KUALA LUMPUR (Nov 29): Oil and gas (O&G) services provider Velesto Energy Bhd's net profit for the third quarter ended Sept 30, 2023 (3QFY2023) dropped 91.9% to RM1.22 million from RM14.97 million in the corresponding quarter a year ago, despite higher revenue, as it incurred higher operating and finance costs.

Earnings per share for 3QFY2023 slipped to 0.01 sen from 3QFY2022's 0.18 sen, its Bursa Malaysia filing on Wednesday showed.

Quarterly revenue was at RM289.24 million, up 66.4% from RM173.78 million previously, as it recorded higher average daily charter rates for jack-up rigs under its drilling services segment, and higher utilisation of hydraulic workover units and increased progress of its integrated rig drilling completion project.

For the nine months ended Sept 30, 2023, Velesto recorded a net profit of RM32.84 million, as opposed to a net loss of RM74.40 million incurred in FY2022's corresponding period, as revenue jumped to RM855.80 million, more than double the RM337.78 million it recorded previously.

On prospects, Velesto said fundamentals of the O&G industry remain strong, with the benchmark Brent oil price remaining above US$80 per barrel in recent months amid production cuts and geopolitical tensions.

Despite the latest escalation of geopolitical risks in the Middle East, Velesto said global and regional upstream O&G activities, including in Southeast Asia, continued its upward trend, with more exploration and development projects being evaluated and sanctioned.

"Major oil producers continue to increase their capex in response to prolonged lack of investment in the past. In Malaysia, a number of new contracts have been awarded with more being tendered out," it noted.

"The positive outlook in the global O&G industry augurs well for the group's financial performance. The group is optimistic that the financial performance for the financial year 2023 [will] be better than 2022," Velesto added.

Velesto discontinues enforcement proceedings against Frontier Oil

Separately, Velesto has decided not to pursue the payment of early termination fees amounting to US$19.2 million (RM89.3 million) that its subsidiary was awarded by arbitration in 2018 against Frontier Oil Corp, as the latter was found to have insufficient assets to pay the debt. The discontinuation is also to prevent the company from incurring more costs, it said.

Its subsidiary, Velesto Drilling Sdn Bhd, was awarded the sum by the Singapore International Arbitration Centre in its dispute with Frontier Oil over a breach of drilling contract in north-west Palawan in the Philippines. The lawsuit against Frontier Oil was initiated in 2015, while the initial agreement between the two parties was inked in 2014.

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