Up to 30 FPSOs to be awarded

The Star Malaysia - StarBiz - - Cover Feature -

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.

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