Won't be surprised the FPSO did not start-up as planned over the weekend, or has failed somehow. Heavy selling!

The Kraken FPSO will be restarted on Sunday. If all is good, we should get an update from Bumi Armada on Monday, probably even before the start of trading.

Here's to hoping next week brings better news.

Have a good weekend folks!

ONGC says "best case scenario" for Armada Sterling V FPSO is August 2023 start-up, "worst case scenario" is October 2023 start-up.

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For ONGC 98/2, that is Kg. Our best-case scenario is August oil production. Worst case scenario is October. It all depends on the way nature and monsoon works and, in the oil, production should commence and then gradually step up.
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Source: https://ongcindia.com/documents/77751/2660534/TranscriptInvestors2023ONGC.pdf/92291464-4440-7bed-adb6-1907622c42b8

No need to hurry. We have been waiting patiently for years, buying the dips. We can wait longer and accumulate more at depressed prices.

@Sense Maker, no more idle vessels.

Finance Lease receivables = Olombendo FPSO and Malta FSRU.

Operating Lease receivables = Kraken FPSO and TGT FPSO.

Disregarding the Kraken troubles, the core annual net profit for FY2022 was expected to be around RM800m - RM850m. Additional RM100m - RM120m p.a. contribution from when Armada Sterling V starts production (within July to September 2023).

Next year's net profit could easily be above RM900m (assuming Kraken returns to normal production by end of this year). At this price, it's getting it at 3x forward P/E!

My questions to Enquest:

How bad is the impact to annual guidance?
How long is the period of shut in expected?
How long before returning to full production?
Who will bear the cost of repairs?
Will we receive compensation from Bumi Armada?

I have added more to my position this morning, my average price is now RM0.2843 for a total of 500k++ shares.

You guys can email Enquest yourself, ask some questions, and they will get back to you.

I sent Enquest an email last evening, as a prospective investor to better understand the nature of the Kraken shut-in.

This is the response I received, reproduced in full:

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As you’ll note from Bumi Armada’s announcement, production at the Kraken FPSO has been shut-in since 20 May due to transformer failure, with a subsequent attempt to restart being unsuccessful. We plan to restart the plant later this week, initially on a phased basis starting with single train operations and 50% production, then working up to full production over the coming weeks.

For each day that we are fully shut-in at Kraken, our annualised production for 2023 reduces by c.40 Boepd which, given our remediation plan, is not expected to be material or impact our full year guidance. You should also note that we are executing maintenance work originally planned during two ten-day periods of single train operations in Q3 2023, and would expect there to be no further planned outage in 2023 once we have restarted.

Acknowledging that Kraken has enjoyed exceptional production uptime in recent years, it is relatively normal for North Sea assets to experience periods of unplanned outage. Accordingly, outwith our normal communication/reporting cycle, we would only tend to go to the market to advise on material events. This issue is undoubtedly material for Bumi Armada, given they have been on a zero day rate since 48 hours following the outage, but it is not expected to be material for EnQuest. Of course, should that change, we would certainly announce to the market.

In terms of compensation, Bumi are currently not being paid any day rate by EnQuest, so the saving to us is in the region of $450k per day.

Hopefully this helps clarify.

According to Enquest, it looks like the production will resume by the end of this week (single train operation at 50% capacity), before ramping up to full production in the coming weeks.

Also, it appears Bumi Armada does not need to pay Enquest any compensation, they merely lose out on the day charter of $450,000 (approx. RM2.0mil).

Hence, each day this drags longer, Bumi Armada will be losing RM2mil, and once production gets to 50%, they will be losing RM1mil a day. As such, the situation is deemed material for Bumi Armada but not Enquest.

If true, this is not as bad as it first sounded like.

Some slight positive news:

Work on Mumbai FSRU starts again

https://www.petrowatch.com/synopsis.php?artId=20889&w=1

UOB downgraded to SELL from RM0.75 > RM0.50.

Can buy but not without its risks. Really depends on the severity of the Kraken issue (which for now, is rather unclear).

I've not sold, but it's a shit-show alright.

Bloodbath incoming

@shocklim

The incident happened on 20th May 2023, this much is confirmed by the CFO of Waldorf Production, which hold a 29.5% stake in the Kraken field.

I am extrapolating (based on the share movement pattern) that by the evening of the 23rd of May 2023, it had become clear that the field had to be shut-in following a failed restart procedure.

According to the Waldorf Productions CFO, the failure began on 20th May 2023. This means during the AGM, senior management was already aware of a serious issue at the Kraken field yet failed to appraise shareholders of what was happening.

That is rather dishonest and downright poor corporate governance. Insiders already knew hence the drop in the share price from on 24th May (from 67 sen to a low of 63 sen). I reckon it would've become clear by 23rd May (evening UK time) that the field would have to be shut-in after an attempt to restart the facility failed, hence the heavy selling the next day.

CIMB cuts TP by 18 sen. Here comes the bloodbath!

https://docdro.id/oNvKcF2

Enquest AGM is today in fact, so I expect better clarity by tonight.

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AKPL is working with EnQuest to assess alternative technical solutions, with the aim to return to production, on a phased basis, in the coming weeks. In the meantime, key maintenance activities, originally scheduled for execution within two periods of single train operations in the third quarter of the year, are being executed during the period of shut-in. These activities are intended to negate the requirement for any further planned outages in 2023.

The current shut-in and future reduced level of production, means that BBC revenue earned by AKPL will be reduced. Given the current uncertainties, the financial impact of this incident cannot be reliably estimated at this point, but is expected to be material for Bumi Armada.
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Bumi Armada earns roughly RM225m a quarter in revenue from the Kraken FPSO. Per week, this amounts to roughly RM18m.

Each passing week without production, this is what Bumi Armada stands to lose.

This is not including the cost of repairing the problem, for which I believe Bumi Armada bears the financial responsibility.

So even if production is offline for 4 weeks, we are looking at a hit of RM72m + whatever it takes to repair the FPSO, for which I'm unable to provide an educated guess.

Enquest should be making an announcement today, I'm surprised they've been quiet as this is a loss of around 20k bopd daily (~USD1.4m per day). We should know further from their announcement on the severity of this issue.

Unless, management has an incentive to momentarily suppress share price, of course, and as such announce this.

But try not to second guess too much, in their entire lifetime, Bumi Armada never made any announcement of a shut in even though it has happened numerous times in the past at Kraken, TGT, Olombendo and other fields.

Assuming no ulterior motive, this is bad. Can't sugar coat it

Guys, I doubt this is a minor issue. Their FPSOs have unplanned shut downs rather frequently but we've never seen them make a Bursa announcement before.

If it was a minor issue why spook the market by making an official announcement?

Looks rather bad. I of course hope it can be resolved.

Might need to cut losses and move on.

June is going to be a momentous month for Bumi Armada.

"ONGC is expecting first oil from the FPSO in 2nd Quarter of FY2024" - from ONGC recent investor meet on 29 May 2023

This is some bad news. The FPSO start-up is being further delayed. There seems to be issues with the subsea infrastructure.

Note: ONGC financial year end for FY 2024 is March 2024. As such, Q2 FY2024 = July to September 2023.

Very interesting price dynamics indeed. As a long-term shareholder, all we can do is just sit and wait.

Can MCA vote in the EGM? Or are they forced to abstain?

Robert, I agree Maybank makes the most convincing case, IF you disregard any potential growth prospects.

We know from the AGM, there will be one exciting announcement in June. The CEO mentioned it himself.

However, Maybank’s target price is also a bit b-@#$hit as they do not factor in option periods of the FPSOs. Unlike Yinson, where they factor in the full option period for producing FPSO. So my question would be why exclude that value? Why ascribe zero value to option periods, when they do it for the other comparable company?

Thank you good sir!

Anybody have research report from UOB or Affin Hwang?

Yes, obviously that's the mismatch. No growth = no excitement = no interest. That's where we are at, right now.

Target price movement summary:

Maybank: RM0.58 (unchanged)
AmInvest: RM0.86 (unchanged)
CIMB: RM0.87 (+18 sen)
RHB: RM0.80 (+10 sen)
MIDF: RM0.83 (+3 sen)

Some positive updates from Vietnam:

- TGT Revised Field Development Plan (RFDP) for two new wells has been submitted to the regulator for approval. Drilling expected to commence in Q2/Q3 2024
- Application for extensions to TGT & CNV licences. Discussions ongoing between partners and PVN on licence terms and work programme commitments for the extension period

https://www.pharos.energy/investors/press-releases/2023-agm-trading-and-operations-update/

Officially the TGT FPSO contract is due to end in Dec 2024, but an extension to Dec 2026 is all but certain and a further extension to Dec 2031 is highly likely contingent on field license extension approval.

Yes Gabriel, but it's not producing oil. As the CEO mentioned during the AGM yesterday, the FPSO vessel is ready, but there are delays on the subsea contractors at the 98/2 field. These subsea contractors are hired by ONGC.

So how long is the delay going to be? The FPSO vessel was ready since January 2023...that's a lot of lost revenue/profits. Surprised no analyst pressed on this.

The title for CIMB's report is "New contract wins beckon".

The difference between CIMB and Maybank's TP is purely based on the future expectations. Maybank assumes no new contract wins and no option period extensions for the FPSO charters. CIMB assumes one EPC contract win and 75% of option period extension.

And , we know from yesterday's AGM, that there is one pending announcement due in June 2023 (not related to FPSO segment). So CIMB might be right, they know Bumi Armada is due to win more than just a FPSO contract.

What I find odd is neither of these reports talk about the status of the Armada Sterling V FPSO. That project is mildly worrying as apparently every component of the 98/2 project is NOT YET READY except for the FPSO. Mind you, that is a mega development with fixed platforms etc. The FPSO is just a small part of the puzzle.

Maybank: https://mkefactsettd.maybank-ke.com/PDFS/320428.pdf

Sell @ RM0.58

Good report, thanks for sharing. If you have the PDF, that'd be great Gabriel.

Please share research reports. Especially interested in reading the report from CIMB.

This will be the last time I share trend analysis on Bumi Armada's debt situation, as the company is out of the woods and no longer has any debt concerns.

Table: https://i.ibb.co/R24Ch1m/armada-23q1-debt.png

Time series: https://i.ibb.co/Csz6vBL/armada-23q1-ts.png

The RM1.5bil sukuk due in September will be refinanced when the time comes - whether in MYR or USD, to be assessed in Q1 next year

The growth plan for the future will be known throughout the rest of the year heading into 2024. CEO mentioned these projects, study, discussions and awards take a long time to materialise

Looks like they're working on multiple new projects, especially on the green energy side. The CFO was teasing a lot saying Bumi Armada is "match fit" on numerous occasions.

The ONGC FPSO is ready for first oil but the delay is from ONGC and its subsea contractors. Management in discussion on the financial penalty of the delay.

The Mumbai FSRU project is still progressing but no urgency as LNG prices have skyrocketed. Alternative designs have been shared

"Some notification coming up next month"

Management sounding upbeat, CFO says Bumi Armada is "match fit" for new projects.

My man Gary, been seeing him every year now

A neutral share price for now should be within RM0.70 - RM0.80 range

@Bon888 don't simply compare. Yinson's debt are mostly secured loans tied to specific projects.

Armada's P/E ratio should be in the 6x range for now. A higher P/E ratio will only be warranted if there is future growth baked into the share price. At the moment, minimal (or maybe even zero) future growth is baked-in as the company has thus far failed miserably to secure new FPSO contracts. If we get one or two decent FPSO contracts, expect to see the share price shooting up to 10x - 15x P/E.

Reported Net Profit to Shareholders: RM201.0m

Adjustments:
Gain on Disposal of JV: -RM0.3m
Reversal of impairment: -RM1.3m
Unrealised FX loss: +RM6.0m
Loss on hedging: +RM1.7m

Core Net Profit: RM207.1m

NOTE: There is also a small gain on insurance claim of RM0.4m. Stripping this off, the core net profit is RM206.7m.

Just one project and Bumi Armada will take-off. Everything looks good and in order otherwise.

Please be hard and ask probing questions during the AGM

WE NEED ONE FREAKING PROJECT!!!