Velesto Energy Berhad slipped into a net loss of RM15.25 million for the second quarter ended June 30, 2020 (2QFY20) after being recorded profitable in the last quarter.
On its quarterly loss, Drilling Services segment registered a 7.8% decrease in revenue to RM137.9 million in current quarter, mainly due to lower average jack-up rig utilisation of 67% as compared to 74% in the corresponding quarter.
While for the Oilfield Services segment, it recorded a 58.8% decline in revenue to RM3.0 million in current quarter. This was mainly due to lower revenue from workover services resulted from lower utilisation of hydraulic workover units in the current quarter.
The impact of COVID-19 continues to suppress global oil and gas demand causing continued lower oil price. The benchmark Brent crude is hovering around USD45 per barrel and it is not expected to recover significantly in the near future. The uncertainty in the recovery of the oil price is causing most oil companies to delay the decision on exploration and development activities.
Many oil companies globally including PETRONAS have reduced both capital and operational expenses to conserve fund. This has resulted in reduced activities including in the drilling sector. In Malaysia, a number of existing drilling contracts are not extended and options are not exercised, resulting in lesser drilling activities.
Currently, only five of the Group’s seven jack-up drilling rigs are working with some contracts expiring in the next few months. At present, there is a small number of new short term contracts being awarded domestically and globally, and we will continue to tender and negotiate for new contracts.
All the hydraulic workover units of the Group are currently idle. The demand for workover and plug and abandonment activities are soft due to the weak market environment. However, the Group’s oilfield services operation in China is seeing a gradual recovery in demand. The viability of this subsidiary will be continuously monitored and evaluated.
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