Analysts ‘not entirely surprised’ by termination of Yinson’s FPSO PTSC Lamson
KUCHING: Analysts are not surprised by the termination announcement of Yinson Holdings Bhd’s (Yinson) FPSO PTSC Lamson, believing that this should allow the group to recoup all its investment and pare down associated debt assuming Yinson receives full compensation.
Yinson announced on Bursa Malayisa that on March 31, 2017, PTSC Asia Pacific Pte Ltd (PTSC AP), a joint venture company owned by Yinson and PetroVietnam Technical Services Corporation (PTSC), had received a letter from PTSC.
“In the letter, PTSC informed that on March 31, 2017, Lam Son Joint Operating Company (LSJOC), the operator of Lam Son Field had issued a notice of termination to PTSC under the Time Charter Contract for FPSO PTSC Lam Son dated May 24, 2012 entered by LSJOC and PTSC.
“The service of such notice of termination is pursuant to the liquidation of LSJOC which is scheduled to occur on June 30, 2017,” the group said.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was not entirely surprised by the termination announcement as such risk has been highlighted by the management in the analysts’ briefing last Friday.
“In the case of such termination, PTSC AP is entitled to an early termination payment from PTSC subject to the terms of the contract,” Kenanga Research said.
“Meanwhile, despite the liquidation of LSJOC, PetroVietnam has the intention to utilise FPSO PTSC Lam Son for the petroleum operations at Lam Son Field.”
While the quantum of termination has yet to be finalized at this juncture, the research arm believed the termination might not be entirely negative to Yinson.
Kenanga Research noted that Yinson has invested close to US$50 million in this joint-venture.
The research arm believed that the termination compensation received would allow Yinson to recoup all the group’s cost of investment and repay its debt associated to the project (estimated at circa US$100 million).
While Yinson has yet to finalise the arrangement of redeployment of the FPSO with PetroVietnam, Kenanga Research maintained its earnings estimates pending a conference call today.
The research arm noted that removal of FPSO PTSC Lamson earnings assuming 90 days notice period will result in eight per cent/13 per cent downgrade in financial year 2018 estimate (FY18E)/FY19E earnings estimates.
As such, Kenanga Research maintained its ‘outperform’ call on the stock.