@Felix888, please get your facts right.

This is from Enquest IR:

"There is a mechanism under which Bumi compensate EnQuest through availability credits, with the basis being performance against daily targets for potential production. It’s not quite as simple as equating production level to lease day rate paid, but retains material incentivisation for Bumi to perform."

Actually Bumi Armada has a track record of dragging their feet on material announcements. In 2017, when FPSO Olombendo achieved first oil, the share price started moving up before Bumi Armada's official announcement due to informational asymmetry. First oil was achieved on 8th Feb 2017 while the announcement was only made on 17th Feb 2017. Insiders already knew this and the price was pushed up over 10% before the official announcement came.

https://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=77852&name=EA_GA_ATTACHMENTS

All of you guys here are privy to what we might as well term as "insider information", although there is nothing illegal about it as the information was sought through legal channels.

That's why investing in Bumi Armada is rewarding if you have your eyes and ears fixed on the right places.

I'm actually still surprised they have not announced that the FPSO has come back online to Bursa Malaysia. As far as I can tell, this is a material development. They can always issue another update when the FPSO is back to full health.

If Bumi Armada can fix the issue within the next 4 weeks, then of course the profit hit will be lower. And consequently, if they take longer (e.g. 6 months) to fix the problem, then the profit hit will be significantly higher.

If the final remaining transformer also fails, then of course that's another huge problem.

Since 3 transformers have failed for a relatively new vessel (<6 years operations), there might also be a possibility of structural defects that will make it unlikely for the option periods to be exercised, or to be tied back to the nearby Bressey and Bentley fields.

@Kakume

"1 day $450,000 loss income, 30 days = RM60,000,000 loss. or RM24M to the bottom line each month.
After this, the rate will go down due to SLA uptime criteria, that is why Bumi know this is going to be very material impact to the earning."

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Please get your facts right. USD450,000 day rate charter is currently being paid to Bumi Armada. However, due to production deficit and performance issues (given that only 1 of 4 transformer is online at present), Bumi Armada will have to issue a credit for some of that revenue, for failing to meet the SLA. To be conservative, lets assume the credit is 50% of the day rate charter.

This means, at present, Bumi Armada is effectively earning a topline revenue of USD225,000 per day from Enquest.

Production needs to be above 95% to earn the full day rate charter. If performance is higher than 95% there is also a bonus paid out in Q4 of every year.

We can forget about the bonus for this year, it ain't happening.

Something that softens the blow a bit is that the maintenance scheduled for August 2023 has been brought forward. Since the maintenance was due to be conducted on a single train basis, now is the perfect time to do it since the FPSO is limited to single train operations for now. Of course, the maintenance might end up taking slightly longer since it is being done ahead of schedule, but no major issue since Bumi Armada will have more than sufficient time to get it done.

The FPSO was offline for 22 days = loss of revenue of ~RM45mil (and consequently loss of profits of the same amount).

Each day more the FPSO is offline, there will be a loss of revenue and profits of around RM1mil.

As to the cost to get the transformer fixed, lets pencil in another RM15mil conservatively (might end up being a lot lower as the transformer itself costs <RM1mil, but I'm factoring other related costs such as shipment, lifting etc).

If Bumi Armada takes 3 more months to fix this issue, there will be a total hit of:

RM45mil + 90 * RM1mil + RM15mil = RM150mil.

This is a conservative estimate, might be slightly lower than this. Given an expected core net profit of RM800m for FY2023, this will result in a revised core net profit of RM650mil. Still not too shabby. The loss of RM150mil will be ultimately worth just 2.5 sen per share.

You can play around with the numbers as you wish and come to your own conclusion.

For now, they are operating at roughly 50% capacity. Will take a while (anywhere between 1 to 6 months) to get back to full production.

The good thing is, at 50% production, Bumi Armada will still get paid. Loss per day will be around RM1mil, compared to loss per day of around RM2mil before this during the shut-in.

The worst case scenario is over, now a matter of how fast the faulty transformers can be swapped out.

The good thing is, these transformers cost less than RM1m each, so rather cheap.

Yes, a few good things in favour:

1. Weather conditions - summer time (imagine if winter, will be a disaster)
2. Proximity to HSP expertise

Holy crap!!! It's back online!

Enquest's investor relations team replied to my email with the following:

"I can confirm that the HSP was restarted on Sunday evening, with single train production resuming yesterday. We will look to ramp up towards full production in the coming weeks".

Also, something I would like to add is that the Cameia FPSO preparations are already in full swing. Bumi Armada has been incurring significant expenses to get the team ready and everything in place. For now, these are "hidden losses". Expect a handy gain (i.e. reversal of the hidden losses" when the revenue starts coming in) once the Cameia FPSO is official awarded to Bumi Armada.

So if we take Bumi Armada's "steady" core net profit per quarter to be RM200mil, then the net profit will reduce by around RM185mil (USD450,000 * 4.6 * 90 days) for that quarter, wiping out pretty much all other profits. This is excluding cost of repairs and associated costs.

Hence this is an extremely material event for Bumi Armada.

@Ravi Kumar

3. USD450,000 is referring to the bareboat charter per day, it is Bumi Armada's "topline revenue" for the Kraken FPSO. Since the costs are relatively fixed in nature, we can assume that all of the loss in revenue will result in a corresponding decrease in profit. Assuming net margin of 30%, the net profit would typically be USD135,000 but due to a loss of revenue, the net loss would now be USD315,000.

5. No idea. Some analysts have said RM50m but they're plucking it from their behind. Might be a lot higher, or significantly lower as well.

If you know people working in Bumi Armada, they will tell you that Bumi Armada had been awarded a Conditional Letter of Award (CLOA) for the ESPCC of the Cameia FPSO from Total Energies back in September 2022.

It is unfair that they did not announce to Bursa Malaysia. I recall asking this question in the AGM but the CEO says they do not comment on "rumours". A CLOA is not a rumour. This creates an uneven playing field where the insiders know far in advance of an award materializing before an official announcement is made to Bursa Malaysia.

My honest opinion, IF AND ONLY IF Bumi Armada is able to repair the transformer and the Kraken FPSO is back to full production in 6 months time (i.e. November 2023), then buying in at these price levels is a complete no brainer.

To make matters sweeter, the Cameia FPSO award will be officially completed within the next 4 to 6 weeks, and Bumi Armada will be announcing a FCSIU win within the next 2 weeks. The Mumbai FSRU is also a go, but I am unsure when the official award will be signed/announced.

Debt has been aggressively repaid, so there will be lots of interest savings moving forward. The Fed rate hikes are slowing down, so the "finance costs" per quarter should start going down appreciable here on out. This will only be strengthened further in Q2 2023 with the sale of the Armada Claire FPSO and the final OSV, i.e. Armada Tuah 300.

Unofficially, the TGT FPSO has also secured a contract extension to December 2026 (from December 2024).

A lot to be excited about, the future looks bright, and now is the time to accumulate IF AND ONLY you believe the Kraken FPSO will be back to full production within 6 months time. If however, the Kraken issue turns out to be terminal (highly unlikely, but you never know), then maybe, just maybe, it is game over for Bumi Armada. Or at least, game over in terms of the stock going on to be a multi-bagger.

I am actually rather disappointed in the Bumi Armada management. They issued a vague update to Bursa Malaysia on 2nd June, and radio silence since then. They ought to appraise minority shareholders of what's going on. Plus my emails to their Investor Relations team go unanswered. It's sad that I have to reach out to Enquest's investor relations team instead to find out what the heck is going on.

To recap what we know about the Kraken shut-in:

1. The shut-in was initiated on 20th May 2023 due to the transformer for the HSP failing
2. A restart was attempted within 48 hours but failed
3. Bumi Armada is losing USD450,000 in revenue each passing day the FPSO remains shut-in
4. Bumi Armada is not paying Enquest any compensation for the lack of production
5. The financial burden of repairing the transformers and alternative solutions to overcome the issue will be fully borne by Bumi Armada
6. There was a second attempt of a restart on 11 June 2023 - thus far, with no news and with heavy selling yesterday, we can only presume this failed
7. Even when the FPSO comes back online, it will be on a phased basis. Initially at 50% capacity (i.e. single train operations), and gradually over weeks to full production

Production from the EnQuest-operated Kraken oil field in the UK northern North Sea remains shut in following the recent failure of hydraulic submersible pump transformers on the FPSO.

The vessel, owned by Bumi Armada subsidiary, Armada Kraken Pte Ltd. (AKPL), operates under a bareboat charter contract.

AKPL and EnQuest attempted a restart of the facility following a remediation program but thus was unsuccessful, and the FPSO remains shut in.

The two parties are assessing alternative solutions with the aim of restoring production, on a phased basis, in the next few weeks.

Maintenance activities, originally scheduled for execution during single train operations this summer, have been brought forward to negate the need for any further planned outages in 2023.

https://www.facebook.com/getmanupco/posts/pfbid0hPWHe3tyJwaVPbBxJQqdYxZEEzXBnsJg5GgKWkdKFTby2gC9sdEkbso9wA143fsgl

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This is likely the reason for today's sharp drop, the attempt to restart the facility with a stop-gap measure failed.

First, not many companies issue a profit warning. On this score, Bumi Armada Bhd deserves a pat on the back for alerting investors to operational problems at one of its floating, production, storage and offloading (FPSO) vessels in the North Sea.

The Armada Kraken, which is operating in the Kraken field in the North Sea, was shut-in last week following the failure of the hydraulic submersible pump (HSP) transformers. According to Bumi Armada, the company, together with EnQuest plc, attempted some remedial works to restart operations but was unsuccessful.


Hence, it is the shut-in of Armada Kraken that will have a financial impact on the company. Bumi Armada stated it cannot reliably estimate the quantum of the impact at this point.

While Bumi Armada has issued a profit warning, which caused its share price to fall by more than 25% to as low as 45 sen within four days, there is no news — adverse or otherwise — on the development of the Kraken field from UK-listed EnQuest.

In its last update on May 24, EnQuest, the operator of the field, stated that the Armada Kraken had continued to perform well with about 94% efficiency as at end-April. Perhaps the company is still looking into the depth of the problem before making an announcement.

Adding spice to the incident is the equipment provider of the HSP downplaying the problems, stating that Bumi Armada’s announcement gives the impression that there is a failure of its pumps.

According to a report, Celeros Flow Technology said the shut-in was due to a failure of “critical motor supply transformers on the topside for the HSP lift system”. It added that the topside equipment was more accessible than well equipment, which could prove more costly to fix.

Well equipment relates to subsea operations, which is more difficult and costly to repair.

The Armada Kraken contributes more than 30% to Bumi Armada’s top line. Any unplanned shutdown will affect its bottom line and investor sentiment towards the oil and gas company that has gained the confidence of analysts and investors.

While it is good that Bumi Armada has issued a profit warning and used the shut-in period to undertake maintenance works, it should issue some guidance on the impact to its bottom line. At the moment, the depth of the problem in Armada Kraken is anybody’s guess.

https://theedgemalaysia.com/node/670728

Bought another 32k shares at RM0.425. What's going on is just crazy really.

Some good news to share. Two project announcements are imminent:

1. Floating Carbon Capture & Storage (to be announced in June 2023)
2. Cameia FPSO EPSCC (to be announce by July 2023)

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.
----------------

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.