PV Drilling profit accelerates, Brunei bottleneck persists

Petrovietnam subsidiary PV Drilling reported strong earnings growth in the first quarter of 2026 on the back of a recovery in the oil and gas market, but continued to face profitability challenges in Brunei, a market with sizable assets that has yet to deliver commensurate returns.

International markets drive growth

The company posted revenue of VND3.4 trillion dong ($129 million) and net profit of about VND300 billion ($11.38 million), both more than doubling from a year earlier, according to its quarterly financial statement. Growth was driven mainly by a regional rebound in drilling activity, with higher average rig utilization and improved leasing rates.

By geography, Malaysia and Indonesia remained the key profit drivers. Gross margin in Malaysia was about 39%, while Indonesia recorded the highest level at around 47%. Both markets have shown stable growth and sustained high utilization rates.

Domestic operations, meanwhile, played a “base” role, generating solid revenue but lower margins of around 10-17%. While not a primary growth engine, the Vietnam market provided stable cash flow amid the cyclical nature of the industry.

The commissioning of the PV Drilling VIII rig in late 2025, along with plans to complete PV Drilling IX in the second quarter of this year, underscores the company’s strategy to expand its rig fleet in anticipation of an industry upcycle. At the same time, well technical services and related segments continued to grow strongly, helping lift overall margins.

Brunei: large assets, weak returns

In contrast to core markets, operations in Brunei remained a drag on performance.

As of the first quarter of 2026, assets in Brunei totalled nearly VND3.4 trillion ($129 million), accounting for about 11.5% of the company’s total assets. However, the market contributed only around 6.7% of revenue and posted a gross loss of more than VND20 billion ($758,800).

Data over several quarters show that operations in Brunei are not consistently loss-making but exhibit a pronounced cyclical pattern. Profit is typically negative or minimal in the first quarter, improves in the second quarter, and then weakens again toward year-end. Even in stronger periods, margins remain modest compared with other markets.

The main reason lies in the long-term contract structure for the PV Drilling V (TAD) rig, which has been operating in Brunei since 2021 under a six-year contract. While this ensures stable utilisation, the day rate is estimated at about $85,000.

CEO Nguyen Xuan Cuong said PVD’s rig day rates currently range from $80,000 to $135,000, with an average of around $90,000, indicating that PV Drilling V is operating at the lower end of the pricing range. The TAD rig also entails higher investment and operating costs and is more complex than jack-up rigs.

Notably, the contract for PV Drilling V in Brunei is set to expire in 2027, with an option for a two-year extension. This is seen as a key window for renegotiating terms, particularly pricing, which could help improve margins after a prolonged period of pressure from contracts signed during a market downturn.

At the same time, PVD’s management remains confident about the market, saying it is prepared to continue the business cooperation contract (BCC) to operate PV Drilling V, and may consider acquiring its partner’s stake if divestment occurs. This suggests the company still views Brunei as a long-term strategic market despite short-term inefficiencies.

The first-quarter results highlight PVD’s ability to capitalize on the oil and gas recovery cycle, with growth driven by higher-margin international markets. However, performance in Brunei remains a key issue to watch, particularly as the company plans to raise capital and expand its asset base.

In that context, improving efficiency in Brunei - through contract renegotiation and operational optimization - will be critical in determining the quality of PVD’s growth in the coming period.

On the Ho Chi Minh Stock Exchange, PDV shares closed Wednesday at VND31,000 ($1.18) apiece.