Armada ... Price Keep Falling, Anymore Hope !!!

It has yet to finalise the execution of the USD1.18 billion contract to supply one FPSO vessel to HCML after several delays. The contract will be terminated should both parties fail to sign by Nov 272014 unless another extension is agreed upon.

The further delay in the execution of the contract does not paint a positive picture of Armada, whose order book is currently (Nov 2014) at rm31.7 billion.

Hit by declining oil prices till 13 Nov 2014, and the untimely listing in Oct 2014 of its rights shares, its share price has fallen by 43% YTD.

It has a rm18.5 billion in long term FPSO, T&I businesses as well as a strong footing in the Caspian Sea T&I market.

T&I should be anchored by recurring work orders from Petronas and Russia’s Lukoil.

The FPSO segment is its earnings driver, making up 85% of its order book and contributing 60% of its 2015 earnings.

The drop in oil price has had no impact on the group’s existing contracts as they are long term in nature, with pre agreed chartering fees.

Expect the FPSO contracts to provide the group with stable earnings stream up to 2018, regardless of oil price movements.

Weak oil price may prompt oil companies to cut spending on exploration drilling and the development of higher cost projects, expect the impact of FPSO market to be muted, as FPSO is a proven technology for oilfield development.

The company has six FPSO contracts in Africa and Brazil.

Armada Installer will continue to anchor earnings for Bumi’s T&I segment.

Unlike FPSO and T&I businesses, expect the group’s OSV segment especially AHS fleet, to suffer from lower oil prices.

It is looking to dispose seven vessels and redeploy some vessels to the Brazil and Africa markets.

It has yet to secure any contracts for its OFS division. There will be additional setback for Bumi’s OFS segment as oil companies are re evaluating their capex plans due to lower oil prices

The company has cash of rm9 billion proceeds from the group’s rights issue in Aug 2014. The rm50 million in net interest savings should more than offset lower OSV and OFS earnings.

Armada’s share base has increased 100% following the listing of the bonus and rights shares.

The group is a proxy for the global FPSO and Caspian Sea T&I markets. These markets segments are relatively insulated from the current (Nov 2014) oil price weakness.

MISC/Ramunia/Armada ( North Malay Basin ) dated March 2012

Sources say US based Hess Corp is expected to award a contract for a floating, production, storage and offloading (FPSO) vessel for the North Malay Basin development soon and plans to start production in the basin later 2012.

The seven fields that make up the North Malay Basin have a combined gas resource potential of 1.3 trillion cu ft.

According to sources, Armada and MISC, with their respective partners are vying head to head for the FPSO contract. Neither company has been notified of any award being made so far.

It should be announced soon, latest by the end of March 2012, if Hess wants the job to start by end 2012.

It is understood that Hess is looking at a three year charter for the FPSO, which is to be between 75000 and 115000 deadweight tons.

Charter rates for an FPSO vary considerably, but are likely to be above US$200000 a day.

Armada is understood to have brought in Oslo listed EOC Ltd – in which Singapore’s Ezra Holdings Ltd has a 46% stake – as its partner in bidding for the contract. It is not known if Armada is eyeing the Hess FPSO job for its recently acquired a 107160 deadweight ton tanker for rm68 million.

MISC meanwhile, is understood to have teamed up with Ramunia Holdings Bhd. Ramunia acquired a tanker in Oct 2011 for US$82.5 million or rm249 million then.

MISC and Ramunia are understood to be looking to modify the FPSO at MHHE. MMHE is a 66.5% unit of MISC.

In Dec 2011, news reported that Armada led consortium was the front runner to bag the job, but since then there has been little news. The silence would means that MISC is back in favor with Hess but this remains to be seen.

MISC is a 62.7% unit of Petronas. Block PM 301, which contains six fields is operated by Carigali Hess Mutiara, a JV between Hess and Petronas. It is not clear who Hess is partnering for this field, but Petronas is likely to have a presence.

Bagging this contract could be a boon for MISC.