AMINVESTMENT Bank has raised Bumi Armada Bhd’s earnings for the financial year ending Dec 31, 2021 (FY21) and financial year 2022 (FY22) by 8.0% on the assumption that its 49%-owned floating production, storage and offloading (FPSO) will secure an additional two years extension in India.
On Wednesday, Bumi Armada announced the FPSO, Armada Sterling, which Shapoorji Pallonji Oil and Gas Pvt Ltd holds the remaining stake, will secure an extension to its seven-year original time charter expiring on April 19, 2020.
The joint venture has received notification of India’s Oil and Natural Gas Corporation’s (ONGC) intention to extend the charter hire of the FPSO from April 20.
AmInvestment Bank said while approval for the formalisation of the contract extension has been delayed due to the Covid-19 lockdown in India, ONGC has requested the joint venture to apply for permit extension from the relevant authorities to ensure continuity of operations at the site.
To recap, the US$400 mil FPSO started operations in 2013 in the ONGC D1 field, off Mumbai, India under a seven-year firm time charter that has six annual extension options. The charter, signed in 2011, has a fixed value of US$620 mil.
“Given that the debt on the vessel would have been mostly settled by now, we expect a lower charter rate for this first annual extension. Assuming a 30% pre-tax margin and halving of the charter rate, we have raised the group’s FY20 earnings by 5.0%,” said AmInvestment Bank in a note today.
The investment bank maintained its sell call on Bumi Armada with an unchanged fair value of 10 sen per share.
Meanwhile, Public Investment Bank said the delay did not give any impact to the earnings as the operation of Armada Sterling FPSO is continuing and maintained its earnings forecast, neutral rating and a target price of 21 sen for Bumi Armada.
“We had recently tweaked Bumi’s FY20-22 earnings by an average 10.3% due to restricted mobility in the current operating climate, which has curtailed speed as well as expectations on lower offshore support vessels utilisation,” it added. — April 16, 2020, Bernama
