Massive war chest primed for Yinson’s new FPSO charters
KUALA LUMPUR: Should Yinson Holdings Bhd (Yinson) secure the charter for the US$1 billion floating production, storage and offloading (FPSO) for Hess’ Tano-Cape Three Points project off Ghana by the end of the year, its sum of parts (SOP) valuation can be raised further by 35 per cent or RM1.79 per share.
Underpinned with locked-in earnings visibility from an order book of US$4.2 billion, AmInvestment Bank Bhd (AmInvestment Bank) said the stock is currently trading at a bargain price earnings estimates for calendar year 2018 (CY18) of 13 times versus 20 times for other Malaysian players.
This is assuming an extension of the group’s 49 per centowned Lam Son FPSO vessel charter by another seven years at a discount of 40 per cent.
“We expect the charter extension to be announced by the second quarter of 2018,” AmInvestment Bank said in a report yesterday.
Recall that PetroVietnam-Petronas partnership Lam Son Joint Operating Company had terminated the FPSO charter with a fee of US$209 million but the vessel is still being deployed in the field in Vietnam currently.
Pending completion of negotiations with PetroVietnam, the charter of the vessel has not been paid since July 1 last year.
“We based Lam Son’s NPV extension of RM436 million over seven years on an equity discount rate of six per cent,” the research firm said.
“This is conservative as the vessel should enjoy risk-free rate of four per cent given that the vessel’s debt has been fully repaid by the termination fee while the project’s equity portion has also been fully repaid.
“Adding the Layang FPSO’s NPV of RM395 million, assuming a capex of US$350 million, following the proposed novation of TH Heavy Engineering Bhd’s (THHE) contract with JX Nippon.
“We expect THHE’s court proceeding – which came under the PN17 status since April last year – on its financial regularisation scheme with its creditors and the completion of the novation to be completed in 2Q2018.”
In the near future, AmInvestment Bank said Yinson may also be eyeing a Hess-related FPSO project in Ghana, which could cost over US$1 billion, similar to the group’s earlier vessel for Eni.
“Hess’ Tano-Cape Three Points project off Ghana recently won a territorial dispute with the Ivory Coast, as mediated by the International Tribunal of the Law of the Sea.
“Even if Yinson does not secure this new Ghana FPSO project, there are multiple other FPSO charters up for grabs, predominantly in Brazil.”
Upstream has reported that Brazil’s Petrobras plans to add nine more large FPSOs to the Lula, Buzios and Mero pre-salt fields by 2022.
Petrobras intends to invest US$18 billion in the three fields over the next five years, adding an installed capacity of 1.44 million barrels per day of oil and 70mil cubic metres per day of natural gas.
The state-controlled company will invest US$11.4 billion at Buzios, where five FPSOs are due to enter operations between 2018 and 2021.
Petrobras is also looking to spend US$4.5 billion at Lula to install the field’s eighth and ninth FPSOs. Both the P-67 and P-69 are scheduled to enter operations in 2018.
The Lula field is already producing over one million barrels per day of oil equivalent and output is still rising.
At the Mero field, formerly known as the Libra NW area, Petrobras plans to spend US$3.2 billion to have the first two FPSOs in the field early next decade.
Petrobras recently awarded Japan’s Modec a contract for the charter of the first floater for Mero. A tender for the second unit is likely for this year.