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.
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.
uncertainties behind the drop. Kraken is the turnaround facator for armada, it had help armada regain its position by reducing debt from 11bil to today 5bil in 6 years time. kraken original contract suppose to end mid 2025. If everything smooth, by then debt level may down to 2bil by mid 2025.
without kraken, everything will change. debt level will maintain at 5bil range, and this will affect armada from taking new project, and also prevent them to distribute cash dividend to shareholder in near future.
even kraken back to working with revise capacity, price hardly back to 0.60. because investor will factor in the risk involve in FPSO. it may only go back to 0.50. and all these depends on how bad the situation is for Kraken.
KimSua 0.45 %net short position. Slowing down. 3.7 mil shares shorted on Monday. Slowed down but depends how's the buying support next #2/3 trading days 13/06/2023 9:50 AM
Great. Now Armada Battleship has made a strong recovery. It now climb 3.57%..
selling looks over for now after yesterday margin call and T+4 for contra players. Recovery will depend on how soon Kraken will be operational again...
Armada is a recovery stock. At the lowest price of 0.42 is a big bargain. Luckily I make full use of this cheap sales to sailang, hope to win big in this stock in the next 3 months. Hopefully, laughing all the way to the bank the second time.
Due to repeated abuse posts, this account has been suspended from posting to the i3investor portal until 2023-08-08. Please refer to the Terms and Conditions of Use or Community Standards of this portal.
The comments were negative due to their interest or due to their envy or the worst is hoping losses for other investors. We live in a world where we hope the good will be dominant but life is not what we hope.
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
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Mikecyc
45,527 posts
Posted by Mikecyc > 2023-06-13 00:04 |
Post removed.Why?