Velesto incurs RM26m net loss on higher operating expenses, finance costs, tax

KUALA LUMPUR (Feb 27): Velesto Energy Bhd posted a net loss of RM26 million for the fourth quarter ended Dec 31, 2022 (4QFY2022), versus a net profit of RM5.43 million a year ago, as the bottom line was hit by higher operating expenses, finance costs and taxation.

Operating expenses at RM244.35 million surpassed revenue of RM243.07 million, resulting in a RM1.11 million loss from operations, according to the group's Bursa Malaysia filing.

Adding salt to the wound was higher finance costs of RM10.4 million, from RM8.52 million in 4QFY2021, as well as taxation of RM15.21 million versus a RM696,000 over-provision of tax previously.

The quarterly revenue of RM243.07 million is 53% higher than the RM158.48 million reported for 4QFY2021, driven by higher utilisation of the group’s jack-up drilling rigs.

On a segmental basis, the group’s profitability was dragged down mainly by its workover services.

Velesto owns and operates a fleet of modular and versatile workover units that are meant for well intervention operations located either on small satellite jackets or large integrated platforms. These hydraulic-driven workover units with high pulling capacities are capable of performing a wide range of workover services.

Velesto said its integrated services segment — which houses the workover services — recorded a bigger quarterly loss before tax of RM13.9 million, compared with RM1.8 million in 4QFY2021, no thanks to a one-off RM11.7 million cost incurred due to unanticipated changes to work programme, prolonged wait on weather period during the demobilisation, and adjustment of inventories.

For FY2022 as a whole, net loss widened to RM100.4 million from RM90.82 million in FY2021, as revenue grew 54% to RM580.85 million from RM377.51 million.

Going forward, Velesto said the positive outlook in the global oil and gas industry augurs well for its financial performance in FY2023, which is expected to be “better than that of the preceding year”.

“The oil and gas outlook remains strong. The benchmark Brent oil price is expected to remain above US$80 per barrel in the medium term,” it said, adding that the group will continue to bid for new jobs for this year and next year.

Shares of Velesto, which has appreciated 83% since the beginning of the year, closed unchanged at 27.5 sen on Monday (Feb 27), giving the group a market capitalisation of RM2.26 billion.