Velesto Energy exceeds expectations on higher rig rates, slower costs
KUCHING: Velesto Energy Bhd's (Velesto Energy) results for its financial year 2023 (FY23) beat expectations due to higher rig utilisation rate and slower cost increase.
Its average daily charter rate (DCR) rose during FY23 and we expect further upside in FY24 as its rigs undergo renewals.
Its FY23 core net profit of RM100.3 million beat Kenanga Investment Bank Bhd's research arm (Kenanga Research) forecast and the consensus estimate by more than 100 and 69 per cent, respectively.
"The variance against our forecast came largely from higher-than-expected rig fleet utilisation rate and contained operating costs.
"Yyear on year (y-o-y), its FY23 top line more than doubled due to an improvement in rig utilisation rate from 62 per cent to 83 per cent and an increase in the average DCR from US$77,000 to US$94,000.
"This more than covered higher operating, depreciation and finance costs, resulting in a turnaround."
Quarter on quarter (q-o-q), its 4QFY23 top line grew 24 per cent largely attributable to a significant improvement in rig utilisation, which rose to 94 per cent from 60 per cent, on a stable average DCR.
Its core net profit surged 17fold as operating expenses were well contained.
Currently, all six of the company's rigs are in use, but five are scheduled to conclude their current charters in 1HFY24.
"This scenario presents an opportunity for the company to secure new charters, potentially at higher DCR, considering the strong market demand for jack-up rigs," Kenanga Research said.
"Also helping, is stabilising labour cost."
Kenanga Research raised its F24 net profit forecast by four per cent after adjusting for slightly lower growth rate in operating costs.