang Sdn Bhd agreed to terminate the contract “without cause” on July 7.
Beyond that, Velesto did not disclose any specific reason for the termination.
“Prior to the termination, [Velesto Drilling] had successfully completed Phase 1 of the project, comprising three of the 12 commitment wells over approximately eight months,” the company said in a Bursa Malaysia filing on Monday.
The contract, first announced in May 2025, was for a period of four years covering 12 firm wells and three optional wells.
A suspension period had been scheduled from February to July 2026, during which Velesto was permitted to market Naga 8 for other opportunities, before operations were expected to resume this month.
Velesto subsequently secured a separate US$16.49 million contract from Jadestone Energy (Malaysia) Pte Ltd in February 2026 to deploy Naga 8 for the East Belumut Phase 9 infill drilling project offshore Peninsular Malaysia.
The four-month Jadestone contract runs from March to July 2026.
Velesto said the termination of the earlier contract gives it the opportunity to market Naga 8 for other jobs.
“The group is currently undertaking efforts to secure new contracts with improved commercial terms, optimised drilling sequence and enhanced overall commercial prospects,” it said.
The termination is not expected to have a material adverse impact on the group’s earnings and net assets for the financial year ending Dec 31, 2026, after taking into account the Jadestone contract and other opportunities being pursued, Velesto added.
Just last week, Velesto called off the proposed US$63 million sale of its Naga 3 jack-up rig to Indonesia’s PT Indonesia Drilling Energy after the transaction was not completed by the agreed deadline.
Velesto did not explain why that transaction failed to meet the deadline, and Naga 3 remains an asset of the group.
Shares of Velesto slipped half a sen, or 2%, to close at 25.5 sen on Monday, giving the company a market capitalisation of RM2.11 billion.