Bumi Armada (BAB) announced its Armada Kraken Floating Production Storage Offloading (FPSO) vessel was recently shut-in following the failure of critical hydraulic submersible pump (HSP) transformers. Given HSP is a specialised equipment and a key requirement for Kraken to lift heavy oil in North Sea, both BAB and its client, EnQUest attempted a restart and undertake a remediation program though was unsuccessful. Kraken FPSO remains shut-in, as a result. On the other hand, BAB is tapping on the shut-in period to expedite key maintenance activities which was initially planned to be executed in 3QFY23. While financial impact of this incident cannot be estimated at this juncture, management expects it to be material to BAB. We cut our earnings by 8% for FY23 as we are taking a conservative stance by assuming the shut-in period would be prolonged for a quarter and only return to production on a phased basis. Although, we are cautious on the short-term earnings impact, we retain our Outperform rating on the basis of stable long-term recurring income. Our TP is reduced to RM0.70 (from RM0.75).
Source: PublicInvest Research - 6 Jun 2023