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RAM Ratings assigns initial AA2/P1 ratings to Velesto Energy Berhad
Published on 22 Aug 2025.
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
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
© Copyright 2025 by RAM Rating Services Berhad
