Bullish outlook for Bumi Armada’s Akia PSC venture

HLIB Research said it is leaving its forecast unchanged as details are sparse at this juncture.

PETALING JAYA: Analysts are generally bullish about Bumi Armada Bhd’s latest venture with the Energy and Mineral Resources Ministry of Indonesia for the Akia production sharing contract (PSC) of oil and gas discoveries in the Tarakan Basin in north Kalimantan.

However, they said it will take some years before the venture starts to contribute to the company’s earnings.

Hong Leong Investment Bank (HLIB) Research said although it is positive on this latest development, it believed it would take a few years to complete the exploration works and feasibility studies as well as development works on the field before contribution from the first oil starts kicking in.

Furthermore, the profitability of the project depends on the total capital expenditure, the amount of reserves post-exploration works and processing capacity of its floating liquefied natural gas (FLNG) and floating production, storage and offloading (FPSO).

“We leave our forecast unchanged as details are sparse at this juncture. Also, the contribution from this development does not fall within our forecast horizon.

“As such, we are maintaining our ‘buy’ call on the stock with sum-of-parts-derived target price of 69 sen a share,” HLIB Research said in a report on Bumi Armada.

This marks the second announcement from Bumi Armada within a month about its expansion plans in Indonesia, after the recent signing of a non-binding agreement to build an FLNG in the Madura Gas Field.

The international offshore energy facilities and services provider said in a filing with Bursa Malaysia on Monday that it has signed a PSC with the Energy and Mineral Resources Ministry of Indonesia for the Akia PSC in the Tarakan Basin.

Bumi Armada said the Akia PSC covers an area of 8,394 sq km and contains the Aster and Tulip oil and gas discoveries.

It said the water depth at the Tulip discovery is 800m and the company would provide and operate an FPSO and an FLNG facility or gas pipeline for the development.

Under the contract, Bumi Armada would be the operator with a 51% participating interest whereas Pexco will hold the remaining 49% stake.

MIDF Research was also positive on Bumi Armada’s prospects in this new project as the Tarakan Basin has a long history of exploration of nearly a century.

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