Currently, all of Bumi Armada’s existing five FPSOs currently located in Nigeria, Vietnam and India are operating as usual with varying firm expiry periods.
KUCHING: The execution of four floating, production, storage and offloading (FPSO) as well as floating storage units (FSU) projects in hand is crucial for Bumi Armada Bhd’s (Bumi Armada) prospects in 2016.
This comes following the group challenging Woodside’s termination of its contract for the Armada Claire FPSO, observed Maybank Investment Bank Bhd (Maybank IB Research), which is currently off-hire from April 2016 and is currently demobilised at a Batam yard.
Financially, Bumi Armada has decided to fully settle the outstanding debts amounting to US$200 million for this asset following the contract impasse.
“An impairment charge on the asset is inevitable but timing is grey,” it said in a note yesterday. “Conservatively, Bumi Armada can decide to hold off undertaking an impairment exercise pending the outcome of the court case. A successful redeployment may minimise the impairment risk.
“We estimate Bumi Armada to be carrying about US$300 million to US$350 million in its book for the Armada Claire.”
Bumi Armada reiterated that this contract cancellation is an isolated case and is deemed to be a ‘termination of convenience’. Operationally, FPSO Claire had been running at 99 per cent uptime and had been consistently paid for its bare boat charter and O&M revenue as per contract prior to the termination notice, MIDF Research said.
“On the other hand, the Balnaves field, where FPSO Claire operates, has been producing below its targeted expectation,” it observed. “Putting things into perspective, this court case is unlikely to be resolved in the immediate term, and could drag on from 2 months to 2 years.
“We opine that an out of court settlement will be the best outcome. After all, Woodside has made an US$128 million provision for the leased FPSO Claire, based on its 65 per cent interest at Balnaves field.”
Currently, all of Bumi Armada’s existing five FPSOs currently located in Nigeria, Vietnam and India are operating as usual with varying firm expiry periods.
The firm is also handling four projects concurrently, which are at varying stages of completion between 42 to 80 per cent. The projects will commence operations from end-2016 to 2017.
Overall, the cost to convert an FPSO has fallen by 25 per cent over an 18-month period.
There are a few merger and acquisition opportunities for mid-sized FPSOs but there is disparity in pricing between buyers and sellers. In terms of prospects, there are several firm tenders lined up for 2016 to 2017.”