BUMI ARMADA BHD
By Affin Hwang Capital Research Buy (maintained) Target price: RM1
AFFIN Hwang Capital Research remains confident that offshore energy facilities and services provider Bumi Armada’s earnings will see strong uplift this year.
The expectation is primarily backed by the projected performance of Bumi Armada’s Olombendo and Kraken floating production, storage and offloading (FPSO) facilities.
According to Affin Hwang Capital Research, both FPSOs are progressing well with final acceptances targeted by April and May, respectively.
“Olombendo continues to recognise 90% of the full bareboat charter (BBC) rates in the first three months of 2018, and producing near 78,000 barrels per day (bpd) of oil. It currently contributes to the bulk of FPSO revenue, accounting for close to 60% in our 2018–2020 estimates.
“As for Kraken, it is recognising around 80%–90% of the full BBC rate based on interim agreement entered with EnQuest, and producing around 45,000 bpd of oil, near the targeted 50,000 bpd field production level.
“The planned maintenance shutdown of Kraken field in the third quarter of 2018, as guided by EnQuest is not expected to affect the FPSO’s BBC, as Bumi Armada will continue to be paid,” it said in a note.
On FPSO Perdana, the research firm said the facility would maintain its status quo, as it continues to see operations only covering operation and maintenance cost from offloading proceeds.
Meanwhile, discussions are ongoing for FPSO TGT1’s firm expiry extension, which is expected to be finalised by mid-to-end of April 2018. As for FPSO Claire, Bumi Armada is expecting a clearer indication by 4Q18, concerning the legal case against Woodside.
“We reiterate Bumi Armada as one of our top sector picks. We believe the progressive FPSO acceptance as well as stronger earnings and cash flow deliveries will help drive the share price.
“We reaffirm our ‘buy’ call on the offshore energy facilities and services provider, while the 12-month target price of RM1 is also maintained,” said the research house.