Yinson JV ordered to halt operations for Vietnam’s Ca Rong Do project

CIMB Equities Research has downgraded Yinson Holdings Bhd from Add to Hold after the share price rallied 23% over the past three months.

KUALA LUMPUR: Yinson Holdings Bhd’s joint venture PTSC Ca Rong Do Ltd, has been directed to halt its operations for the time being for the Ca Rong Do or Red Emperor field offshore Vietnam.

It said on Tuesday Talisman Vietnam 07/03 B.V had informed the JV company not to carry out the scheduled work programme for the CRD project for the time being.

Yinson Clover Ltd (YCL) and PetroVietnam Technical Services Corporation (PTSC) hold 49% and 51% each in PTSC Ca Rong Do.

The contract is a time charter contract comprising the bareboat scope of work and operation and maintenance of the floating production storage and offloading (FPSO). 

PTSC Ca Rong Do has sought clarification from Talisman Vietnam on the nature of the alleged force majeure event, including particulars of how the latter’s performance of its obligations under the contract has been affected.

PTSC Ca Rong Do had also sought Talisman Vietnam’s reply on how to remedy the situation as provided for under the provisions of the contract. 

“Pending resolution of this matter, and in compliance with the Notice, PTSC CRD will endeavour to take all reasonable actions to mitigate the effects of the force majeure event,” Yinson said.

It was reported that Vietnam halted the oil drilling project in the Red Emperor block off its southeastern coast licensed to Spanish energy firm Repsol following pressure from China.

Red Emperor, known in Vietnamese as the Ca Rong Do field, is part of Block 07/03 in the Nam Con Son basin, 440 km off the coast of Vietnam's southern city of Vung Tau.

Hence, Repsol could call off the US$1bil 10+five-year CRD floating production storage and offloading (FPSO) FPSO charter, awarded to Yinson-PTSC last year. 

Maybank Research had on Monday said should this happen, Yinson will incur: (i) the loss of income from FY21 and (ii) a 24 sen a share impact to the  target price but it is entitled to a full recovery of cost for the FPSO currently under refurbishment. 

“Last Friday’s fall in share price, in our view, has priced in this CRD effect,” it said.   

The research house had highlighted that the cancellation of the project could result in Repsol and its partners potentially losing US$200mil on investments already made. 

“As in most FPSO contracts, Yinson is entitled to a full recovery of costs already sunk in for this impending job. This CRD charter impact is about 24 sen a share to our NPV/TP estimates,” it said. 

Yinson-PTSC secured the FPSO bare-boat contract worth US$1bil (10+five year charter) in April 2017, with operations scheduled from FY21.     
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