Thus far, it was a rather quiet first half of the year. Not one single news announcement (other than Armada Sterling V first oil).

Some announcements due in the 2nd half of the year:

1. Armada Sterling V full acceptance
2. Armada TGT charter extension
3. RM1.5bil corporate sukuk refinancing
4. Update on Akia PSC
5. Armada Kraken / Sterling II charter extension

Looks like Yinson is set to secure yet another FPSO win in West Africa. Truly a slap on the face of Bumi Armada management. Despite having 3 to 4 FPSOs under varying phases of development, Yinson is still able to secure lucrative contracts. That's how far Bumi Armada has fallen. Their reputation in the FPSO space is tattered, and they have no reputation in the green energy or gas spaces. They were the best OSV player around a decade ago, now they sold off the entire OSV division. Bloody bunch of ammeters!

https://www.upstreamonline.com/exclusive/malaysia-player-set-to-scour-market-for-africa-fpso-topsides-modules/2-1-1666960

Greedy Gary is going to Almaty in a few days. Blessed may he be.

Don't hold your breath though, I expect Bumi Armada to fail to secure either of these contracts.

There are two upcoming #FPSO opportunities in Malaysia:

1. ConocoPhillips-operated Salam-Patawali oil development offshore Sarawak: This project requires a new FPSO with a production capacity of 30,000 to 55,000 barrels of oil per day and storage for up to 600,000 barrels of oil.

2. PTTEP-led replacement project on the Kikeh oilfield offshore Sabah: This project needs a replacement FPSO for the existing Kikeh field.

Invitations to bid for these projects are expected to be issued soon. This is a good opportunity for suppliers of leased FPSOs.

Here are some additional details that might find helpful:

• Malaysian FPSO players are well-positioned to benefit from these opportunities, with companies like Bumi Armada, MISC, Yinson and MTC having a strong track record in the region.

• The FPSO market in Southeast Asia remains buoyant, with several tenders expected for floating production, storage and offloading vessels.

Overall, these projects represent a significant opportunity for companies in the FPSO sector.

https://www.upstreamonline.com/field-development/double-fpso-opportunity-in-malaysia-about-to-begin-bidding-phase/2-1-1665451

Rohan understand it but your concerns about the calculations are misguided. In the absence of new contracts and all else being equal (i.e. fx rates etc), then as the company runs down its charters, the NPV will reduce every sequential quarter.

Even Genting has a lucrative FLNG contract. https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3457525

Quite shameful I must say.

The Armada Sterling V FPSO, operating at ONGC’s Cluster 2 project in Block KG-DWN-98/2 in India, achieved first oil on January 7, 2024. The FPSO, owned by a joint venture of Shapoorji Pallonji Energy (70%) and Malaysia’s Bumi Armada (30%), is awaiting a final acceptance test to start receiving the full charter rate from ONGC. However, Bumi Armada disclosed that certain payments have been withheld by ONGC during the start-up phase, pending discussions on additional outstanding claims. Market sources indicate that the FPSO owners are currently receiving lower revenues compared to the full charter rate due to these unresolved issues.

The main outstanding issue appears to be the introduction of gas into the FPSO, which, once resolved, will trigger the start of the full dayrate. Additionally, payment issues have persisted from the previous year when the FPSO was ready to receive hydrocarbons, but ONGC could not deliver production due to damaged subsea infrastructure at Cluster 2. Bumi Armada and ONGC continue discussions to resolve the payment issues and move forward with full operations.

The Armada Sterling V is India’s largest floater, with an oil processing capacity of 50,000 barrels per day, a gas capacity of 3 million cubic meters per day, and a crude storage capacity of 700,000 barrels. The FPSO, converted from the tanker Ariake by Seatrium in Singapore, is designed to withstand severe cyclonic conditions.

https://www.upstreamonline.com/rigs-and-vessels/payment-dispute-lingers-for-largest-fpso-operating-in-india/2-1-1660662

Tim, they've been stuck at 12k bopd since January.

New Delhi, June 11 (IANS) Public sector upstream giant Oil and Natural Gas Corporation (NS:ONGC) will start gas production from its eastern offshore deep-water field in the Krishna-Godavari block KG-DWN-98/2 soon, Minister for Petroleum and Natural Gas Hardeep Singh Puri said on Tuesday after taking charge as a member of the Modi 3.0 Cabinet.

He also said that oil production will increase to 45,000 barrels per day very soon.

https://in.investing.com/news/stock-market-news/ongc-to-start-gas-production-soon-from-eastern-offshore-krishnagodavari-field-hardeep-puri-4245649

I know two project-related personnel (buyer and engineer) who have been re-designated to support roles (asset integrity and compliance). I also see a number of people who are linked to the "green energy" ventures such as FSIU and FCSIU looking for new roles.

As such, one could deduce that Bumi Armada really may not have much, if at all anything, in the pipelines.

The Armada Sterling V FPSO should achieve full acceptance in the coming weeks. They are actively tendering for their SC vessels in the Caspian sea. They are working on tie-back for the Bressey field to the Kraken. They will secure license extensions for TGT and Kraken FPSOs, maybe Sterling II FPSO as well. They are working on progressing the Akia upstream project. Other than this, there's nothing concrete coming out from Bumi Armada. The Bluestreak CO2 venture is going nowhere.

Again, things may change overnight if they win a contract. But nothing for now.

Recent research report on ONGC that includes commentary on the 98/2 project.

https://images.moneycontrol.com/static-mcnews/2024/06/20240605095301_ONGC_05062024_Motilal-Oswal.pdf

https://rfs.cgsi.com/api/download?file=90a6ff1b-5a9a-48fd-8719-04ce19936385

Pharos Energy has confirmed that FPSO extension will be secured before drilling commences for the 2 new wells. Previously they told me that it would be signed by mid May 2024.

It's still coming, and probably very soon. I expect the announcement to come within the next 3 months.

Irrelevant Jonathan

"This forum is beginning to feel like a university study group doing a thesis on BAB."

HAHA. Isn't that a good thing though?

SSLEE Yinson's job is just properly executing its contracts. That's partially Bumi Armada's downfall - they were working simultaneously on 4 projects in 2015, and there were delays for all. Compounded by Armada Claire being terminated and the OSV oversupply situation back then. Yinson would be wise to learn and avoid a repeat of the same.

@Robert they've not won anything, we'll be one of the first to know once it's public knowledge.

@SSLEE the contract value reduces by 70% as per contractual terms. Everyone who has done solid research about Bumi Armada knew about this long ago.

Evolution of Debt Profile since March 2019:

Table: https://i.ibb.co/HKnMpqr/barm-q12024ts.png
Graph: https://i.ibb.co/2kH0Csf/barm-q12024graph.png

While I disagree with the overly conservative SOTP valuation by UOB (they don't provide a detailed enough breakdown), the content itself is scathing but accurate. Management has been talking a big talk for long enough, but no follow through. So I agree with their assertion that Bumi Armada's future prospects are unclear. Although, it's puzzling they didn't factor in the likely contract extensions for TGT and Kraken.

Some interesting nuggets:

- BAB is increasingly focused on securing gas projects (capex sizes: US$0.2b-1b) vs FPSOs (mega capex: US$3b)
- With lower gearing, management guided that it can take on two new FPSO projects, or in detail at least one new large wholly-owned FPSO (US$1b capex) and 1-2 FPSOs on the JV level with Sharpoorji, without the need to incur additional equity fund raising
- Other than FPSOs, BAB is also preparing for more floating gas (FSRU/ FLNG) type of projects, or even projects related to carbon capture

One thing I disagree with UOB's and Kenanga's report is the treatment of the Lombendo FPSO's O&M adjustment. The RM60mil O&M adjustment is attributable to Angoil Bumi JV, which is a 50% subsidiary. So the net effect to Bumi Armada's net profit to shareholders is only half of that. So when you exclude RM53mil for previous quarters from the current net profit, it's foolish to deduct the full RM53mil - rather the deduction should be for Bumi Armada's share, i.e. RM27.5mil.

Thanks Jacinta!

Anybody have reports from UOB, HLB or Citi, would appreciate it if you could kindly share.

Some further good news from Enquest:

Kraken net production averaged 13,700 Boepd, reflecting 98% production uptime and water injection efficiency of 95% as partial offsets to natural field decline. This continued strong operational performance saw Kraken reach the milestone of 70 million barrels of oil produced during May.

Planning work is underway ahead of the planned return to drilling at Kraken during 2025, with joint venture approval granted to order select long lead equipment required to facilitate the two-well sidetrack programme.

https://www.enquest.com/media/press-releases/article/operations-update-18

Reading the analyst reports, there is more information that can be gleaned.

1. From CGS's report, the RM60mil O&M revenue adjustment recognised in Q1 2024 includes RM7mil for Q1 2024 and RM53mil for prior quarters.

This means the recurring adjusted O&M charge is around RM30mil/year or RM7mil/quarter, with further adjustments possible in line with escalations in actual O&M costs incurred. Do take note that the O&M is with a 50% subsidiary, so the net effects on Bumi Armada's profitability with be halved.

2. From CGS's report, Bumi Armada's 30% stake in the Armada Sterling V FPSO incurred a loss of RM56mil in Q4 2023, which then narrowed to RM25mil in Q1 2024.

If we conservatively estimate that this will contribute RM100mil per year to Bumi Armada once the vessels earns the full bareboat charter rate, this means that recurring quarterly profits might see a RM50mil boost (reversal from RM25mil loss to RM25mil profits per quarter) from the Armada Sterling V FPSO.

3. From MIDF's report, the Akia PSC will be progressing to the seismic testing phase by Q4 2024, with appraisal wells expected sometime in FY2025.

If this is true, it is possible for a fast-track FID by 2026 with commencement of operations in 2028. I am unsure how much this play could be worth, if someone knows how to estimate and value oil and gas reserves, would very much welcome your input.

I was just on the webinar with Navigator Gas and posed some questions on Bluestreak CO2. Sadly, the CEO sounded rather downbeat. He said that he hopes it will pick up pace. He says emitters need sufficient incentive to set-up long-term CCS solutions. He says the business case has to work - for emitters, and for the Bluestreak partners. He says more regulation and subsidies are needed to push emitters to invest in CCS and the solutions being offered by the Bluestreak JV.

So my take on this is that the Bluestreak JV is a longer-term thing, do not expect any contract awards in the near or mid future.

Which then brings me to the question, what exactly is Bumi Armada on the cusp of attaining that they're building their cash pile towards? My bet would be either the FLNG with Pertamina, CCS with Shell, or some other smaller gas/carbon project in Indonesia.

CEO Gary highlighted that Bumi Armada is actively tendering for FPSOs on the leased model. They are not interested in EPC or BOT FPSO projects. According to him contract awards for the projects being bid will be at the end of 2024 or in 2025.

CFO Luke spoke positively about extension to 2026 for the TGT FPSO. He pointed out that Pharos Energy had stated on their press release on their website that a two well drilling program will commence in H2 2024, which augurs well for the longer-term viability of the field and the continued need for the FPSO to extract oil.

As I had shared before, the Mumbai Port FSRU project is officially scrapped as it is no longer economically viable given the run up in LNG prices.

CEO Gary says that he will be travelling to Almaty, Kazakhstan to participate in talks with potential clients there. He is going on 30th June 2024. He sounded very upbeat and positive about prospects from the Caspian region for the SC vessels, and singled out Kazakhstan as a likely destination for their next contract win. In another reply to MSWG questionnaire, I believe they mentioned there is USD2bil potential SC contracts to bid for between 2024-2026.

CFO Luke also spoke about the renegotiated O&M contract with Eni in Angola, and mentioned a positive contribution of RM60mil to Q1 2024 revenue. However, I am unsure if this is one-off in nature or recurring every quarter moving forward.

Some information on Kojo joint study.

https://www.ruangenergi.com/ketika-lavender-dan-kojo-di-joint-study-kan-lemigas/

Gary spoke about Kojo field, explaining that Bumi Armada has "first refusal" and have enquiries from potential partners on the field development. Very brief, nothing much more to it. He didn't speak about the Talu field, but I believe it is also in Indonesia.

@MM78 no the Armada Kraken is not fully amortized at the end of the firm charter. If I recall correctly, they showed the amortization schedule in the previous quarter and it was previously on a fixed line basis to the end of the option charter period. They made some adjustments which resulted in the massive impairment in Q4 2023, but the vessel will still only be fully amortized in 2042.

Does anyone have any screenshots or recording from the AGM? I also missed some of the written questions from MSWG and shareholders (including myself)

@MM78 care sharing more about the question you're referring to from the AGM on building the cash pile instead of paring down debt. I missed it, only heard the question being read but not the answer.

$2bil worth of tenders in the Caspian Sea for the two subsea construction vessels.

One big nugget is that Armada Sterling V acceptance is expected in June 2024.

Discussions are ongoing to extend Sterling II, TGT and Kraken FPSO contracts.

Anybody attended the AGM? I missed the Q&A.

Point to note, they are borrowing USD400mil (RM1.85bil) to repay the existing Sukuk facililty of RM1.5bil.

1. Why is the new borrowing more than the old borrowing? Why does Bumi Armada need to borrow MORE cash?
2. Usually lenders want the borrowings backed by some project. What are they backing this with?

Armada TGT FPSO - The Group is in discussion with the charterer for extension beyond Nov 2024.

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Finally, official acknowledgement that discussions are ongoing to extend the charter period.

In any case, this is Bumi Armada's best ever reported quarterly net profit. Congrats to those who've been in for the long haul!

"Operations segment increased mainly due to higher revenue from Armada Olombendo FPSO resulting from resolution of outstanding issues with the charterer which includes escalation of the operating fee pursuant to the charter agreement."

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It appears that the O&M contract with Eni has been revised higher, presumably due to escalating costs in the past couple of years.

The Group holds a 30% interest in associates involved in the 98/2 Project. Armada Sterling V FPSO is currently in the progress of performing the necessary tests to achieve final acceptance which is required for the vessel charter to commence. During this start-up phase, the associates are entitled to certain revenue, but the charterer has withheld certain amounts from payments pending ongoing discussions regarding this and additional outstanding claims that are being worked on to achieve resolution.

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We are still waiting for first gas, let alone final acceptance. Might still take a while.

We are pursuing new opportunities in targeted markets. We will continue to focus on the following;

• Safety and health of all employees, partners and assets;
• Improve the operational performance of our vessels;
• Maintain and further develop effective relationships with our clients and partners;
• Secure new projects in core regions and with our preferred partners;
• Building our energy transition pathway towards achieving net zero goal by 2050 or earlier, by focusing on carbon emission reduction and carbon injection technologies and solutions including the Bluestreak joint venture; and
• Explore complementary business opportunities in the upstream sector.

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Same sh!# as before!

I'm looking forward to hearing CFO Luke later. Watch out for his pronunciation of "millions", which he pronounces as "minions".

And also good guy Gary. Not the greedy one, but the safety guy. Very nice chap.

This quarter, they only repaid RM122mil in borrowings as most of the borrowings have been either repaid or restructured to a longer-term. At the same time, their cash pile has swelled by RM197mil.

Logic dictates that if they had nothing coming up, they should've just repaid the term debt that was restructured last year, as the cash pile is earning significantly less than the interest on the debt. However, they didn't do that - do they know that they will be needing cash for certain project(s) real soon and are building up their warchest accordingly? After all, CFO Luke is a rather capable man.

The stock is trading at a 3.5x P/E ratio. Even if this is a sunset company, the cash generation potential is huge. It's still undervalued by 20-30%.

Now if the company can somehow secure contracts, only the sky is the limit.

Core net profit is around RM138.5mil after accounting for RM0.9mil reversal in bad debts and RM0.7mil insurance claim.