https://www.upstreamonline.com/rigs-and-vessels/major-fpso-company-says-not-enough-competitors-for-big-high-cost-projects/2-1-1606125

Nick how do you interpret the last sentense of this from RHB
e sizeable impairment on Armada Kraken caught us by surprise, and management explained that it was mainly due to the value-in-use (VIU) of this vessel falling significantly below its net book value (NBV) approaching the end of firm period (Mar 205), coupled with a hike in the discount rate in arriving at the VIU. It was highlighted that there has been no change to contracted cash flows and the recent transformer failure did not affect the VIU. BAB is currently in talks with the client on the potential extension and the renewal rate could be 50-70% lower than its firm contract. T

cashflows. This is potentially a near-term rerating catalyst. Other potential rerating catalysts include the FPSO Armada Sterling 5 (30% owned by BAB) securing final acceptance by the client, ONGC (ONGC IN, Not Rated) in the next few months. The FPSO received first oil at the Kakinada field, offshore India, on 7 Jan 2024, and is currently in the process of stabilising operations upon which it hopes to pass the ’72-hour’ test and then secure the certificate of final acceptance from ONGC. Once final acceptance is received, the FPSO can begin to receive its full contracted BBC rate, and the nine-year firm charter period can begin. At the moment, the FPSO is likely to be receiving a proportion of its full BBC rate, as it is producing oil (the first cargo offload was on 28 Feb 2024), in our view. However, ONGC will not pay the full BBC rate until final acceptance is secured by the FPSO. Meanwhile, a potential extension of the FPSO Armada TGT-1 charter from 14 Nov 2024F to 26 Aug 2031F, could add a further 15 sen to our SOP. A contract extension is currently being negotiated between BAB and the charterer Pharos Energy (PHAR LN, Not Rated). Separately, BAB said at the analyst briefing that it already received credit committee approvals from several banks to refinance the RM1.5bn sukuk borrowings which will be maturing on 4 Sep 2024F. Hence, the probability of a successful refinancing exercise is high, in our view. Downside risks include an unexpected decline in oil prices that may cause a pause in the pace of upstream FPSO capex spending by the oil majors and national oil companies, which could impact BAB’s growth prospects. BAB’s longer-term growth plans may also require equity funding in the medium term, leading to a potential rights issue, in our view.

The RM437m impairment against the FPSO Kraken was calculated as the difference between the NBV of the asset and the VIU, with the NBV written down to the lower VIU. For information purposes, if the VIU is higher than the NBV, the NBV is not adjusted higher; however, this is not applicable in the case of the FPSO Kraken. The FPSO Kraken’s NBV is based on the original cost of construction, depreciated on a straight line basis over 25 years to its assumed residual value of 2% of the original cost. The depreciation period of 25 years encompasses both the firm charter period of eight years and the option charter period of 17 years. The VIU is calculated as net present value (NPV) of the future bareboat charter (BBC) cashflows of the FPSO, and the VIU naturally declines with the passing of time because FPSO charter contracts have a finite life. FPSO charter contracts are also split into two distinct periods, i.e. the firm charter period, and the option charter period, with the firm period usually paying the FPSO owner a high daily BBC rate, with BBC rate in the option period typically at just 30% the firm period’s BBC rate (i.e. 70% lower). As such, VIUs of FPSO charter contracts would naturally be higher if the firm charter period has many more years remaining, and become lower once the FPSO contract enters into the option charter period due to the lower BBC rate in the option period. The VIUs of FPSO charter contracts also fluctuate depending on the discount rate applied to calculate the NPV, and higher global interest rates over the past two years would have put the VIUs under pressure, we believe. Specifically in relation to the FPSO Kraken, its eight-year firm charter period is nearing its end on 31 Mar 2025F, upon which the 17-year option charter period will commence at significantly lower BBC rates. Also, the discount rate applied by BAB for the VIU calculation at end-2023 was 8.5%, which BAB confirmed was higher than the rate used in previous years’ calculations. The combination of these factors caused the FPSO Kraken’s VIU at end-2023 to fall under its NBV, resulting in the RM437m impairment. BAB emphasised at the post-results analyst briefing that the contracted cashflows for the FPSO Kraken remain unchanged. Therefore, our DCF valuation of the FPSO Kraken, which is included in our SOP-based target price, is not affected by the accounting, non-cash impairment of RM437m in 4Q23. We have applied a cost of equity discount rate of 13% to discount future FPSO Kraken cashflows to equity (Figure 4). BAB also said that the FPSO Kraken impairments had nothing to do with the failure of transformer equipment on the FPSO in May 2023.

On the other hand, BAB reported a net loss of RM166m in 4Q23, which we did not expect. This arose from RM437m impairment against the FPSO Kraken, as well as a RM77m impairment against the net book value (NBV) of the two subsea construction vessels due to delays in securing new jobs caused by sanctions against Russia. The impairments were partially offset by RM36.4m in writebacks of prior years’ provisions of doubtful debts. The FPSO Kraken impairment was due to the NBV of the asset written down to its value in use (VIU); the latter is calculated as the discounted present value of future cashflows. We explain in detail the reasons for such an impairment on page 3, but emphasise that the contracted cashflows for the FPSO Kraken remain unchanged and therefore, our DCF value of the FPSO Kraken charter contract is not affected by the accounting, non-cash impairment. Trading in BAB shares is likely to be dominated by retail flows, in our view, and the average retail investor may find it difficult to understand the rationale for such an impairment; this caused BAB’s shares to plunge 11% yesterday after the lunchtime release of its FY23 results. In our view, this is an opportunity for investors to accumulate BAB shares for a potential short-term rebound.

4Q23 core net profit of RM313m was substantially above our RM177m estimate, because of stronger-than-expected operating performance by the FPSO Kraken after all the issues relating to its transformer failures in May 2023 were fully resolved in Aug 2023. Also, BAB settled in 4Q23 long-outstanding contractual issues with EnQuest (since 2016) over the technical performance of the FPSO Kraken, and this permitted BAB to record both higher revenues and reverse prior years’ cost provisions in 4Q23 amounting to a total of RM70m. The closure of the OSV division, after the last vessel was sold in 2Q23, also saved BAB RM20m in costs during 4Q23.

MBB remains TP at 66c

Net debt 3.65B

Sukuk Murabahah of RM1,500.0 million is classified as current liabilities as the repayment is due within 12 months from the balance sheet date (i.e. September 2024). The Group is confident that the Sukuk Murabahah will be refinanced based on the following: there is sufficient time to conclude the new financing, positive indications received from the financiers, and the Group’s strong operating cash flows and significant cash holdings. As of the date of this Report, the financiers are in the process of obtaining the approval from the credit committees to support the new financing. The Group expects to conclude the new financing within the next few months. (3) The Group has successfully secured a syndicated term loan facility for USD105.5 million (RM484.7 million) (“the Syndicated Term Loan”) with a final maturity of 25 September 2028, to refinance the previous term loan facility. As the Syndicated Term Loan is repayable over 60 months, the amount due more than 12 months from the balance sheet date has been classified as non-current liabilities.

https://www.ogv.energy/news-item/enquest-seeking-production-boost-from-north-sea-kraken-area

From PIB

28/2

BAB updated their ESG in website ald

Thanks nik. Can you elaborate bit more the update you share under item no. 3 above. Interesting to know how it actually work. Does all existing FPSO support gas field. Its looks like more and more gas will be tie to FPSO going forward

Can we expect some write back from kraken this year ?

https://www.linkedin.com/feed/update/urn:li:activity:7161595091248250881?utm_source=share&utm_medium=member_android

https://www.offshore-technology.com/news/enquest-subsidiary-granted-north-sea-drilling-licence-despite-previous-fine/

https://www.linkedin.com/posts/oilandnaturalgascorporation_ongc-aatmanirbharbharat-indiaenergyweek2024-activity-7158778008659496961-pQXS?utm_source=share&utm_medium=member_android

https://www.linkedin.com/posts/oilandnaturalgascorporation_ongc-aatmanirbharbharat-indiaenergyweek2024-activity-7158778008659496961-pQXS?utm_source=share&utm_medium=member_android

https://www.linkedin.com/posts/oilandnaturalgascorporation_india-ongc-indiaenergyweek2024-activity-7157227732655898624-d4ud?utm_source=share&utm_medium=member_android

https://www.linkedin.com/posts/oilandnaturalgascorporation_india-ongc-indiaenergyweek2024-activity-7157227732655898624-d4ud?utm_source=share&utm_medium=member_android

Mrcb...the previous partner for lrt3

Don under estimate india if US want to India to grow fast they will get enough support

Bcos the data the collect based on historical data...if u shortern the data collection period then armada beta is low

ITreeinvestor

#ONGC is eyeing commencement of #Oil production from its flagship deepwater project KG-98/2 Development Project in December 2023.

Gas production from Project has already commenced in March 2020 with plan of further ramping up by May 2024.

https://www.linkedin.com/posts/oilandnaturalgascorporation_ongc-oil-ongcjeetegatohjeetegaindia-activity-7137463703498596352-aHSb

Nik the minister may refer to the gas production in 2nd stages in May 2024

Here state oil production will state this month posted 2 days ago only why so many noise here

https://www.linkedin.com/posts/oilandnaturalgascorporation_ongc-oil-ongcjeetegatohjeetegaindia-activity-7137463703498596352-aHSb?utm_source=share&utm_medium=member_android

https://www.linkedin.com/posts/oilandnaturalgascorporation_ongc-oil-ongcjeetegatohjeetegaindia-activity-7137463703498596352-aHSb?utm_source=share&utm_medium=member_android

https://www.google.com/amp/s/amp.cnn.com/cnn/2023/07/31/energy/sunak-north-sea-oil-gas-licenses/index.html

FPSOs market:
Tight capacity due to financial constraint.
Participation can be from JV, new project
Alternatively, can acquire deliver project
Opportunity is there
Don have to worry about the BAB competency
Design or technical related vs yinson.
Yinson so far so good but projects have just been delievered or underconstruction.
Majorities are delivered less than 3 years. So its still early to judge the FPSOs delivered. If BAB has the FCF and low gearing I don see why BAB cant grow their top line in near term.
I also noted that some of the investors very sensitive to the day to day operation or hitcup or development for instance the HSP issues when I shared my view as an investor and I do not have in depth technical knowledge but my view purely from top down approach and BAB has navigated tru that incident. So we as an investors must know what is crucial to assess, what will weight on the share price and what type of investors are you, else every day is a doom day.

Just my view.

Be selective always a key for the new CEO onboard few years ago. Things started to turn better. So beae with them. Don risk for unprofitable project.

Pls refer annual report

Thanks robert. Im not good at this

The key learning pts here is the hsp can be refurbished and the lead time is not as scary as the analysts shared. So now just lool forqard for the green agenda plan

Nick. Thanks for update. Based on the info gather from here. With 2nd hsp they prodiction can reach 100% anytime without 3rd hsp in near term
Also noted that the lead time to look for refurbish hsp ald shortern than expected. All things looking good.

https://www.tradewindsnews.com/interviews/navigator-nearly-good-to-go-on-carbon-carrier-orders-as-it-targets-uk-with-bumi-armada/2-1-1475823

Navigator has been prpfitable over the last 3 years. The equity fund stand at 1.1B.

Biz model for ccs. BA will be an owner for injection vessel and operatijg for the vessel

BAB EPCC project not bad mah. Don have to carry so many oil & gas portfolio. Diverting to green energy attract investors

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EXCLUSIVE See all articles

EnQuest chief executive: Amjad BseisuPhoto: ENQUEST
Kraken FPSO update: UK safety regulator checking events that led to shutdown
All quiet from field operator EnQuest on the plans for restoring production

16 June 2023 3:01 GMT UPDATED 16 June 2023 6:55 GMT
By Russell Searancke in Oslo
The UK’s Health & Safety Executive (HSE) is examining the events that led to the shutdown several weeks ago of the Kraken offshore oilfield in the UK North Sea, which field operator EnQuest has still not acknowledged.

An HSE spokesperson told Upstream the agency is aware of the Kraken incident and is “currently looking into the circumstances leading to the shutdown”.


Critical topsides equipment failure forces shut-in of UK FPSO
Read more
The Kraken field had, according to EnQuest, performed well during the fourth quarter of 2022, during which time it passed the milestone of 60 million barrels of oil (gross) produced since start-up in mid-2017, and delivered “top-quartile production efficiency of 93% and production at the top end of its guidance range”.

However, a sudden failure of hydraulic submersible pump (HSP) transformers on the Armada Kraken floating production, storage and offloading vessel forced the field to be shut down, according to the FPSO's owner Bumi Armada, which leases the vessel to EnQuest under a bareboat charter contract.

The Malaysian FPSO operator warned on 2 June that the financial impact of the incident was “expected to be material for Bumi Armada” due to the uncertainties around future operations.

Upstream asked EnQuest to acknowledge the incident and to provide a forward plan, but the UK company said it had no comment to offer.

Likewise, Bumi Armada was not ready to provide an update regarding the Kraken situation.

The forward plan
According to well-placed industry sources, the FPSO has four HSP transformers, which are essential in the production process of the thick viscous oil from Kraken.

Only one of those HSPs is available for use, and the other three need to be replaced.

The focus is therefore on bringing on restricted production via the one available HSP, and trying to convert a water injection pump to function as an HSP, said sources.

Some sources suggested that limited production had in fact been generated, but this could not be confirmed.

The reasons for the sudden failure of the HSPs could not be confirmed either, but several industry experts said EnQuest and Bumi Armada had pushed the processing equipment to its limits.

They have not reported any news prior to this in fb. Btwn. I think drop due to oil price sentiment

Niki i feel like the content of this facebook is old story. Is not the latest news. Looking at the storyline

2260lots here. Damn cool

CIMB released report with assumption of worst senario

Robert. U see the points. Thing broken (now) and can be replaced or resolved vs previous issue did not meet the requirement due to geo issue. Low revenue or renevue lost from kraken is for sure but will recover eventually.

If cant restart then go by phased like the mentioned in the announcement. split the operation rather than waiting for one

There are 15 units of Subsea – Hydraulic Submersible Pumps (HSPs) installed in fpso for wells.

Previous management team vs current management team

This is bursa requiremenr for listed company. Good to understand from listing requirement rather than guessing