Velesto expects insurance to mitigate sunken rig costs

Malaysian rig owner Velesto Energy expects the financial impact of an incident in which its NAGA 7 jack-up tilted and submerged off Sarawak will be mitigated by the insurance.

The incident happened on Velesto Energy’s NAGA 7 jack-up rig on Monday, 3 May 2021 due to rapid penetration into the formation.

The NAGA 7 rig tilted and subsequently submerged at the location on 4 May.

In an update on Thursday, Velesto said that the operation of Velesto NAGA 7 was interrupted.

Subsequently, the focus remained on rescue, evacuation, and recovery efforts and the company stated that all 101 personnel onboard have been transferred safely to Miri, Sarawak.

“At the time of this announcement, the board of directors is unable to estimate the overall financial impact on the group from this incident, but expects it to be mitigated as the rig is adequately insured”, Velesto added.

Apart from this, the company said that other businesses of the group are operating as usual, including the other six rigs in the fleet.

The company noted it is working closely with the client and insurers, and providing full cooperation to the relevant authorities.

Malaysian business and financial news publisher The Edge Markets previously said that, as a result of the incident with the NAGA 7 rig, Maybank Investment Bank Research had cut Velesto Energy’s FY21 to FY23 earnings by 58 per cent to 144 per cent due to the operational setback on the rig.

NAGA 7 is an independent-leg cantilever jack-up rig delivered in January 2015. It has a drilling depth capability of 30,000 feet and has a rated operating water depth of 375 feet.

At the time of the incident, the rig was working for ConocoPhillips under a contract, which was awarded back in March 2021.

The rig was hired to drill up to three wells with the tentative start date sometime in the first half of 2021.

The NAGA 7 rig also previously worked for Petronas back in 2019. Before that, the rig worked for Shell.