Velesto’s NAGA 2 secured a new contract with Petronas Carigali to drill 5 wells with a contract value of USD12.4m. The contract is expected begin in Dec 2021 and it has the option to drill additional 1+1 wells at the end of contract expected in Apr 2022. Based on the assumption of 150 days (30 days/well), this implies DCR of USD83k/day. However, we estimate effective DCR is at USD70k/day as the estimated contract value includes other additional expenses such as mobilisation fees and procurement of other materials for the clients. This is largely similar to its current daily rate.
This is its third rig that has secured contract for 2022. NAGA 8 will be fully occupied for the whole year as it is contracted by Carigali Hess for drilling campaign at MTDJA whereas NAGA 4 is contracted by Sarawak Shell until mid-2022. Based on existing contracts, this implies utilisation rate of 30% for 2022. We expect it to secure more contracts in the near future based on our assumption of 70% utilisation rate. Its remaining tenderbook currently stands at RM1.8bn which comprises 5 short term local contracts, 3 long term local contracts and 5 foreign contracts.
Maintain BUY on Velesto with unchanged TP of RM0.28 pegging 1x P/B to FY22F. We think current high oil price and the improving Covid-19 condition in the country will expedite the roll-out of new drilling projects soon.
Source: BIMB Securities Research - 4 Oct 2021
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