File photo shows FPSO Armada TGT 1. Analysts are optimistic on Bumi Armada following a six-year firm contract extension with HLJOC (Vietnam) for the charter of this vessel with a contract value of US$285 million or RM1.16 billion.
KUCHING: Analysts are optimistic on Bumi Armada Bhd (Bumi Armada) following a six-year firm contract extension with HLJOC (Vietnam) for the charter of FPSO Armada TGT 1, with a contract value of US$285 million or RM1.16 billion.
This extension is expected to begin immediately from August 27, 2018, upon the expiry of the initial contract, and will last until November 14, 2024. TGT 1 has had a long working relationship with HLJOC over the past seven years since achieving first oil in August 2011.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) was positive on this contract on the back of longer term visibility for the group.
“Looking at the earlier arrangement prior to securing this contract, the extension would only be done every year over an eight year period, upon the firm contract expiry in August 2018.
“However, we are more positive with this new contract as it will provide longer-term visibility on TGT1 earnings and cash flow. Based on a back-of-envelope calculation, the renewed BBC rate is estimated at US$127,232 per day day, which is about 40 per cent lower than previously,” it said in a report yesterday.
“Nevertheless, as FPSO TGT1 has been debt free since early-2018, the net impact will be about 30 per cent lower, which is in line with our expectations.”
While the extension charter value is half the value of the initial charter as the vessel’s debt would have been fully repaid, AmInvestment Bank Bhd (AmInvestment Bank)
said it was still higher than its earlier conservative estimates.
To note, the Te Giac Trang field is in Block 16-1 in the Cuu Long basin. Hoang Long partners are PetroVietnam E&P with 41 per cent, Soco at 30.5 per vent and Thailand’s PTTEP at 28.5 per cent.
“The risk profile of the group is improving with its clientele’s upcoming albeit belated final acceptances of the FPSO vessel Olombendo and Kraken,” it said in a separate report.
“Additionally, Upstream had earlier reported that Bumi Armada has emerged as the front-runner to land the charter for a huge FPSO, which could cost over US$1 billion, for Eni’s Zabazaba project off Nigeria in in the OPL 245 field.”
Following this, researchers at MIDF Amanah Investment Bank Bhd (MIDF Research) estimated that Bumi Armada’s latest orderbook as at March 31, 2018 stands at RM26.2 billion compared with RM22.3 billion as at 31 December 2017.
“About 95 per cent or RM24.8 billion of the orderbook consists of FPO contracts while the remaining five per cent (RM1.4 billion) are OMS jobs. The optional extension orderbook stands at RM11.1 billion.
With the company’s macro outlook improving and optimism on upstream exploration and production activities, we believe that the FPO segment could benefit positively.
However, we still believe that the OMS segment could face further headwinds as the OSV segment (especially the higher brake horsepower vessels) remain in an oversupply state.