FPSO contractors lining up for replacement of sizeable Malaysian floater

FPSO companies potentially lining up include Malaysia's MISC and Bumi Armada, India's Shapoorji Pallonji Energy and Singapore-based HBA Future Energy

https://www.upstreamonline.com/exclusive/fpso-contractors-lining-up-for-replacement-of-sizeable-malaysian-floater/2-1-1706125

Kraken Field Summary

Average net production of 13,637 Boepd (2023: 13,082 Boepd) in the first half of 2024 was driven by 98.5% production uptime and 97% water injection efficiency. This exemplary performance is testament to the focus and collaboration between the EnQuest and Bumi Armada operational teams, and the parties are undertaking further process work to extend this excellent performance.

The Group is focused on enhancing the next phase of Kraken operations and is working with its joint venture partner to finalise infill drilling plans for 2025. Work is ongoing to mature the Enhanced Oil Recovery (‘EOR’) project, which presents a material upside to the existing Kraken base reservoir performance. The EnQuest team is advancing the Bressay gas import project as a subsea tieback to Kraken, which will displace the majority of the diesel currently used to power Kraken operations; driving a material reduction in FPSO emissions and materially reducing operating costs. In the second half of 2024, trials will also commence to assess the potential for hydrogenated vegetable oil to be used as a diesel alternative for the equipment that cannot be run on gas. The Kraken maintenance shutdown is ongoing and is expected to be completed within ten days (six days full shutdown and four days on single train operations). The key scope to be completed is the five-yearly swivel inspection.

Source: Enquest 2024 Half-year Results
https://www.enquest.com/fileadmin/content/press_release_pdfs/2024/EnQuest_HY_Results_RNS_vF.pdf

I have been buying since 2020, always averaging up. My anchor purchase was way back in 2020 and been adding usually once or twice a year ever since. Average price is now RM0.3125 sen.

RM0.225 (2020) > RM0.310 (2021) > RM0.335 (2021) > RM0.39 (2022) RM0.45 (Kraken shutdown in 2023) > RM0.42 (Kraken restart before official announcement) > RM0.47 (now)

I have averaged up at RM0.47. Long-term, I don't see much of a future given the lack of orderbook replenishment. But in the short to medium term, this looks attractive at current price levels. The risk-return pendulum is now in favour of getting superior returns at lower risk levels.

Thesis:

1. Commencement of full charter of Armada Sterling V - will trickle to bottomline from Q3 2024 onwards, roughly net profits of RM25mil to RM32mil.

2. Imminent charter contract extension for Armada TGT. It will either be a 2+5, or 1+1+1+... (individual annual extension for 7 years), or direct 7+0 extension. At the bare minimum, 2 years is all but confirmed, with a full 7 year extension highly likely eventually.

3. Subsea tieback to the Bressay field is imminent. Next year, there will be a return to drilling at the Kraken field. Taken together, this means the Kraken production will continue far into the 2030s and even beyond. Firm contract period ends in Q1 2025, the first year extension has been agreed. I anticipate continuous annual extensions, or maybe even a renegotiated long-term fixed contract.

4. Extension of the Armada Sterling II charter. The firm charter ended in Q1 2024 and it has entered the first annual extension period. I anticipate continuous annual extensions, or maybe even a renegotiated long-term fixed contract.

5. Debt overhang is all but removed. Bumi Armada has substantial capacity to repay the refinanced debt over the next 6 years from its cashflows from operations.

The above is not even taking into account potential new job win for the subsea vessels in the Caspian Sea (or even their potential divestment), nor does it factor in any new floating job win for Bumi Armada. There are a number of projects that might get awarded in the coming months/years that may add to the upside potential.

i. Shell CCS offshore Sarawak
ii. Sullom Voe FSRU in the North Sea
iii. Uniper FSIU/FCSIU in the UK (Bluestreak CO2)
iv. Madura FLNG
v. Akia PSC (upstream)
vi. Akia PSC (FPSO + FLNG)
vii. Additional PSC (upstream) in Indonesia
viii. Mid-size FPSO win - e.g. Salam-Patawali (Malaysia), Nam Du / U Minh (Vietnam)

Ananda's demise might cause some panic selling, but does not alter the fundamentals of the company. By and large, the professionals and executives run the show at his businesses, including at Bumi Armada. If anything, it will be a solid opportunity if this heads to the lower 40 sen region to buy in the face of solid fundamentals.

Source, rohank71?

According to my sources, the two well drilling program has commenced at the TGT field. We should get a notification from Pharos Energy on the completion in the coming month or two.

This all but confirms that the FPSO will have to be chartered until Dec 2026 at the very least, but very likely beyond that, up to Dec 2031.

Expect around 2 sen per share contribution for each year of extension. So in the low case, there should be a boost of 4 sen, up to 14 sen for the company's valuation.

I believe this is not priced in sufficiently. This is the most certain, near-term win, that we can expect.

The official extension announcement from Bumi Armada may only come towards the end of the year, so there may be an opportunity to act on information arbitrage here.

Anyone have research reports they can share?

Looks like best ever quarterly profits on record. At these price levels, does Public Bank still offer a good prospect?

Fo you have UOB latest report?

Obviously management won't commit to it, but too much lazy capital rolling around is unproductive and I'm sure the larger shareholders would rather it be paid out than sit and do nothing.

Dividend will need to be declared next year if there is no new project. The cash pile is going to grow by around rm200mil per quarter moving forward with the reduced debt load and the refinanced sukuk.

Full year core net profit is still on track to hit RM1bil!

This will be Bumi Armada's "best year ever", before profits decrease by some 30% next year, and gradually thereafter, eventually falling off a cliff in 2030.

Even in the absence of any new contract, simply securing TGT extension for 7 years, getting Kraken extensions for the next decade and a half, getting Sterling II extensions till 2030, getting Sterling III extensions to 2033 should put Bumi Armada on a handsome course.

The fair value is still in the 70 - 80 sen range as things stand.

We've had some good news in recent weeks:

1. Sterling V achieved full acceptance. Full charter rates will be reflect in Q3 2024 results.
2. RM1.5bil sukuk has been refinanced to a USD400mil 6-year term loan.
3. Kraken's first extension option has been activated.

Coming soon:
1. TGT charter extension

SC asks public listed companies to transition back to holding physical, hybrid shareholder meetings

https://theedgemalaysia.com/node/723792

Somebody send this to Gary and team.

No interest in Bumi Armada at the moment

Previous quarter CEO comment:
Commenting on the results, Mr. Gary Christenson, Chief Executive Officer of Bumi Armada said, ”This is a solid start to the year. I'm pleased we’ve continued to operate safely. We remain vigilant in ensuring the stable operation of our vessels which drives our financial performance. We continue to seek new projects and opportunities while maintaining our focus on safety, ESG, operational excellence and financial discipline."

Latest quarter CEO comment:
Commenting on the results, Mr. Gary Christenson, Chief Executive Officer of Bumi Armada said, “Our robust cash generation enabled us to further improve our balance sheet as we continue to explore potential new projects to enhance shareholder value.”

---------------

Less "vague" BS and fluff, direct to the point. Something is brewing?

The first annual option period for the Armada Kraken FPSO contract has been confirmed.

Massive quarter, net profit of RM266mil. Going to delve in to see the devil in the details.

Guys the loan is to refinance existing debt. It will be repaid from the cash flow from existing projects, mainly from Olombendo FPSO which is on firm charter until 2030.

Projects, projects, projects. Everything else is noise.

Some not-so-good-news. I am on the Navigator Gas investor call.

CEO says that there is a lot of uncertainty with regards to Bluestreak CO2's MOU with Uniper. It;s uncertain when it happens, and even if it does, it will most likely be pushed to the end of this decade.

However, there is potential to secure other CO2 projects sooner within the next 1-2 years.

Gary has run the ship into the ground, no doubt. There will be a one or two awards in the coming weeks/months, but they will not be FPSO contracts, which is the bread and butter of the company.

All things said, since these price thumping of late is due to souring market sentiments, it'd be rather foolish to sell out just for that. If anything, for those with spare cash lying about, this is the time to be loading up.

Bumi Armada might not be destined for the starts but it's fair value is still in the 70 to 80 sen range, with potential upside with imminent award of TGT FPSO extension.

Damn the hell is going on. My only regret is I don't have much loose change to top up!!!

A few reasons acting together:

1. General market weakness
2. Weakness in oil prices
3. Falling USD

Be careful people.

Someone might know something we don't.

I also do believe their might be working with Enquest as well as a potential client for Bluestreak CO2 at Sullom Voe.

As shared before, Bumi Armada was involved in the Shell Sarawak CCS FEED.

Also, they participated in the FSRU pre-FEED for EnQuest at Sullom Voe.

Unsure about any possible final award for either of these projects.

If Bumi Armada does get a project anytime soon, it will be a regasification (FSRU) or liquification (FLNG) project. But that's a big IF.

GANAPATHY SRIHARI RAMA IYER is directly involved in the Bluestreak CO2 venture. He is Ananda's right hand man, directly from Usaha Tegas. Unsure if he is under Bumi Armada's payroll.

Most analysts are clowns not worth their money.

https://www.kenanga.com.my/wp-content/uploads/2024/07/ARMADA-240725-CU-Kenanga.pdf

Official award is not happening by the end of this year, merely a formalization of the Bluestreak CO2 JV. The official award is still a good 12 - 24 months away, maybe even longer or never at all. This MOU is extremely preliminary.

This is a follow up to this: https://www.uniper.energy/united-kingdom/news/uniper-awards-design-study-contracts-for-grain-carbon-capture-project/

Any formal contract award is still at the minimum up to 2 years away. This is a long-term thing that will develop slowly over time.

Some progress as Uniper Grain Power plant is named for the CCS project in UK

Berdasarkan catatan SKK Migas per Juli 2024, beberapa lapangan eksplorasi yang sedang dalam proses farm-out di antaranya wilayah kerja (WK) Andaman I, WK Akia dan WK Bobara.

https://ekonomi.bisnis.com/read/20240722/44/1784405/skk-migas-rayu-perusahaan-kecil-masuk-ri-eksplorasi-migas-bisa-makin-semarak

https://www.petromindo.com/tender/detail/akia-3d-moriite-scismic-acquisilion

Bumi Armada moving ahead with the seismic on Akia.

Reason for increments in share pricing, anyone?

Ambank downgrades to RM0.60. Very odd update given that there's no update or changes to fundamentals.

Gabriel as I understand it, for TGT no renegotiation of rates. It should be broadly in line with previous charter extension. If anything, rated might be lower, but only marginally.

Again, based on my checking with Pharos Energy, the extension to the FPSO charter has been agreed to in principle but no formal signing has taken place.

Basically, they will not be proceeding with drilling two new wells unless there is a charter extension to the FPSO, which expires at the end of this year.

The FPSO will either be extended for a 7 year firm period, or for a 2 year firm + 5 year option period.

Sonnia I think you're in the wrong company. Not suited to what you are looking for (movement with oil prices).

Pharos announces their update on 18th July 2024. Might be some positive update on their TGT drilling and/or license extensions.

One down. Small wins, one at a time.

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

Something decent for once.

Still puzzling why it takes them 10 days to announce. If they practice good governance, they should announce as soon as something is finalised to minimise insider trading.

Another opportunity lost. Some more, this is a gas FPSO closer to home. Bumi Armada has been trumpeting its "gas projects".

Gary is sleeping on the wheel and somebody gotta be waking him up!!!

https://www.upstreamonline.com/exclusive/two-contractors-in-battle-for-petronas-ultra-deepwater-fpso-project/2-1-1674744

Haiyoo rather than making stuppid announcements on Bursa, announce something substantive!

Back to reality!

Speculations of a merger might have lifted Bumi Armada’s (BAB) share price in the past month. While combining both FPSO fleets may propel the merged entity to Modec’s fleet size, alongside complementary geographical FPSO market presence, the stumbling blocks are too great in our opinion. There is a lack of financial synergies from the non FPSO segments. If any, we think a collaboration in certain projects may generate more positive market reaction. We advise investors to take profit on BAB.

SELL BAB with an unchanged target price of RM0.50. We assume the recent share price appreciation is related to the speculation, as BAB’s fundamentals is unchanged with no nearterm prospects of a contract win. Moreover, a Jun 24 Upstream article revealed that the payment dispute by ONGC for the JV FPSO Armada Sterling V still lingers, despite the FPSO having already achieved first oil on 7 Jan 24. This also implies that the final acceptance test may miss management’s expectation of Jun 24. Hence, we advise taking profit on BAB.

https://research.uobkayhian.com/content_download.jsp?id=79779&h=633b65a72baf25227e30eaab8d497bba

A deal, if any, is still in its infancy.

I wrote in to Bursa Malaysia today on both MISC and Bumi Armada. Only MISC has responded with an official clarification.