ARMADA (5210) - (The Star) Bumi Armada 'buy'
Oil production from Angola to commence ahead of estimates
BUMI ARMADA BHD
By UOB KayHian
Buy (maintained)
Target price: 92 sen
BUMI Armada Bhd can expect incoming cashflow from its floating
production, storage and offloading (FPSO) unit Olombendo, by this week
as oil production from project offshore Angola will commence ahead of
initial estimates.
UOB Kay Hian in a report yesterday said Italy’s oil and gas (O&G)
company Eni SPA has started production of the East Hub Development
Project in Block 15/06 of the Angolan deep offshore region, five months
ahead of schedule.
“Given this newsflow, we now expect incoming cashflow from Olombendo to
begin from Feb 17. Nevertheless we maintain our 2017 and 2018 earnings
forecasts of RM305mil and RM466mil respectively, which already assume
new contribution from all four projects.”
FPSO Olombendo, which can generate up to 80,000 barrels of oil per day
and compress up to 3.4 million cu m of gas per day, is operating on a
firm 12-year contract (with eight optional extensions).
It is also Bumi Armada’s largest contract with capital expenditure of over US$1bil (RM4.45bil), said the research house.
“We view this positively as the first oil target is within Bumi Armada’s guidance for the first quarter of 2017.
UOB Kay Hian added that it was the second of the company’s four new projects that have started charter ahead of 2017.
It also said payments should be rewarded according to original contract
terms, as Eni is a strong counter-party (one of the world’s supermajors)
with good financial standing, adding that the East Hub is one of Bumi
Armada’s most important new projects.
“We understand from management that the final acceptance process are in
several stages. Hence the only outstanding matter with regard to the
FPSO contract, is the first gas of the East Hub field as gas processing
is scheduled to start later than the first oil.
“The estimated timeline for first gas is April 17. Nevertheless, as the
FPSO is already producing oil, we view any forms of delay/contract
renegotiation concerns is now being reduced substantially.”
UOB Kay Hian expected substantial improvements in cashflow and doubling
of the group’s profit base in 2017, from both new project start-up and
stabilisation of offshore marine services utilisation in view of better
oil prices.
“With two out of four projects having started charters, there is also
potential for earnings upgrades relative to consensus forecasts which
may have conservatively assumed further start-up delays.
“The remaining projects are Karapan Armada Sterling III which is now
undergoing installation in Madura Field and FPSO Kraken which is
undergoing final inspection in KeppeVerolme in Rotterdam.”
Bumi Armada Bhd posted a net loss of RM96.71mil for the third quarter
ended Sept 30, 2016 from a net profit of almost RM70mil in the same
quarter a year ago, as contributions FPSO and floating gas solutions
narrowed.
Revenue for the period fell 32.5% to RM377.51mil from RM559.46mil a year
earlier, while loss per share was 1.65 sen compared with earnings per
share of 1.19 sen.
ARMADA (5210) - (The Star) Bumi Armada 'buy'
http://www.thestar.com.my/business/business-news/2017/02/14/incoming-cash-flow-seen-for-bumi-armada/
