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KUALA LUMPUR: Offshore oilfield services provider Bumi Armada
plans to bid for Oil and Natural Gas Corporation Ltd’s KG-DWN-98/2 project, targeted for March 2018, with potential for further delay.
CIMB Equities Research said on Friday a capital expenditure (capex) of more than US$1bil was expected.
The research house said that commercial bids for Hess’s TCTP block offshore Ghana, with capex of up to US$1.4bil, may be submitted by mid-2018F.
“For both projects, Bumi Armada is in 50:50 JVs with its Indian partner, Shapoorji Pallonji. Our target price of 88 sen (unchanged) does not factor in any contract wins.
“To manage its risks, Bumi Armada will only accept one project in FY18F. Bumi Armada has a US$1.5bn multi-currency euro medium term notes (MTN) programme which it can tap into to fund its equity commitments for any new projects,” it said.
CIMB Research said the downside risks to Bumi Armada include protracted delays to final acceptance for the Olombendo and Kraken floating production storage and offloading (FPSOs).
Bumi Armada had taken part in CIMB’s 10th annual Malaysia Corporate Day on Thursday and met more than 30 fund managers.
The company highlighted that it had made a lot of progress with its final two assets that were still awaiting final acceptance, i.e. the, while positive news was likely for the TGT1 and Claire FPSOs.
Bumi Armada also spoke about its plans to bid for new projects, paying attention at all times not to be overextended.
To recap, the Olombendo and Kraken FPSOs may be near final acceptance.
The Olombendo FPSO is chartered to Eni Angola and achieved first oil in Feb 2017. The necessity to replace some equipment (covered by supplier warranties) caused a delay in final acceptance, but Eni paid Bumi Armada 80% of the contracted bareboat (BBC) charter rate during 2Q-3Q17 and which likely rose to 90-100% during 4Q17F.
As such, Bumi Armada is anticipating the Olombendo to achieve final acceptance by 1Q18F. Only upon final acceptance will the Olombendo commence its 12-year firm charter, which is turning out to be a bonus for Bumi Armada, since it had been paid the majority of its BBC rate since 2Q17 anyway.
“Only with final acceptance will Bumi Armada be able to start official negotiations to sell minority equity stakes in the Olombendo and Kraken FPSOs to interested financial investors, helping Bumi Armada raise cash and reduce concentration risk.
“As for the Kraken, it is currently producing in excess of 40,000 bpd, or almost 90% of the theoretical well-flow capacity of 48,000 bpd, which means that Bumi Armada is earning almost 90% of Kraken’s BBC rate.
“Our forecasts assume that Bumi Armada will only reach this level in 2Q18F, hence things have progressed better than expected,” it said.
CIMB Research pointed out progress towards final acceptance has been stalled by the bad North Sea weather. Bumi Armada and EnQuest are negotiating on the technicalities, and Bumi Armada is hopeful to secure EnQuest’s acquiesce to start the acceptance process soon, and to achieve final acceptance for the Kraken by end-1Q18F.
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