This exceeds the US$1bil (RM3.27bil) in capital expenditure (capex) Bumi Armada is expected to charge for the Kraken FPSO, which it clinched last November.
The offshore services provider told the stock exchange yesterday it had secured a letter of intent (LOI) for the charter, operation and maintenance of an FPSO tanker facility with mooring system from Italian state-owned oil and gas firm Eni SpA.
The contract was awarded to a consortium of Bumi Armada Offshore Holdings Ltd and Angoil Bumi JV Lda for Block 15/06, East Hub in Angola.
Block 15/06 is operated by Eni Angola with a 35% interest, SSI Fifteen Ltd (25%), Sonangol P&P (30%), Falcon Oil Holdings Angola SA (5%) and Statoil Angola Block 15/06 (5%).
Bumi Armada said the LOI was an interim agreement that would allow it to start engineering and procurement work immediately ahead of the final award.
The commercial terms and final details are expected to be hammered out within four months of the effective date of the LOI, which was March 28, 2014.
“If Eni Angola terminates the LOI during the LOI period, the contractor will be compensated on the basis of documented costs up to an agreed maximum amount,” Bumi Armada said.
Bumi Armada Offshore is a wholly-owned unit of Bumi Armada and incorporated in the Republic of the Marshall Islands.
Angoil Bumi JV, meanwhile, is a joint venture between Bumi Armada Offshore, Angoil Exploracao Petrolifera SA and Cosmarg Limitada.
Bumi Armada had been cited as the favourite to bag the Angola FPSO over rival Saipem, a subsidiary of Eni, as the Italian oilfield services firm was believed to be pulling out of the FPSO game, reports said.
The job from Eni boosted Bumi Armada’s firm order book by a whopping 72% to RM22.7bil from RM13.2bil, an analyst from Hong Leong Investment Bank (HLIB) Research told StarBiz.
Its fleet of FPSOs also increases to eight, cementing the group’s fifth place on the league table of the world’s top FPSO players.
Shares of Bumi Armada jumped at the news, gaining 4% to a high of RM4.07 before paring gains to close unchanged at RM3.91. Some 10.62 million shares changed hands in the counter.
Analysts said the Angola contract, given its size, was a re-rating catalyst for Bumi Armada, whose shares had sagged 2.98% since the beginning of the year.
The HLIB Research analyst said the FPSO was likely to be split into a 12 and eight-year term for the firm and extension periods, respectively.
Alex Goh of AmResearch said Bumi Armada would hold 100% of the higher value bareboat charter portion of the project, and 49% of the operation and maintenance.
This means Bumi Armada will retain all of the capex, estimated at US$1.5bil, earmarked for the conversion of the FPSO, according to analysts. A bareboat charter is an arrangement for the hiring of a ship or boat without crew or provisions.
An analyst from Alliance Research said operating margins for the Angola project should range between 30% and 40%, matching its historical returns.
Bumi Armada said the award was seen contributing to its earnings from the current financial year ending Dec 31, 2014 onwards.
The FPSO’s first oil is scheduled for end-October 2016. It will be Bumi Armada’s first conversion of a very large crude carrier-sized tanker, which is typically about 500m in length. The company has nominated the Armada Ali for the job.
“The LOI is our second large (capex of more than US$1bil) FPSO award in six months and underscores our successful migration into the large-project FPSO sector,” Bumi Armada executive director and chief executive officer Hassan Basma said in a statement.
“This is the second time Eni has turned to Bumi Armada for an FPSO in West Africa and we will continue to collaborate with our tried-and-tested value-chain, as we have done in the past, to successfully deliver this project for our repeat customer.
“The FPSO will be delivered in 31 months and will take Bumi Armada’s fleet to eight, moving us into the top-tier of global FPSO players.”
The group also said in a separate statement that it had secured a syndicated bridge loan of US$750mil (RM2.45bil) from Oversea-Chinese Banking Corp Ltd, Maybank International Labuan Branch, Sumitomo Mitsui Banking Corp Singapore Branch, United Overseas Bank Ltd, Export-Import Bank of Malaysia Bhd and Korea Development Bank Singapore Branch for its unit Armada Kraken Pte Ltd.
The debt will be used to part-finance and reimburse all costs and expenses related to the acquisition, conversion, refurbishment, mobilisation, transport, hook-up and mooring and installation of the Kraken FPSO.
The facility is to be refinanced by long-term project financing in due course.
