Page 8 - AsianOil Week 12 2021

AsianOil SOUTHEAST ASIA AsianOil

Velesto wins drilling

contracts from Petronas

PROJECTS & MALAYSIA’S state-owned Petronas has Industry observers are increasingly upbeat
COMPANIES awarded drilling contracts for up to six shal- about the Malaysian upstream’s prospects, after
low-water wells to local service provider Velesto the coronavirus (COVID-19) forced develop-
Energy. ers to slash their capital expenditure budgets in
Velesto said in a stock exchange filing on order to survive the downturn.
March 19 that wholly owned subsidiary Velesto
Drilling had won two contracts worth more than Outlook optimism
$20mn for the NAGA 2 and NAGA 5 jack-up MIDF Research, for one, upgraded the sector to
rigs. positive on March 11 while noting that the sec-
NAGA 2 can operate in water depths of up to tor’s recovery “remains on track”.
350 feet (107 metres) and is capable of drilling This sense of optimism is being driven by
to a depth of 30,000 feet (9,144 metres), while both macro and micro factors. For example, the
NAGA 5 can operate in up 400 feet (122 metres) global economy is slowly recovering, helping to
of water and drill to 30,000 feet. buoy oil prices, which have also received support
Velesto said NAGA 2 would drill three firm from the recent OPEC+ to keep production cuts
wells, with work to begin between May 15 and in place. At a local level, Petronas is expected
June 15, while NAGA 5 had been assigned one to expand its domestic capex for this year to
firm well with an extension option of one plus MYR22-24.75bn ($5.33-6mn) from MYR17.3bn
one well, with work to start between April 1 ($4.19mn) in 2020.
and April 14. The value of the four firm wells MIDF Research said: “We are expecting
amounts to $20.76mn. O&G players to register stronger year-over-year
The contract wins have raised analyst expec- earnings growth in 2021, after a series of com-
tations for the service provider’s short-term mendable earnings recovery recorded from [Q3-
prospects, with Maybank Investment Bank 2020] onwards.”
Research suggesting they represented the start AmBank Research, meanwhile, pointed to
of a turnaround for the beleaguered company. the sanction of MYR1.5bn ($363.7mn) worth
“For that, we raise our EV/replacement on new projects in the fourth quarter 2020
value to 1x (mean valuation) vs. 0.7x previously as cause of cheer after noting that new pro-
(-1SD) to reflect a cyclical recovery outlook. This ject rollouts had fallen to a three-year low of
equates to a higher TP of MYR0.30 (vs. MYR0.13 MYR569mn ($137.95mn) in the first quarter
previously),” local daily The Star quoted the bank of last year. The research house said at the start
as saying on March 22. of this month that the recovery in new projects
The research house noted that Velesto was indicated that worst of COVID-19 was behind
expected to release a poor set of financials for the the sector, given “prospects of stronger order
fourth quarter of 2020, owing to low utilisation flows in 2H21”.
of its drill rigs, with that weakness likely to drag Indeed, local daily The Edge reported earlier
on through the first half of this year. Maybank this month that Petronas had invited 10 local
has predicted that the company will record utili- shipyards to participate in a tender to build 16
sation rates of 64%, 60% and 74% for 2020, 2021 offshore support vessels (OSVs), with a com-
and 2022 respectively. bined estimated price tag of $180-220mn.™

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