Bumi Armada - Vessel Hooked Up, MQ Research Positive
The share price of Bumi Armada (BAB) surged 8.2% to close at RM0.725 on Friday, halting its 2-days of losses. The share price jump followed news of the arrival of its Armada Kraken floating, production, storage and offering (FPSO) vessel at the Kraken field in the UK North Sea. The vessel is currently on station and is securely moored.
Following this, Macquarie Equities Research (MQ Research) wrote a report on BAB, expressing their positive views on the announcement while maintaining their “Outperform” rating.
The share price of Bumi Armada (BAB) surged 8.2% to close at RM0.725 on Friday, halting its 2-days of losses. The share price jump followed news of the arrival of its Armada Kraken floating, production, storage and offering (FPSO) vessel at the Kraken field in the UK North Sea. The vessel is currently on station and is securely moored.
Following this, Macquarie Equities Research (MQ Research) wrote a report on BAB, expressing their positive views on the announcement while maintaining their “Outperform” rating.
Event
- BAB announced that its Armada Kraken FPSO has arrived at the Kraken field in the UK North Sea. The hook-up of the Submerged Turret Production buoy mooring system to the FPSO was completed on 15th February and a full rotation test performed so that the vessel is now on station and securely moored.
- Commissioning work will continue on the topsides and the client, EnQuest PLC (ENQ LN), expects delivery of first oil is on track for 2Q 2017.
Impact
- MQ Research are positive on the announcement: (i) the Armada Kraken FPSO looks on track to achieve its first oil in Apr17, within MQ Research’s expectations; and (ii) with a daily charter rate of US$440,000-450,000, MQ Research expect the Armada Kraken FPSO charter to contribute significantly to BAB's free cash flow and 10% of 17-18E revenue.
- To recap, Armada Kraken FPSO is chartered to EnQuest for its Kraken project for US$1.4bn over a 8-year firm charter period, with 17 annual extension option worth US$0.9bn.
Action and recommendation
Maintain Outperform. This is MQ Research’s second positive update on BAB's FPSO projects, following Eni SpA's recent announcement on the commissioning of production at Angola East Hub Project, where Armada Olombedo FPSO is deployed. Overall, MQ Research expect the commissioning of three new FPSOs in 1Q-2Q17 to lift 17-18E FCF/EV to 9%-10%, thereby re-rating the share price.
Source: Macquarie Research - 20 Feb 2017
Bumi Armada - Vessel Hooked Up, MQ Research Positive
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