Yinson has entered into an exclusivity agreement with BP to potentially supply a FPSO vessel to the UK oil supermajor’s proposed 10-well subsea PAJ project based in Block 31 offshore Angola.
KUCHING: Yinson has entered into an exclusivity agreement with British Petroleum (BP) to potentially supply a floating production storage and offloading (FPSO) vessel to the UK oil supermajor’s proposed 10-well subsea Palas, Astrea and Juno Oil Fields (PAJ project) based in Block 31 offshore Angola.
The agreement also involves the reservation of FPSO Nganhurra, in which Yinson holds the exclusive purchase option with its owners Woodside Energy and Mitsui E&P Australia Pty Ltd until June 30, 2023 with an optional six-month extension until Dec 31, 2023.
In addition, the vessel reservation will remain effective until December 31, 2022 with an option for BP to extend until June 30, 2023 while both parties negotiate a 10-year contract to convert, operate, maintain and lease FPSO Nganhurra for the PAJ project.
The contract is then expected to be executed by the end of 2024 subsequent to BP’s final investment decision within the stipulated period.
FPSO Nganhurra is equipped with a production capacity of 100,000 barrels of oil per day as well as a storage capacity of 700,000 barrels of oil. The vessel was previously operating at the Enfield field in Australia until the autumn of 2018 and is currently laid up outside Labuan.
“Despite the lack of clarity about the contract at this juncture, we gather that the redeployment of FPSO Nganhurra would likely entail a total conversion cost of US$400 million to US$500 million, of which BP might fork out a big sum of upfront payment to help Yinson finance the purchase of the FPSO,” commented AmInvestment Bank Bhd (AmInvestment Bank).
“This would ease Yinson’s capital commitment, thus allowing it to secure another one to two new projects without overstretching its balance sheet.
“We also view the contract’s estimated commencement date at the end of 2024 to be favourable for Yinson as it would likely coincide with the completion of conversion works for FPSO Parque das Baleias (PDB) and FPSO Enauta.
“This would help ensure earnings continuity from its engineering, procurement, construction, installation and commissioning (EPCIC) operations while alleviating capacity bottleneck concerns.”
All in all, assuming a conservative capex of US$500 million, an estimated daily charter rate of US$400,000, a 60 per cent earnings before interest and tax margin and a project internal rate of return of 15 per cent, AmInvestment Bank estimate Yinson’s SOP could potentially increase by an additional six per cent or RM0.22 per share from this charter contract alone.
Recall that the group is aggressively bidding for up to seven new FPSO projects, including Eni’s deep-water Agogo block in Angola as well as Total’s Cameia field in Angola and Maka in Suriname.
Of these, management is still expecting an award for the Agogo project by the end of 2022.
RHB Investment Bank Bhd (RHB Research) is positive on the agreement as Yinson stands a good chance to secure another redeployment project following the completion of FPSO Abigial-Jospeh and FPSO Helang.
“We are guided that the total capex for this project could be in the range of US$400 million to US$700 million and Yinson is expecting certain upfront payment from the client (ie to cover vessel cost) as part of the terms,” it said in its own analysis.
“If Yinson manages to seal the deal by 2024, it will take about 18 months to convert the vessel and the first oil could be achieved soonest by end-2025, or early 2026.
“This is rather timely as FPSO Maria Quitéria (PDB project) is expected to start operating by 4Q24.”