Up to 30 FPSOs to be awarded

THE global floating production storage and offloading (FPSO) demand looks promising, with new potential floating production requirements and progressing developments in projects coming on board.

According to an industry source, it is estimated that 30 FPSO projects could arrive at the final investment decision stage next year, resulting in more contract awards.

However, it is likely that some of the projects, particularly those in Africa, Brazil and India, could be delayed.

“In South-East Asia, we reckon that four floating storage and offloading (FSO) leased units could be deployed next year,” he said.

Since 2014, Bumi Armada Bhd has not bagged a new FPSO contract.

As of Sept 30, Bumi Armada has a firm order book value of RM21bil, with additional optional extensions of up to RM10.3bil.

On the other hand, its peer Yinson Holdings Bhd has secured one project this year – the FPSO Helang charter contract, formerly known as Layang.

The project was taken over from TH Heavy Engineering Bhd and has an aggregate value of US$860mil (RM3.37bil).

As of May 31, Yinson’s order book amounts to US$4.3bil (RM17.38bil) which provides earnings visibility until 2037.

According to AmInvestment Bank Research, Yinson remains hopeful of securing at least another FPSO contract potentially costing US$1bil over the next 12 months.

This comes on the back of multiple developments in Brazil, West Africa and Mexico where there is a limited pool of contenders with the necessary track record and financial capability following the severe industry downturn over the past three years.

Analysts opine that Yinson has better financials compared with Bumi Armada, given its better-managed debts and project financing approach.

“Yinson, as an FPSO owner, is usually protected against contract termination risks, as seen in the termination of its US$1bil charter contract for its FPSO in Vietnam.

“Its charter rates are also highly reliable and predictable source of cash flow as the rates are not linked to oil and gas prices nor to the field performance on which the FPSO operates,” an analyst says.

The analyst adds that Yinson’s termination fees are typically contractually structured and calculated based on the present value of lost future revenues payable as lump sum payments.

In a recent report, UOB Kay Hian Research says it continues to like the group’s long-term potential, being a major beneficiary of FPSO bids globally, and potential opportunities with its strategic partners.

This is despite Yinson’s premium valuation, which currently trades at a price-earnings multiple of 16.54 times.