Bumi Armada Bhd (Bumi Armada) announced that it has secured a Letter of Interim Agreement from the UK-listed EnQuest and its partners to supply and operate a Floating Production, Storage and Offloading (FPSO) vessel for the Kraken field in the North Sea. The Kraken field lies in Block 9,350 kilometres (km) north east of Aberdeen, Scotland, and 420km west of Stavanger, Norway.
This signifies Bumi Armada’s maiden entry into the large FPSO segment, which brings its total FPSO fleet to seven, placing it among the largest FPSO players in the world. According to HwangDBS Vickers Research Sdn Bhd’s (HwangDBS Vickers Research) analyst, the contract value has not been disclosed yet and the final award is expected to be concluded by November 30, 2013.
“We understand that the contract could offer an eight-year firm period and a 17-year extension given the field’s expected production life of up to 25 years. We estimate the charter rate at around US$550 per day, suggesting a whopping US$1.6 billion (circa RM5 billion) contract for the eight-year duration.”
The analyst noted that the earnings forecast has been raised to account for the contribution from Kraken FPSO in FY14 and a similar large FPSO in FY15 given Bumi Armada’s focus in this segment which has high entry barriers.
“A financing agent has been appointed for this US$1 billion capital expenditure (capex) project which entails 30 months of conversion period before first oil in 2016 to 2017. We expect Bumi Armada’s balance sheet to stay healthy at 0.9 times by FY15.”
Meanwhile, analyst Aaron Tan of MIDF Amanah Investment Bank Bhd research arm (MIDF Research) said this job win comes as little surprise as it was much anticipated since August/September 2013. In addition, he highlighted that the company is still a strong contender for the Madura FPSO job by Husky Energy worth around US$400 million.
“We are maintaining our buy recommendation premised on expanding topline, increasing orderbook quality value with sizable extension options, sustainable margins of more than 20 per cent, and undemanding valuation,” Tan noted.
Source: Borneo Post