Bumi Armada FPSO completes first North Sea cargo delivery
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.