The Group has revealed that the amount claimed pursuant to its suit against Woodside Energy Julimar Pty Ltd for termination of the Armada Claire FPSO charter is USD275.8m, with an additional USD7.7m for work done and materials supplied as part of the contract. We understand that Armada Claire is currently being relocated to Batam to be anchored while new options for it are explored. We have yet to factor in this potential claim to our valuation, as we are still assessing the future status of Armada Claire, whether it will be ready-stacked or cold-stacked if there are no contracts in the near to medium-term. This would determine the cost levels that would have to be accounted for from the claims. In the interim we maintain our Neutral view on BAB, with an unchanged TP of RM0.90 premised on our DCF valuation.
Armada Claire’s status. Once anchored at Batam, the vessel will be reviewed for its minimum safe-manning requirements. The minimum safe-manning certificate is to allow a vessel to travel safely from one port to another, and to ensure that its complement includes the grades/capacities and number of persons required for the safe operation of the ship while protecting the marine environment.
The claim. The USD275.8m is the general claim for the Notice of Termination deemed invalid, but is tantamount to a cancellation for convenience or repudiation. The additional USD7.7m is sought for work done and materials supplied as per the requirements of the contract.
What happened? Armada Claire had been operating in the Balnaves Field, off north-western Australia since its delivery of first oil in August 2014. Contracted to Apache Energy Ltd since 2011 to operate in block WA-49-L of the Balnaves Field, northwest Australia, Woodside acquired Apache’s 65% stake in April 2015. The contract was to have been for a 4-year fixed-term time charter of Armada Claire, with an option of a further 4 years annual extension period, valued at c.RM1.46bn. The contract was terminated in early-March this year however. The purpose-built double hull disconnectable FPSO has an oil production capacity of 80,000 bbls/day.
Our valuation. The “purported” termination of the FPSO charter is expected to impact contributions for FY16, however to what extent will depend on the outcome of this lawsuit. Assuming the full potential USD283.5m is claimable during the year, the cost incurred to ready-stack Armada Claire in FY16 would reduce this gain if it is not deployed for a new contract. Our TP of RM0.90 has accounted for the non-extension of the option, and has also excluded the project from our valuations as we had already questioned (some time back) the probability of an extension considering the depleting production levels coupled with lower oil prices that could severely impact the commercial viability of the Balnaves Field.
Source: PublicInvest Research - 22 Apr 2016
ARMADA (5210) - Bumi Armada - Termination Gains?
http://klse.i3investor.com/blogs/PublicInvest/95247.jsp
