PETALING JAYA: Analysts have cut earnings forecasts and lowered target prices (TP) for Bumi Armada Bhd
after its first quarter (1Q26) results came in below expectations, weighed down mainly by technical disruptions at its floating production, storage and offloading (FPSO) unit Kraken stationed in the North Sea.
CGS International Research (CGSI Research) said the oil and gas company’s 1Q26 core net profit fell 78% year-on-year (y-o-y) to RM40mil, which came in below expectations at 11% of its full-year forecast and 9% of consensus estimates.
The earnings miss was largely due to outages at FPSO Kraken, which suffered oil heat exchanger issues in January 2026, followed by two process plant trips in February.
“Although March 2026 uptime returned to 100%, the FPSO Kraken saw its 1Q26 uptime fall to 77%,” CGSI Research said.
Despite equipment repair costs borne by client United Kingdom-based EnQuest Plc, Bumi Armada still suffered a loss of revenue of about RM11mil in 1Q26 due to lower uptime at FPSO Kraken compared with its budgeted revenue for the quarter.
It also recorded a RM16mil provision against revenue during the quarter, following EnQuest’s exercise of the third option year for FPSO Kraken covering April 2027 to March 2028.
The provision relates to contractual penalty payments to EnQuest for equipment on the FPSO that has not been repaired by Bumi Armada.
According to the CGSI Research, Bumi Armada has the choice to either repair the equipment or pay a penalty to EnQuest.
The company has opted for the latter as it is of the view that the penalties are lower than the cost of repairing the equipment, the research house said.
It added that the decision was also influenced by uncertainty over future contract extensions, noting that EnQuest is exercising its options on a y-o-y basis.
Separately, Bumi Armada said at its analyst briefing that it had submitted front-end engineering and design work for a new FPSO last month, with the charter contract expected to be awarded in the second half of this year.
CGSI Research said this likely refers to the FPSO Tangkulo project for the offshore gas and condensate field in Indonesia, where Bumi Armada is competing with Yinson Holdings Bhd.
The research firm said a successful bid would mark the group’s first FPSO contract win in years and serve as a key re-rating catalyst supporting its “add” call.
“If Bumi Armada does not win the contract, we believe the company may use its excess cash reserves for share buybacks or to increase cash dividends,” it said.
“Bumi Armada’s upstream production ventures in Indonesia remain some years away before capital expenditure spending for development starts, in our view.”
CGSI Research maintained its “add” call with a lower TP of 53 sen from 54 sen, still based on a 50% discount to sum-of-parts valuation amid weak investor sentiment.
RHB Research also maintained its “buy” call, but lowered its TP to 40 sen from 54 sen, after cutting financial year 2026 (FY26) to FY28 earnings by 6% to 26%.
The research house said it trimmed earnings forecasts after adopting a more conservative operational outlook for FPSO Kraken following recent equipment-related disruptions and downtime during the quarter.
Still, RHB Research said Bumi Armada’s earnings visibility remains supported by a firm FPSO order book of about RM7.5bil as at 1Q26 (or RM8.6bil including extension options), underpinned by long-term charter contracts across its core assets.
“While near term earnings may stay moderated following the FPSO Kraken’s charter rate reset, stable uptime across key FPSOs, potential charter extensions, and continued balance sheet deleveraging – which is lowering finance costs – should help sustain earnings stability over the medium term,” it said.
Meanwhile, MBSB Research has lowered the group’s FY26 to FY28 earnings forecasts by 22%, 19% and 23% respectively, while keeping its “buy” recommendation.
It noted that Bumi Armada’s cash position remained on an upward trajectory, despite a 46% quarter-on-quarter drop in cash generation to RM192mil, mainly due to lower operating profit, less favourable working capital movements and reduced dividend income.
In 1Q26, MBSB Research said the group repaid about US$85mil (RM337.2mil) in debt, bringing net gearing down to 0.15 times, while about 29% of total debt is hedged.
