Bumi Ar­mada FPSO com­pletes first North Sea cargo de­liv­ery

The Star Malaysia - StarBiz - - News -

PETALING JAYA: Bumi Ar­mada Bhd’s long-de­layed Ar­mada Kraken float­ing pro­duc­tion stor­age and of­fload­ing (FPSO) com­pleted the of­fload­ing of its first car­goes in the UK North Sea on Tues­day.

The off­shore en­ergy fa­cil­i­ties and ser­vices provider said in a state­ment that the FPSO has been op­er­at­ing on the Kraken field there.

On Tues­day, the FPSO com­pleted the of­fload­ing of its first car­goes and it ar­rived at the lo­ca­tion in the UK North Sea the next day.

Bumi Ar­mada said the FPSO achieved first oil on June 28, which was 4 ½ months af­ter its hook-up on Feb 15, which was the fastest first oil de­liv­ery on an FPSO in the North Sea in the last 10 years.

Mean­while, AmIn­vest­ment Re­search has main­tained its “hold” call on Bumi Ar­mada with un­changed fore­casts and fair value of 79 sen a share based on a 20% dis­count to its sum-of-parts (SOP) val­u­a­tion of 99 sen a share.

“Our val­u­a­tions are main­tained al­though the group’s long-de­layed FPSO ves­sel Ar­mada Kraken has man­aged to off­load its first cargo on Tues­day,” the re­search house said in its re­port yes­ter­day.

“This is be­cause the char­ter rates for the FPSO are cur­rently un­cer­tain pend­ing the client EnQuest’s full ac­cep­tance of the ves­sel,” it said.

EnQuest is the op­er­a­tor of the Kraken field. The re­search house said Bumi Ar­mada has in­di­cated that an in­terim agree­ment has been reached be­tween the group and EnQuest for the pay­ment of the char­ter rates based on the pro­por­tion of FPSO Kraken’s pro­cess­ing ca­pa­bil­ity ver­sus the field’s pro­duc­tion rate.

Re­call that the FPSO Kraken will be re­ceiv­ing re­duced char­ter rates due to tech­ni­cal prob­lems which have caused lower-than-ex­pected pro­duc­tion rates.

“While man­age­ment in­di­cated that the Kraken char­ter, even at the lower tem­po­rary rates, could still be prof­itable this year, we re­main con­ser­va­tive given the group’s past earn­ings dis­ap­point­ments,” it said.

AmIn­vest­ment Re­search said Enquest had awarded a US$1.8bil FPSO char­ter for an ini­tial eight years (which in­cludes 17 years of op­tional ex­ten­sion) to Bumi Ar­mada back in 2013. While the group’s earn­ings from Q2FY17 on­wards could po­ten­tially im­prove from the full recog­ni­tion of the FPSO ves­sel Ar­mada Olombendo, which achieved first oil on Feb 8 this year, “we re­main cau­tious on the com­pany’s near-term earn­ings tra­jec­tory given the un­cer­tain­ties aris­ing from Kraken’s lower char­ter pay­ments”.

The re­search house said even though off­shore sup­port ves­sel util­i­sa­tion rates are im­prov­ing, man­age­ment af­firmed that char­ter rates are still weak­en­ing against the back­drop of the pre­vail­ing oil price which con­tin­ues to slow down the progress of new po­ten­tial projects.

The stock cur­rently trades at a fair FY17 fore­cast price earn­ings of 14 times ver­sus the sec­tor’s 20 times due to lin­ger­ing risks on sec­ond half of fi­nan­cial year 2017 earn­ings re­cov­ery, it said. Shares of Bumi Ar­mada closed one sen up at 74 sen yes­ter­day.

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