PETALING JAYA: Analysts are positive on the prospects of Bumi Armada Bhd
, bolstered by its expected growth through new floating production storage and offloading (FPSO) contracts, and a stronger balance sheet.
CIMB Research said the group’s charter contract for FPSO Sterling II is set to expire on March 7, following the completion of a one-year extension period from March 8 worth US$43mil, or RM198mil.
The research unit is taken to understand that Bumi Armada is currently in active discussions with the charterer regarding a potential extension.
“While Bumi Armada remains confident in securing an extension for the FPSO, which is currently leased to Indian state-owned Oil and Natural Gas Corp Ltd (ONGC) for operations in the Cluster-7 field located approximately 210 km off the west coast of Mumbai, the renewal decision lies with ONGC, who will determine whether to either extend the contract for another year under the current agreement or enter into a new contract,” it said.
CIMB Research added that although this is a positive development for the oilfield services provider, it has not factored in any contract renewal for FPSO Sterling II, as it expects the financial impact to be minimal.
The research house pointed out that with its stronger balance sheet, Bumi Armada is well-positioned for future growth, particularly in expanding its portfolio through new FPSO contracts or acquiring existing producing vessels that are still under contract.
It is also growing its presence in the carbon capture and storage segment in the North Sea through its joint-venture (JV) with Bluestreak and Uniper.
It said: “The group’s solid financial standing enables it to support large-scale projects in this capital intensive industry.”
At the same time, subsequent to the sizeable multiple impairments on Armada Kraken, RHB Research reported that Bumi Armada sees minimal impairment risk on its existing vessel unless charters on these vessels do not get extended.
“The group has also repaid US$58mil in borrowings in the last quarter of financial year2024 (4Q24), and its net gearing further improved to a multi-year low of 0.37 times compared to the 0.45 times of 3Q24.
“As such, management would consider acquiring new or existing FPSO projects,” pointed out the research house.
It said Bumi Armada is still in the midst of finalising its potential merger with MISC Bhd’s offshore businesses, opining that the merger could boost the group’s financing access but, noting that its structure and pricing are crucial factors.
Bumi Armada closed 32.5 sen, or 4.46% higher to settle at 58.5 sen at the end of yesterday’s trading session.
