Bumi Armada sees RM30mil hit from FPSO shutdown
Group to suspend ops to Erin Petroleum Nigeria due to payment delays
PETALING JAYA: International offshore energy facilities and service provider Bumi Armada Bhd estimates the financial impact of credit risk recovery from the shutdown of its floating production, storage and offloading (FPSO) vessel Armada Perdana to be RM30mil, based on its results for the financial year ending Dec 31, 2018.
Bumi Armada first made an announcement on this on June 21, 2017.
Bumi Armada had said that its units – Armada Oyo Ltd (AOL) and Bumi Armada (Singapore) Pte Ltd (BASPL) – were suspending the bare-boat charter (BBC) and operations and maintenance (O&M) contracts, respectively, on the FPSO vessel Armada Perdana to Erin Petroleum Nigeria Ltd (EPNL), a subsidiary of Erin Energy Corp.
It said the suspension of opera- tions was due to longstanding delays in the BBC payments due to Bumi Armada, as well as irregular payments on the O&M contract.
This situation had been brought about by Erin’s refusal to provide the group with a clear structure of how it intended to comply with the contractual agreements and repay the amounts owing to Bumi Armada.
In a filing with Bursa Malaysia yesterday, Bumi Armada said that on April 11, BASPL had received a notice from EPNL, among others, advising of a purported “force majeure event” and requesting the immediate, orderly shutdown of operations on the FPSO Armada Perdana.
Bumi Armada said the company had also received a notice of seizure/attachment of goods from a third party informing that the entire crude oil produced and to be produced and stored in Armada Perdana had been seized by a writ of attachment from the Federal High Court of Lagos, in relation to legal proceedings to which the Bumi Armada Group is not a party.
“The company had sought clarifications from EPNL on such notice of seizure/attachment of goods, but EPNL has not responded to the company despite numerous reminders,” said Bumi Armada.
Notwithstanding the above, Bumi Armada maintains that the suspension of provision of services under the bareboat charterparty contract and operational and maintenance services contract respectively remains in place, and that EPNL is not relieved from its obligation to make all payments due to AOL and BASPL under the contracts.
Bumi Armada is of the view that the purported force majeure declaration by EPNL is wrongful under the operational and maintenance services contract, and the company is reviewing its legal options, including commencement of legal proceedings against EPNL, to uphold the contractual rights of AOL and BASPL under the contracts.
“The company will continue to provide updates from time to time on any further material development on this matter,” it said.
Bumi Armada returned to profitability in the fourth quarter ended Dec 31, 2017, posting a net profit of RM63.8mil compared with a net loss of RM1.37bil in the same period a year ago.
Its turnaround came on the back of a higher revenue, which rose to RM662.1mil from RM106.2mil in the same period last year.