Still the impairment seems silly. Surely the carrying value should be conservative. I don’t see other FPSO operators facing this issue. Simply means we as investors need to be wary that Bumi Armada’s FPSOs carrying values are likely overstated on their balance sheet. Especially Armada Olombendo, which is their golden goose. I shudder to think what the impairment for that would be come 2029.

No Rohan, Kraken failure has no impact. This is unrelated. Kraken failure was recognized via lower revenue at that point in time already.

What a bloodbath!

ITreeinvestor none else ending soon, so no other near term risk of the same thing recurring. Next is still 3 years away and is a JV vessel

www.bumiarmada.com/wp-content/uploads/2024/02/Q4-2023-Results_IR-deck_Full-Version_vF.pdf

The investor presentation goes into some detail on the impairment adjustment. On the whole, I think it’s still a positive quarterly results.

Core net profit to shareholders (after adjusting for net impairment): RM312.4mil

Operating cash flow before changes in working capital for Q4 2023 was a staggering RM455mil. By far the highest ever in any given quarter.

I won’t be surprised if this is just a blip. After all the impairment charges are completely non-cash in nature. The cash generating power of the business was the best it has ever been in Q4 2023

As investors, we must discount some of Bumi Armada’s net asset value as it might be overstated.

Everything looks good except for the impairment. Too many impairments done for Kraken and SC vessels. Now all research houses will mark down target prices cause you never know when more impairments are due. Especially for Armada Olombendo.

Roughly rm250mil reduction in net debt.

There is also reversal of impairment of RM36.4mil. No information about this whatsoever.

So many hidden things that are not addressed by management.

There is also this statement: “… resolution of outstanding issues with a charterer which resulted in higher revenue and a reversal of accrued costs.”

No clarity on what this refers to!

There are some funny hidden losses here. If you look at share of results for JV for “Others” segment in Q4 2023 (Page 15), there is a staggering loss of RM56mil.

This likely is related to front-loaded expenses for the Akia JV and/or Bluestreak JV. Good thing cause it shows there is some progress, though not mentioned explicitly.

If discounting the impairment, the Q profit would’ve likely been above rm200mil, maybe touching rm300mil even. I need to do a proper analysis later, am out now.


Of course the other good thing is with the impairment, there will be lower depreciation expenses going forward.

“ Even though there has been no change to the contracted charter cash flows,
adjustment to the carrying value of Armada Kraken FPSO (impairment) was required
in Q4 2023 mainly due to the impact caused by accounting depreciation recognised
on a straight-line basis and the reduction in the charter revenue during the optional
extension period.”

Surely this amounts to accounting fraud? Armada Kraken’s carrying value has been inflated all this while. No changes to contractual terms. The lease revenue dropped was known right from the beginning!

Haha. Now that’s one hell of a f-you!

Also, a key thing to look out for is repayment plans for the RM1.5b sukuk due in Sep 2024.

12.30pm

A part of me hopes for something good from the results, but another part of me says don't expect anything out of the ordinary

But again, profits mean nothing really. With sustained "good" profits, the company will probably head closer to 70 sen. But to go beyond that (looking at RM1.00 and above), the mantra is "new contracts, new contracts, and new contracts". Can't run away from that.

Just got confirmation that Q4 2023 results will be released at 12.30pm on 28th Feb 2024.

Expectations would be of a net profit of ~RM200mil to RM220mil (after stripping off any one-offs). Anything above can be said to be a bonus, anything below will be a disappointment as the Kraken FPSO was back to 100% during the whole quarter.

ConocoPhillips is ready at last to start a FEED competition for a floating production unit at the Salam-Patawali oil project offshore Sarawak, Malaysia.

ConocoPhillips has worked quietly on this project for some years, with its efforts last year focused on pre-FEED technical studies performed by floating production, storage and offloading specialists, according to Kuala Lumpur sources.

Market suggestions were that Malaysia's MISC, Dutch company Bluewater and a few other contractors had been engaged in last year's pre-FEED work.

Now, the focus has turned to a FEED competition to be performed by a minimum of two parties, with ConocoPhillips currently going through the process of selecting those companies.

All the top-tier Malaysian FPSO companies are keen on a new contract with a quality client, including BumiArmada with its Indian partner Shapoorji Pallonji Energy, MISC and
Yinson Holdings, all of which are currently wrapping up the delivery of FPSOs on their books.

Other Malaysian companies like MTC Engineering are also keen, while Bluewater is in the mix too.

https://www.upstreamonline.com/exclusive/eagerly-awaited-malaysian-floater-project-advancing-as-oil-giant-narrows-contractor-field/2-1-1601411

Gabriel, is that a guess or you checked with IR?

Felix, this week or next week?

Yinson mulls US$1b funding round for unit before IPO, Bloomberg reports

https://theedgemalaysia.com/node/701570

Got me excited and hopeful for a while there!

False alarm, looks like a pump scheme across the sector in KLCI.

Good Q4 alone shouldn't shoot up the price. There has to be more to this, otherwise chalk it down to Mr Market's manic episodes.

Some signs of insiders purchasing after getting to know some good news (new contract?). Or could just be the crazed market gyrating.

Alas, we shall get some better clarity as to what they've been up to this week.

@Gabriel, anything specifically new you've identified? I don't seem to see anything new compared to last week.

Seems like the floating carbon storage (FCSIU) project is still being worked on. We should get an official announcement to Bursa Malaysia in H1 2024 if they manage to secure a firm contract. If we hear nothing by June 2024, safe to assume this venture is dead in the water.

Unfortunately not too familiar with the technical stuff, I'm trying to find out and understand more too.

But from what I remember in the AGM two years ago, I recall the CEO saying that tiebacks are good for Bumi Armada as it's considered a variation order and Bumi Armada earns additional revenue from that.

By going to gas from diesel, the operating costs would also decrease, but I believe this will be to Enquest's benefit as they pay for it.

The FPSO would be "greener" though, and that benefits Bumi Armada as far as ESG is concerned.

@Gabriel Khoo, I believe there will not be any lumpy write-back. Rather, kind of "credit" from the initial writedown is usually given by Enquest as "credits" for meeting top quartile performance at every year end. Doubt Bumi Armada gets it for 2023 given the transformer issues.

Guys, the reduction in Kraken FPSO lease rate for the option period is known long ago.

Link: https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=1758639

Simplified calculation:
Firm: USD1,400mil for 8yrs = USD175.00mil/annum
Option: USD924mil for 17yrs = USD54.35mil/annum

54.35/175 = 31.1% (i.e. reduction of 68.9% which matches Enquest's statement)

Note: When the contract runs into the option period, the asset is almost fully depreciated and the loan fully repaid. So while the revenue is 70% lower, the profit margins will be higher, and thus the impact to net profit contribution from Kraken would be lower than 70%.

Positives from the update:

1. Kraken FPSO issues relating to the HSP transformer malfunction is well and truly resolved, with production at 98% in the final four months of 2023.

2. Firm plans for two new wells to be drilled in 2025 at Kraken. Preparations will begin later this year.

3. Firm plans to tieback Bressay gas field to the Kraken FPSO.

4. 70% reduction in Kraken FPSO lease rate from 1 April 2025.

Points 2 - 4 taken together paints a positive picture for the continued charter of the Kraken FPSO.

Excerpts from Enquest's Operation Update that was just published:

2023 Review:

Kraken net production averaged 13,580 Boepd. This reflected high uptime before and after the failure of HSP transformer units during the first half of the year. Full production was restored in early August, with production and water injection efficiencies averaging 98% and 99%, respectively, in the final four months of the year. Further 2023 production gains were achieved by the acceleration and early completion of planned maintenance work while production at the FPSO was shut-in, and deployment of new transformers provides increased resilience to future production capacity.

2024/2025 Outlook:

Ahead of a return to drilling at Kraken in 2025, EnQuest will purchase selected long lead equipment required to facilitate the two-well sidetrack programme. Capital investments are also planned to lower operating costs and reduce future carbon emissions. These projects include a new stabilisation facility and an electricity power grid connection at SVT, as well as preparation for a future tieback of the Bressay field's gas cap to Kraken; displacing diesel that currently powers Kraken operations.

Work is expected to continue to develop a technical solution in order to access the c. 115 MMbbls of 2C resources at Bressay, which remains one of the largest undeveloped fields in the UK North Sea, including the potential for a gas tieback to Kraken as an initial development phase. The Group will continue to consider options around the full Bressay development, including incorporation of an additional partner to lower the Group's equity share of development cost.

The Group also expects unit margins to improve as the Kraken FPSO lease rate reduces by c. 70% from 1 April 2025, while the culmination of major projects at SVT will crystallise significant operating cost reductions and emission reductions in 2026 and beyond.

https://www.enquest.com/media/press-releases/article/full-year-2023-operations-update-and-2024-guidance

While we look forward to new business coming in, the utmost focus must be on extending current contracts. We have 3 contracts expiring in the next year or so:

1. Armada Sterling II - Firm charter expires in March 2024. 1-year extension has been confirmed to March 2025. Subsequent 1-year extensions are possible.

2. Armada TGT - Firm extension charter expires in November 2024. There has been regulatory approval for TGT field license extension to 2026, and the operator is applying for extension to 2031. FPSO charted will almost certainly be extended to 2026, up to 2031.

3. Armada Kraken - Firm charter expires in March 2025. Enquest is likely to exercise 1 year renewals. Field end of life estimated in early 2040s.

Latest Maybank research: https://mkefactsettd.maybank-ke.com/PDFS/364186.pdf

While Maybank assumes full bareboat charter from April 2024 (and nothing before then), in reality the FPSO will start earning around 80-90% of bareboat charter when it hits first oil.

@Felix chill it takes time to connect additional wells.

All wells are planned to be connected by May 2024, the peak oil production is expected at 45,000 barrels. Although, I won't be surprised we don't even got to 40,000 (though no fault of the FPSO).

I posted it to show that there has been some progress. The initial start-up oil production was around 7,000 barrels, so they must've connected a second well.

Q4 2023 financial results should be out by the end of next week.

Maybank has cut the TP from RM0.71 to RM0.65

At present, the total oil and gas production at KG 98/2 stands at 12,000 barrels of oil per day and 1.75 million metric standard cubic metres of gas per day, ONGC said.

https://www.ndtvprofit.com/business/ongc-expects-5-6-rise-in-oil-production-in-fy25

Happy New Year to all Bumi Armada shareholders, be it short-term traders or medium/long-term investors.

Here's to hoping in the Year of the Dragon, Bumi Armada fulfils it's potential. Looking forward to some concrete announcements with regards to green energy initiatives (FLNG, FSRU, FCSIU).

Everyone here talking about trends, oil price etc. Okay yes they impact short term price fluctuations, but the baseline long term trend is informed by the underlying prospects of the business. For which, Bumi Armada has yet to deliver.

I wonder when will there start being an exodus of long-term investors.

Every other day, they post some nonsense initiative (that has zero bearing on their core business) on LinkedIn.

Hopefully there's more to come from them.

Indonesia is the new focus area but not sure if there's going to be much if any profits there.

Also, Akia is a JV with Anada's private company, hope we're not subsidising his foray into upstream O&G.

I believe Bumi Armada participated in the bid for this FSO. So far, no official winner announced. Something to keep an eye out for perhaps.

https://theenergyyear.com/news/murphy-oil-takes-its-fid-on-vietnam-project/

@rohank71 you jinxed it brother!!!