Velesto Energy Berhad : - Annual Report 2021

Integrated Annual Report 2021

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OUR iLEAP CORE VALUES

EXCELLENCELEADERSHIP

• • We aspire to be the leader in our business.

• • We support and encourage our people to become a competent and recognised team in the industry.

• • We embrace humility, clear communication, teamwork and respect.

• • We lead by example.

• • We are passionate to do our best to exceed expectations.

• • We are committed, disciplined and focused to achieve excellence in everything we do.

• • We oblige safety as our utmost priority.

• • We continuously identify and innovate better ways to improve our own targets and beyond what people and customers expect of us.

• • We deliver value through performance, innovation and service quality.

AGILITY

• • We are strong and committed to our objectives, and are able to adapt to changes.

• • We are willing to improve ourselves and our Company.

• • We are proactive to create new and better ways to address challenges.

• • We are resilient and committed to create value.

INTEGRITY

• • We do the right things at all times.

• • We act with honesty and adhere to the highest standards of moral and ethical values.

• • We are accountable, open and responsible in all that we do.

  Velesto Energy

  Berhad is a

  Malaysia based multinational provider of services for the upstream sector of the oil and gas industry. The Group owns and operates six premium jackup drilling rigs, which are capable of operating in water depths of up to 400 feet - ideal for the shallow waters of South East Asia. VELESTO is also a provider of workover services through its fleet of hydraulic workover units. To ensure continuity and quality in the drilling sector, VELESTO plays its part through Velesto-INSTEP Drilling

  Academy.

  To be a leading player in the oil and gas industry, operating both domestically and globally supported by proven track records, true spirit, quality services and healthy growth potential.

  Developing a Malaysian owned company that provides quality services to the oil and gas industry and maintaining standards by matching - if not surpassing - other international companies providing similar global services.

  PEOPLE-FOCUSED

• • We earn people's trust.

• • We care for our people who are the greatest asset to our organisation.

• • We respect and value the diversity of our people and their opinions.

• • We recognise the efforts and achievements; appreciating and rewarding our people when they do good things and guide them to improve when they perform below expectations.

• • We work as a team, respecting and supporting each other.

ANNUAL REPORT 2021

About This Report

Velesto Energy Berhad ("VELESTO") and its subsidiaries ("the Group") continues to make progress in its adoption of the globally recognised, Integrated Reporting ("") framework. Now in its third year of reporting, the Group has strengthened its disclosures in accordance to the principles based framework of the International Integrated Reporting Council ("").

The rationale for adopting is to align VELESTO's corporate reporting to a best-practice reporting structure that enables effective disclosure of not just past performance but to provide more comprehensive disclosure on the Group's business model, operating environment, industry value chain and ultimately, how the Group creates financial and non-financial values.

This includes comprehensive yet concise disclosures on VELESTO's overall organisational performance, capital disbursements, risk and reward assessments, value growth appraisals, and qualitative transparency in addition to representing its continuous aptitude in delivering a strong and distinctive value proposition that positions the Group as a preferred best-in-class energy service provider.

The selection of the framework is to also facilitate effective disclosure on future oriented information such as outlook and prospects for the oil and gas sector, VELESTO and the Group's strategies in response to future trends and developments.

In realising the aforementioned disclosures, the reporting approach enables the development of integrated thinking within the Group; and also develops a stronger focus on ensuring value creation over the short, medium and long-term perspectives.

APPROACH TO REPORT CONTENT

In selecting relevant content for the Integrated Annual Report 2021 ("IAR2021"), VELESTO has adopted the following materiality criteria:

• • Information that is pertinent to the Group's business model and industry value chain

• • Information that is related to the creation of financial and non-financial values

• • Information that is deemed material from a triple bottom line perspective of environmental, social and governance perspectives

• • Information that is related to the Group's future orientation and strategic priorities

ABOUT US

In essence, information contained herein encompasses VELESTO's business operations, activities, processes and employees, including applicable Group subsidiaries in relation to the Group's principal business activity of Drilling and Oilfield Services. The IAR2021 disclosures may also include supply chain disclosures where relevant.

FRAMEWORKS APPLIED

Our report has been prepared in accordance with the following regulatory frameworks:

• • IIRC Principles Based Framework

• • Main Market Listing Requirements ("MMLR") of Bursa Malaysia Securities Berhad ("BURSA")

• • Bursa Malaysia Sustainability Reporting Guide, 2nd Edition 2018

• • FTSE4Good Index Disclosures (FTSE Russell's ESG Data Model)

• • Companies Act 2016 (Act)

• • Malaysian Code on Corporate Governance 2021 ("MCCG 2021")

• • Malaysian Financial Reporting Standards ("MFRS")

• • International Financial Reporting Standards ("IFRS")

• • ISO 31000 Risk Management Standard

MATERIAL SCOPE & BOUNDARY The material scope of this reportisregulatedby existing standards of relevant and accurate data collection in a consistent manner which, unless otherwise specified, currently reflects the Group's Drilling and Oilfield Services business operations and undertakings.

As VELESTO strives to persistently expand its proven Drilling Services and technology into more strategic international markets and regions of geographical focus, we are confident that future reports will be further imbued with valuable information obtained without compromise from these global operational assets.

RELATED INFORMATION

This report is accompanied with additional online disclosures for our stakeholders including consolidated and quarterly financial statements, policies, corporate governance documents, and other associated data instituted since the Group's establishment. This information is referred to in this report and additionally disclosed on VELESTO's company website at velesto.com

The Group's latest corporate presentations and BURSA announcements can also be found under the Investor Relations online portal (see "Reports & Presentations" and "Bursa Announcement" tabs respectively) at https://www.velesto.com/investor-relation-information/. News and press releases on the Group are also available on our corporate website athttps://www.velesto.com/ media-centre/.

Forward-Looking Statements

This report also provides statements referring to the Group's future predictions of its overall industry outlook and expected risks entailed, tactical geographical expansion, excellent Health, Safety and Environment performance, Sustainability, rig utilisation rate, expanded revenue opportunities, and value chain improvement prospects. Such informational assumptions have been derived from existing forecast models and current market conditions that may arbitrarily vary due to a myriad of factors beyond the Group's control.

As such, all forward-looking statements in this report are not categorically definite and actual plans and results relating to the Group's future operations or finances may significantly diverge from said statements in this report. Forward-looking statements issued in this report have not been reviewed or audited by an external auditor.

About This Report

Assurance

This report covers financial data audited by Ernst & Young PLT. Adhering to their reporting standards and process, the financial data depicts a true and fair view of the Group's financial standing. The report was prepared in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

The Group has not undertaken third-party assurance for non-financial and Sustainability related data.

SPECIFIC RELATED CONTENT SECTIONS Following are the key sections:

CORPORATE PROFILE

Basic introductory information of VELESTO such as its principal business operations, operating assets, location of operations and key facts and figures. The section serves to provide an understanding of the nature and extent of the Group's business operations.

OUR APPROACH TO VALUE CREATION

A concise view of how VELESTO creates financial and non-financial values. The section outlines what external and internal factors are drivers or influencers of the business model.

OUR VALUE CREATION MODEL

How VELESTO consumes resources and how these resources are utilised to create financial and non-financial values for stakeholders.

BUSINESS STRENGTHS & COMPETITIVE ADVANTAGES

An overview of VELESTO's business strengths and how these are leveraged upon to drive business strategies and ultimately, value creation.

STRATEGIC PRIORITIES

Identification of key strategic thrusts for VELESTO in response to the industry outlook going forward. The key aspect is how the Group's business model may change, if any to sustain or enhance value creation.

OUR RISKS

A description of major risks faced, as well as the Group's mitigation measures.

OUR VALUE CHAIN

A step-by-step review of the upstream oil and gas value chain in which VELESTO operates, with defined stages throughout the operational lifecycle.

INDUSTRY TRENDS AND THE EXTERNAL OPERATING ENVIRONMENT

Specific information on existing and emerging industry trends and external developments that impact or influence exploration and production activities.

OUR CAPITALS

The principal resources consumed by VELESTO through its business model and business processes for the creation of values. The section also covers challenges or issues affecting availability of capitals as well as potential trade-offs between capitals.

MANAGEMENT DISCUSSION AND ANALYSIS

Provides a comprehensive narration of the Group's financial performance, as well as non-financial values created from the perspective of the Management.

SUSTAINABILITY REPORT

A comprehensive review of the Group's strategies and performance in addressing Environmental, Social and Governance ("ESG") materiality topics and ultimately non-financial value creation. The focus is to showcase how ESG matters are vital to ensure sustained financial performance.

DAHREB YGRENE OTSELEV

SU TUOBA

ANNUAL REPORT 2021

Our Assets

ABOUT US

TOTAL ASSETS 6 JACK-UP DRILLING RIGS 4 HYDRAULIC WORKOVER UNITS 1 OILFIELD SERVICES Scan this QR code for more information on Our Assets

JACK-UP DRILLING RIGS

NAGA 2 NAGA 5 Design GustoMSC-CJ46-X100D Delivery Construction Yard October 2009 Jack-Up Type PT. Drydocks World Graha, Batam, Indonesia Independent Leg Jack-Up Drilling Rig Design Delivery Construction Yard Jack-Up TypeKeppel FELS B ClassMarch 2014 Keppel FELS Yard, Singapore Independent Leg Jack-Up Drilling Rig Classification Class Notations ABS Classification Class Notations ABS A1 Self-Elevating Drilling Unit Water Depth A1 Self-Elevating Drilling Unit400 feet Water Depth 350 feet NAGA 6 NAGA 3 Design Design Delivery Construction YardGustoMSC-CJ46-X100DSeptember 2010 Jack-Up Type PT. Drydocks World Graha, Batam, Indonesia Independent Leg Jack-Up Drilling RigDelivery Construction YardGustoMSC-CJ46-X100DSeptember 2014 China Merchants Heavy Ind. (Shenzhen) Co., Ltd. China Jack-Up Type Independent Leg Jack-Up Drilling Rig Classification ABS Class NotationsA1 Self-Elevating Drilling Unit Classification Class Notations ABSWater Depth 350 feet Water Depth A1 Self-Elevating Drilling Unit375 feet NAGA 4 NAGA 8 Design Delivery Construction Yard Jack-Up TypeKeppel FELS B ClassMarch 2013 Keppel FELS Yard, Singapore Independent Leg Jack-Up Drilling Rig Design Delivery Construction Yard Jack-Up TypeKeppel FELS B ClassSeptember 2015 Keppel FELS Yard, Singapore Independent Leg Jack-Up Drilling Rig Classification ABS Class NotationsA1 Self-Elevating Classification Class Notations ABS Drilling Unit Water Depth 400 feet Water Depth A1 Self-Elevating Drilling Unit400 feet

DAHREB YGRENE OTSELEV

SU TUOBA

ANNUAL REPORT 2021

Our Assets

DAHREB YGRENE OTSELEV

ABOUT US

HYDRAULIC WORKOVER UNITS

OILFIELD SERVICES GAIT 1 GAIT 2 GAIT 5 GAIT 6

TIANJIN, CHINA PLANT

SU TUOBA