[RAM] RAM Ratings assigns initial AA2/P1 ratings to Velesto Energy Berhad

RAM Ratings has assigned corporate credit ratings of AA₂/Stable/P1 to Velesto Energy Berhad (Velesto or the Group). The Group is a niche and  sole Malaysian provider of jack-up  drilling services for the upstream oil and gas (O&G) sector. It is 51.6% owned by Permodalan Nasional Berhad, one of Malaysia’s largest government-owned investment companies. No rating uplift is accorded to the Group’s ratings as we view the likelihood of extraordinary support to be ‘low’ under our rating methodology for government-linked entities.

Operating  six high-specification jack-up rigs, primarily serving shallow-water projects across Southeast Asia, and two hydraulic workover units, this core segment accounts for almost all the Group’s revenue and earnings. The Group boasts a strategic market position in the domestic upstream O&G segment, achieving healthy above-average rig utilisation and daily charter rates in the last three years. This, coupled with past deleveraging efforts have resulted in a strong and clean balance sheet today, a key consideration that anchors the Group’s rating. This strong buffer is critical to shield Velesto against the inherent volatilities of the O&G sector, as well as softening daily charter rates amidst the global oversupply of rigs and potential reduction in capex investments by oil majors. 

As at end-June 2025, Velesto was in a net cash position, with a gearing ratio of just 0.05 times and leverage is expected to stay conservative. Projected funds from operations debt coverage is anticipated to exceed 1.0 time by fiscal 2026, providing Velesto ample headroom to withstand potential fluctuations in rig utilisation and charter rates.

The Group’s secured order book (of circa RM1.2 bil) and tender book provide high earnings visibility for the next two years. Counting PETRONAS (which accounts for over half of fiscal 2024 revenue) and other upstream O&G companies as repeat clients, RAM expects Velesto to continue to benefit from sustained regional demand for jack-up rigs. The Group is mitigating against client concentration and potential capex softening by pursuing regional diversification, entering into longer-term charter contracts and pivoting to an asset-light strategy. Early investments in digitalisation and proactive maintenance have translated into positive financial outcomes, seeing the Group’s operating profit before depreciation, interest and tax margin grow to 48% in 1H FY Dec 2025, a testament to its disciplined execution and strategic focus. 


Analytical contact
Chew Wei Li
(603) 2708 8301
weili@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my