Yup, Aircel.

https://www.thestar.com.my/business/business-news/2018/03/01/mainly-malaysian-maxis-owned-indian-aircel-files-for-bankruptcy/

Not sure if AK can buy more since he holds about 35%, any more will trigger mandatory takeover.

But downside risk is really quite limited now that AA2 is signed.

A clearly defined, step by step items to achieve final acceptance. Armada wouldn't have agreed to pay US$15m to Enquest and take a large impairment hit if they think the steps are unachievable.

Just a matter of time for final acceptance now, but I just hope it's sooner than later.

Other things are more opportunistic and more distant in the future - secure new zaba zaba project, redeployment of Armada Claire / Perdana, win the woodside petroleum court case (+0.20 cents to share price), better utilization of OSV vessels etc.

So, the #1 focus will be on Kraken's final acceptance over the next month.

I think that's the #1 thing institutional investors are looking for.

Final acceptance of Kraken has many implications - not just improved charter rates.

The short term debt can be reclassified as long-term debt upon full acceptance, and Armada can tap on the US$1.5bn medium term note to finance new projects with much better terms. This will significantly alleviate balance sheet stress, putting Armada in a much better position.

For those who wants a better breakdown on the write-offs in 2Q 2018.
Provided by CIMB:

The exceptional losses in 2Q18 totalled RM614.8m, and included the following
items:

 RM477.2m (US$119m) impairment on the FPSO Kraken in relation to the
penalties imposed by EnQuest for the technical failure to deliver oil in the
quantities and specifications required;
 RM1.7m impairment for the FPSO Gema, which is an unused asset;
 RM104.3m write-off of deposits placed with shipyards to purchase OSVs
which BAB has decided it will not take delivery of;
 RM13.1m provision for doubtful debts in the FPSO division, probably in
relation to the Armada Perdana FPSO;
 RM14.8m unrealised foreign exchange loss; and
 RM3.7m various miscellaneous items.


Excluding these one-off write-offs, core net profit is around RM30m ( 585m loss add back 615m).
If we also count the US$15m (RM60m) settlement to Kraken as one-off, then the core-net profit is actually closer to RM90m in 2Q2018.

So please, Bumi Armada, you've signed the agreement since end Jul, so you must have worked on it for a month now. Get your shit together and secure the final acceptance in the next 2 weeks.

The ideal scenario will be:

1) Pay Enquest US$15m

2) Enquest agree to issue final acceptance certificate in 2 weeks, and Armada commits another US$10m to complete a checklist of items post final acceptance.

I guess this is where the US$25m (RM100m) will hit the P&L. 60% (US$15m) already recognized in Q2, another 40% (US$10m) in 2H2018.

Small bullet to bite for final acceptance.
EXECUTE WELL PLEASE MANAGEMENT. LAST CHANCE.

Haha, maybe.

Technically, they do not need to do the impairment in Q2 results, because the agreement was only signed in Q3 (end Jul 2018). So not quite sure why they've decided to do it in Q2.

Also, if final acceptance indeed happens in 2 weeks, then this presents a really good opportunity to accumulate.

I'm gonna give it one last shot, accumulate and average down now, and hold till end Sep.

CIMB Research:

TP: RM0.72, BAB told CIMB that final acceptance is expected within 2 weeks.
Up to the market to believe it or not.
But if it indeed happens, then a strong rebound can be expected.
However, management is a famous promise breaker, so keep that in mind.

Bumi Armada
Kitchen-sinking done; only upside from here?
■ BAB’s 1H18 core net profit underperformed at only 28% of our previous FY18F
forecast, due to compensation provisions made in 2Q18 relating to the Kraken FPSO.
■ BAB shocked the market with a huge 2Q18 net loss of RM586m, due to even more
penalty provisions for Kraken, which is the only BAB asset without final acceptance.
■ BAB expects final acceptance within two weeks, a final compensation agreement with
EnQuest has already been signed, and the kitchen-sinking was already done in 2Q18.
■ We incorporate the penalties and cut our SOP-based target price to 72 sen, but keep
an Add as the risks are to the upside, particularly after the sell-off yesterday.
Highlights of 2Q18

First, BAB agreed to pay EnQuest US$15m as the full and final settlement for all claims prior to 31Jul 2018. Second, BAB expects to incur a further US$10m in costs to bring the FPSO to
final acceptance and to complete a checklist of items post-final acceptance.

probably not a good target for shorties today - technical rebound day + all over the news that armada tanked crazily yesterday. First instinct now is to buy cheap probably.

Enquest announcement on Kraken:

http://www.enquest.com/media-centre/press-releases/2018/29-08-18.aspx

29 AUGUST 2018

KRAKEN FPSO SETTLEMENT AGREEMENT

EnQuest PLC ('EnQuest'), an independent oil and gas production and development company listed on the London and Stockholm stock exchanges (ENQ.L and ENQ.ST), is pleased to announce an agreed compensation settlement with Armada Kraken Pte Ltd, a wholly-owned subsidiary of Bumi Armada Berhad ('Bumi'), in relation to historic issues with the FPSO. Bumi has agreed to pay $15 million to the Kraken partners, which is to be fully settled by 17 December 2018.

While there is still further work to complete before a final acceptance certificate can be issued, this agreement allows all parties to work together to deliver final acceptance on a defined basis.

Analyst presentation deck: http://www.bumiarmada.com/App_File/Image/assets/Q2%202018%20Analyst%20Briefing%20Final.pdf

guys, let's be objective and not resort to personal attacks.
we're all here to learn from each other and learn different views.

First Report Out by Jefferies (TP: 0.95)

We maintain Buy on Bumi Armada (BAB) with a lower fair value of RM0.95, as we
reduced the value of FPSO Armada Kraken in our sum-of-parts valuation. BAB
recorded large one-off losses, largely relating to an impairment on Armada Kraken
following the amended agreement with its clients. This should pave the way in
securing final acceptance for the FPSO, which should strengthen its financials going
forward.

Kitchen sinking on FPSO Armada Kraken to facilitate final acceptance
BAB entered into an additional amended agreement with its clients for Armada Kraken (to
be effective from 31 July 2018), which allows the project to progress on a more defined
basis towards final acceptance of the vessel, by achieving commercial consensus on the
technical requirements to complete and rectify certain works on the FPSO to facilitate this.
Additionally, the parties have agreed to mutually waive their respective rights from certain
claims and events that occurred prior to the effective date of this agreement. As part of
these mutual waivers, BAB has agreed to pay its clients a total sum of USD15mil as
compensation.
BAB estimates a negative financial impact of USD25mil on its P&L for FY18, with ~50% of
the amount being recognised in 2QFY18. Additionally, BAB recognised an impairment loss
of USD119mil (RM477mil), based on the revised terms in the amended agreement.

Maintain Buy; TP reduced to RM0.95
All in all, it appears that BAB’s financial vitality hinges on its ability to secure the final
acceptance for Armada Kraken, which would lead to BAB receiving the full charter rates
from the contract. Management is more confident on achieving this in view of the revised
technical requirements under the amended agreement. Although we believe that the
expected contributions from Armada Kraken may be potentially reduced going forward from
the revised terms in the amended agreement, this would nevertheless create more
certainty in its future cashflow, which should also facilitate the restructuring of the group’s
balance sheet.

Last few minutes for discount sales!!!

so sad, just when I thought Leon Harland finally did a fairly good job in securing a multi-year contract extension for TGT1, Kraken hits hard. And that's like the one most important thing that they should focus on, but screwed up.

Best Merdeka gift ever.

(a) AKPL and the Charterers have agreed to mutually waive their respective rights under the Bareboat Charter that arose from certain claims and events that occurred prior to the Effective Date. As part of these mutual waivers, AKPL agreed to pay to the Charterers a sum of USD15 million (approximately RM60 million) ("Agreed Sum"). This sum is to be fully paid by 17 December 2018.

Cash must be fully paid by 17 Dec 2018. But they just accrue the expenses into P&L first - i.e. increase expense, increase payable. When finally cash is paid, decrease payable, decrease cash.

Not worried that right issue is coming.
It'll be unwise to do a rights issue now with the share price in tatters - they'll just raise less money.

they lump in the penalty for kraken to enquest to cost of sales.

but the 5% dip to 0.67 yesterday evening could be due to insider trading.

no, the QR was announced since this morning on bursa website.

well i think essentially what's been negotiated is a clear, reduced requirement for Armada to achieve final acceptance for Kraken, in exchange for some reduced price and penalty.

Final acceptance is definitely going to happen with Armada biting the bullet now with the new framework.

Armada's probably having a meeting with analysts now - let's see what additional color the analysts can provide in their report late today or tomorrow.

Pretty numb to it somehow haha. Shit hits the fan sometimes.

Made the wrong call in putting hope on Tunku Ali and Leon Harland based on their earlier guidance that final acceptance would happen very soon.

At 0.55 now - the same price as Nov-Dec 2016 when OPEC decided on the historic production cut to lift oil price from all time low of US$30-40 / barrel. Can't help it to buy more, lol.

Paper loss RM200k

same, collecting more below RM0.60. first few hours typical over sell.

squeezed in the balls by Enquest for Kraken. probably 0.6-0.65 today.

Let's all remember this day when the management asks for multi-million ringgit incentive award in the next AGM.

That's true on the new project and I agree with you.

Armada can either do a rights issue or tap on the US$1.5bn euro medium term note at that point to finance the new project. The key difference is the market may react very differently if there's a profitable new project immediately at hand that requires financing, vs Sapura's case of needing to do rights issue to repay debt. It's an active value creating move (Armada) vs defensive debt repaying move (Sapura).

The bottom line is Armada is probably not as desperate as Sapura in needing the rights issue, and could afford to do it only when the share price is much better than where it currently is to minimize dilution.

That's not true, Sapura has no liquidity to service the loan in 1Q2019 with no default, because it's a RM3.8bn repayment. Hence the need for rights issue now.

Armada's debt, in contrast, as I've laid out above, is not as dire in terms of immediate repayment.

Prima facie, I think you've got a point that Armada has some liquidity issues.

Armada's net current assets (current assets less current liabilities) is indeed illiquid at -RM3.8bn, as at 31 March 2018 balance sheet date. Technically, this means that they have a RM3.8bn financing gap that they need to plug in the next 12 months.

Current Assets: RM2.85bn (cash, receivables etc.)
Current Liability: RM6.65bn

However, if you look at Note 21 of the Q1 2018 financial statements, about RM2bn of current liabilities is related to Kraken, which the lenders are not calling. Once Kraken gets the final acceptance, this will be reclassified as long term debt, easing liquidity pressure.

"The amount due after one year from the reporting date of RM1,955.1 million remains classified as current liabilities as the project lenders of Armada Kraken Pte Ltd have the right to issue, but have to-date not issued, a cancellation notice for a full prepayment of the loan."

Also, RM1.3bn is a revolving credit facility which can be extended as long as you pay interest.

Hence, in other words, RM3.3bn of the RM3.8bn liquidity crunch is technically not due within the next 12 months.

I would estimate the real liquidity crunch here is really around RM500m. For that, Armada does not need a rights issue at this point. A 10% private placement to Usaha Tegas at current market price will be sufficient to plug the gap, if required.

Or just tap on the US$1.5bn multi-currency medium term note facility that Armada still has.

I think the likelihood of any rights issue is still very low at this stage. Armada still has an untapped US$1.5 billion (RM6.3 billion) multi-currency euro medium term note from banks.

Also, Armada is solvent without no immediate liquidity crunch in terms of debt repayment. Sapura had to issue RM4bn rights issue because they have a RM3.8bn debt repayment due in 1Q2019. Without rights issue, they will run the risk of default. There is no such risk with Armada.

In any case, the spillover fear from Sapura creates a great entry opportunity now for Armada, IMO.

Can't wait for the QR to be released lol. It should be a good one.

25 Aug 2017
26 Aug 2016
27 Aug 2015
20 Aug 2014
20 Aug 2013
16 Aug 2012
25 Aug 2011

Today is 28 Aug 2018 already!!!

On the USD part - Armada's vessel day rates are also in USD, no? As long as USD cash inflow > USD cash outflow, strengthening of USD is a good thing - it will become a FX translation gain in the P&L.

Lol.

Armada's share price almost always drop in a few days leading up to QR results for the past few quarters.

2 year holding this stock, entered 0.75, now around 0.67.

One more month to selling down all Armada shares if no Kraken final acceptance by end Sep 2018.

http://www.theedgemarkets.com/article/bumi-armada-does-not-need-rights-issue-project-financing

We met up with Bumi Armada Bhd management recently and came away with these salient findings. It strongly refutes any need to resort to a rights issue for major project financing as the group still has an untapped US$1.5 billion (RM6.3 billion) multi-currency euro medium term note programme proposed back in 2013.

Possible repositioning by institutional funds from Sapura Energy to Armada.

Armada is just much more defensive and strongly profitable if the institutional funds want Malaysian O&G exposure in their portfolio.

Buy before QR is out. They should also provide some updates on Kraken during QR (hopefully postiive).

It's the quarterly report out today?

The past 2 years - 25 Aug 2017 and 26 Aug 2016 were both released on a Friday.

http://www.theedgemarkets.com/article/bumi-armada-2h18-outlook-seen-positive

@eskaylien thanks for the update on Kraken!

Leon finally did something well with TGT1. Good job.

Soldier on with Kraken final acceptance & closing new contracts!
These are the top 2 catalysts that institutional investors are looking for.

http://www.theedgemarkets.com/article/cimb-research-upgrades-bumi-armada-raises-target-83-sen

KUALA LUMPUR (Aug 6): CIMB IB Research has upgraded Bumi Armada Bhd (BAB) to “Buy” at 71 sen with a higher target price of 83 sen (from 79 sen) and said BAB’s 15% share price fall over the past three months has exposed value in light of the better-than-expected TGT1 renewal.

In a note today, the research house said BAB announced last Friday that it had secured a six-year renewal of the TGT1 FPSO ncontract at an average bareboat charter rate that was 2x our original expectations.

“This has led us to raise our SOP-based target price from 79 sen to 83 sen, with rerating catalysts including potential new contract wins.

“Downside risks include slower-than-expected final acceptance of the FPSO Kraken,” it said.

lol that may very well happen if the US-China trade war escalates further, with Trump increasing the tariff on additional US$200bn Chinese goods from 10% to 25%. It'll spook market triggering further foreign funds outflow.

also, with oil price softening now. short term macro looks bleak.

https://www.fitchsolutions.com/corporates/oil-gas/commissioning-issues-threaten-start-pipeline-05-09-2017

We have made a minor adjustment to our UK production forecast following ongoing commissioning issues at EnQuest's Kraken heavy oil field development. Whilst we remain positive on UK oil output growth, the potential delays to other project start-ups in the North Sea basin will remain the largest downside risk to the timescale of our production forecast over the near term.

The Kraken oil field development, having been brought online in June 2017, has faced several problems with the operation of the site's Floating Production, Storage & Offloading (FPSO) vessel, forcing EnQuest the operator to reduce the expected field production figures for 2017. The company revised down guidance production to approximately 37,000b/d from a previous estimate of just over 50,000b/d. The delays to full production are expected to be temporary, with the company aiming to achieve peak output from H1 2018.

Start-up issues with EnQuest's Kraken field in the North Sea are indicative of the potential issues for other project start-ups in the North Sea over the next two years. Whilst in general, teething issues from new fields tend to be short-term technical challenges that can be resolved, there are risks that problems maybe more serious or long-lived, not only affecting our production forecast, but negatively effecting company finances in the North Sea. For highly leveraged independents such as EnQuest, the delay in cash flow from new projects has more serious implications.

Yup, out by end 3Q2018 if no Kraken final acceptance.

It's a shame, but there are plenty of other potentially better performing stocks in my portfolio for allocation.

The trailing 4 quarters net profit is already around RM350m but share price is still depressed.

Definitely under valued, but there is no catalyst to spur institutional investors to correct the mispricing, until they announce kraken final acceptance / winning new contract / TGT1 extension / redeployment of Claire or compensation from lawsuit / better OSV utilization rate.

It's just going to ping pong between 0.68 - 0.75 until we see some new developments.

If you're looking for a quick profit within a short time frame, this stock will disappoint you, so don't bother.

If you're buying in now (seems quite low at 0.71), hoping that they will announce kraken final acceptance sometime soon and for the share price to rocket, i have been waiting for it since last year and nothing happened until today.

Also don't bet on EPF to correct the mispricing. They're just playing defensive accumulation to support the price, but they're not buying in big for the share price to spike.

Lots of patience will be required to make $ from Armada. Like years worth, not months.

http://www.upstreamonline.com/live/1545252/eni-cleared-for-usd-749bn-mexico-plan

Eni cleared for $7.49bn Mexico plan....a race believed to be between Modec, Bumi Armada and Yinson.

Defensive accumulation by EPF.

Institutional investors are on the sidelines until Armada confirms Kraken final acceptance.

Without that, share price will just slowly languish.

I'll probably sell down all my shares if there's no news on Kraken again by the end of 3Q2018.
That's 2 more months and I'll be gone for good.
There's probably something wrong if delays are happening again and again.

Now Usaha Tegas (Ananda Krishnan's investment vehicle) is probably busy scrambling for the India Aircel-Maxis corruption case.

I have met some of the investments team people - including Ashwin Kumar Das - the head of investments some years ago.

My impression is that they're very secretive and not transparent. Perhaps it is this culture from Usaha Tegas, the largest shareholder that flows down to Bumi Armada.

End of July approaching - 1 month after missing kraken final acceptance deadline that they set themselves.

Silence....

Yup, held the stock for about 2 years+ now since Leon joined.
Price now is same as 2 years ago - i.e. 0% return - worse than FD.
Basically losing money from inflation.

No value has been created for a medium-to-long term shareholders.
While management like Leon Harland gets RM15m share bonus.

I certainly hope you're right for Armada's shares to move up in August! I hold more than 1 million shares. The ball is in management's court now to perform and execute well.