[RAM] RAM Ratings assigns initial AA2(s)/P1(s) ratings to Velesto's RM1 bil IMTN and ICP Programmes issued by funding vehicle

RAM Ratings has assigned a AA₂(s)/Stable rating to Velesto Energy Berhad's (Velesto or the Group) proposed RM1.0 bil Islamic Medium Term Notes Programme and P1(s) rating on its RM1.0 bil Islamic Commercial Papers Programme. Both programmes share a combined limit of RM1.0 bil, and are issued by its funding vehicle, Sumber Ribu Sdn Bhd. The enhanced ratings reflect Velesto's credit strength as the purchase undertaking obligor and corporate guarantor for the programmes.

Velesto's credit profile underscores its role as the largest Malaysian provider of jack up drilling services to the upstream oil and gas (O&G) sector. The Group operates six high specification jack up rigs supporting shallow water projects across Southeast Asia, alongside two hydraulic workover units, which collectively contribute the bulk of its revenue and earnings. 

The Group continues to streamline its asset base, Velesto recently disposing of a drilling rig and its hydraulic workover business unit. Although earnings impact is modest, these initiatives demonstrate the Group's move toward a leaner, more capital efficient asset base, enhancing resilience against sector cyclicality. Velesto is also pursuing regional expansion, supported by ongoing digital transformation and supply chain optimisation efforts.

Operational performance remained strong, with average rig utilisation improving to 83%, while daily charter rates eased to USD112,000 in 4Q 2025 from USD126,000 in the corresponding quarter last year. The Group sustained a high asset uptime of 99%, driven by proactive maintenance and digitalisation. These improvements supported stronger financial outcomes, with the operating profit before depreciation, interest and tax margin widening to 46% in FY2025 (FY2024: 39%).

As at end December 2025, Velesto remained in a net cash position, with gearing at just 0.05 times, and leverage is expected to stay conservative. Funds from operations debt coverage is projected to exceed 0.7 time by FY2026, providing a healthy buffer against fluctuations in utilisation and charter rates.

Velesto's secured order book of RM1.3 bil, together with a robust tender pipeline, underpins earnings visibility over the next two years. With PETRONAS and other upstream O&G players as recurring clients, RAM expects the Group to continue benefiting from sustained regional demand for jack-up rigs.

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.


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

Ben Inn
(603) 2708 8290
ben@ram.com.my

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