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Monday, 7 March 2016 | MYT 10:59 AM

Abrupt FPSO cancellation a majorsetback for Bumi Armada, saysMaybank IB

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KUALA LUMPUR : Maybank IB Research is reviewing itsearnings forecast for Bumi Armada Bhd following the surprisingcancellation of its floating production storage and offloading(FPSO) contract in the Balnaves field in northwestern Australia. In a note today, the research house said that the contract wasworth USD593mil on a 4+4 years charter. “Based on our preliminary assessment, which is based onlimited information, this news is a major setback to Bumi

Armada's operations and financials. Typically, when an FPSO contract is terminated midway,our understanding is that the the FPSO operator would be compensated accordingly based onthe legal contractual framework,” it explained. In a filing to the exchange on Mar 4, Bumi Armada announced that it had received a notice oftermination from Woodside Energy Julimar Pte Ltd in relation to the charter of the ArmadaClaire FPSO vessel which has been operating since the Balnaves field delivered first oil in Aug2014. On the other hand, the oil and gas firm added in its filing that the purported notice oftermination is not valid. It also intends to fully enforce its rights under the contract, which mayinclude the initiation of legal proceedings against Woodside.

“The cancellation will bring a negative knee-jerk reaction on Bumi Armada's stock, and thematter is unlikely to be resolved anytime soon,” said Maybank IB. Shares of the company fell steeply in early trading today. The stock hit an intraday low of 75sen before staging a rebound. As at 11AM, the stock was last traded at 83 sen. It closed at RM1 on Mar 4. Pending a review of Bumi Armada's contract situation, Maybank IB currently has a 'buy' call forthe stock with a target price of RM1.45.

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Bumi Armada , Oil and Gas , Markets

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