Velesto Energy Q2 2025 Financial Review: Navigating Market Headwinds with a Strong Order Book
Velesto Energy Berhad has just released its financial results for the second quarter ended June 30, 2025. While the numbers show a dip compared to a stellar performance last year, the report reveals a company strategically positioning itself for the future with higher charter rates and a robust order book. Let’s dive into the details and see what this means for the energy giant.
One of the most eye-catching announcements is the declaration of an interim dividend, signalling confidence in its financial standing and commitment to shareholder returns. But the core story lies in the operational dynamics of its drilling segment.
Q2 2025 Core Financial Highlights: A Year-on-Year Snapshot
This quarter’s performance saw a notable decrease when compared to the same period in 2024. The primary drivers for this shift were the completion of a significant i-RDC project in late 2024 and a lower jack-up rig utilisation rate. However, this was partially cushioned by higher average daily charter rates, which rose to USD123k/day from USD115k/day last year.
Q2 2025 (Current Quarter)
Revenue: RM199.9 million
Profit Before Tax: RM61.3 million
Profit After Tax: RM50.4 million
Earnings Per Share (EPS): 0.61 sen
Q2 2024 (Comparative Quarter)
Revenue: RM393.4 million
Profit Before Tax: RM86.2 million
Profit After Tax: RM62.8 million
Earnings Per Share (EPS): 0.76 sen
Deep Dive into Business Segment Performance
Velesto’s operations are primarily divided into two segments: Drilling and Others. As expected, the Drilling segment remains the powerhouse of the group’s revenue and profitability.
Drilling Segment: The Core Engine
The Drilling segment reported revenue of RM195.8 million, a significant decrease from RM389.7 million in the corresponding quarter. This was mainly due to a lower rig utilisation rate, which stood at 57% compared to an impressive 98% in Q2 2024. The completion of the i-RDC project also contributed to this decline. Despite the lower revenue, the segment still posted a healthy profit before tax of RM60.9 million, supported by higher daily charter rates and a reversal of a prior year’s cost provision.
Others Segment
The “Others” segment, which includes operations in Tianjin, showed positive growth. It recorded a higher revenue of RM4.1 million (vs. RM3.8 million in Q2 2024) and swung to a profit before tax of RM0.5 million from a loss of RM0.3 million last year, reflecting improved performance in its smaller business units.
Assessing Financial Health: The Balance Sheet
A look at the company’s financial position as of June 30, 2025, reveals prudent financial management.
| Indicator | As at 30/06/2025 (RM’000) | As at 31/12/2024 (RM’000) | Change |
|---|---|---|---|
| Total Assets | 2,799,578 | 3,071,309 | -8.8% |
| Total Liabilities | 338,760 | 500,106 | -32.3% |
| Total Equity | 2,460,818 | 2,571,203 | -4.3% |
| Net Assets Per Share (RM) | 0.30 | 0.31 | -3.2% |
The Group’s total assets decreased mainly due to foreign exchange revaluation on property, plant, and equipment. More significantly, total liabilities saw a sharp reduction of RM161.3 million, driven by lower trade payables and repayments of borrowings. This demonstrates a clear effort to deleverage and strengthen the balance sheet.
Dividend Declared for Shareholders
In a move that will be welcomed by investors, the Board of Directors has declared an interim dividend of 0.75 sen per share for the financial year 2025. This amounts to a payout of RM61.62 million. The dividend will be paid on November 18, 2025, to shareholders on record as of October 21, 2025.
Risks and Future Prospects
Velesto’s management expresses cautious optimism for the remainder of 2025. The global energy market remains volatile, with Brent crude prices fluctuating in the USD65-70 per barrel range. While rising supply from OPEC+ and non-OPEC producers could exert downward pressure on prices, ongoing geopolitical risks provide a floor, keeping prices supported.
The key to Velesto’s future performance lies in its order book and operational strategy. As of July 2025, the company boasts a solid order book of RM1.2 billion, providing earnings visibility into 2028. Key highlights include:
- NAGA 2, 4, and 6: Contracted through Q1 2026.
- NAGA 5: Commenced work with PTTEP with extension options until Q1 2027.
- NAGA 8: Operating in Indonesia until February 2026, with a second phase expected to start in Q3 2026 for two years.
- NAGA 4: Secured a new contract in Vietnam from Q2 2026 to Q2 2027.
With global jack-up rig utilisation projected at 81% for 2025, Velesto is well-positioned with its long-term contracts. The Group’s focus remains on maximizing shareholder returns by preserving margins, securing long-term earnings, and implementing cost optimisation initiatives.
Summary and Investment Recommendations
Disclaimer: The following is a summary of the financial report and should not be construed as financial or investment advice. We do not provide buy or sell recommendations. Please conduct your own due diligence.
Velesto Energy’s Q2 2025 results reflect a transitional period marked by lower rig utilisation following the completion of a major project. However, the underlying operational strengths are evident in the higher daily charter rates and disciplined cost management. The significant reduction in liabilities and a continued commitment to dividends are positive indicators of financial prudence. The forward-looking order book of RM1.2 billion provides a strong foundation for future earnings and stability.
Key risks for investors to monitor include:
- Oil Price Volatility: The company’s fortunes are closely tied to global oil prices, which influence capital spending by oil and gas companies.
- Cyclical Nature of the Industry: The offshore drilling sector is inherently cyclical, and demand can fluctuate based on broader economic and geopolitical factors.
- Contract Renewals and Utilisation Rates: Sustaining high utilisation rates and securing favorable terms for contract renewals are crucial for future profitability.
Final Thoughts
From a professional viewpoint, this quarter’s lower numbers appear to be a result of timing and project cycles rather than a fundamental weakening of the business. The ability to secure higher charter rates and a multi-year order book in a competitive market speaks to Velesto’s strong operational capabilities and market position. The key will be to manage the current lull in utilisation for certain rigs and convert its strong order book into consistent profits.
What are your thoughts on Velesto’s performance this quarter? Do you believe the strong order book is enough to offset the current market volatility? Share your views in the comments below!
