BIMB SECURITIES RESEARCH

MARKET INSIGHT

Monday, 19 March, 2012

PP16795/03/2012(029624)

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News Flash FPSO Kamelia – Dished Out, ex-Bumi Armada?

Chiong Tong Chai

chiongtc@bimbsec.com.my

03-26918887 ext 175

According to a newswire, Hess has issued out the Letter of Intent to Emas Offshore Production and Construction (“Emas”) from Singapore for the supply of a Floating, Production, Storage and Offloading (“FPSO”) vessel for its North Malay Basin’s early production system. The contract has an initial term of 3 years with an extension option. Emas is touted to tap into its existing gas FPSO, Lewek Arunothai which was released last year. The vessel will undergo a modification prior to its deployment in 1Q2013. Contrary to expectations, Emas did not partner with any Malaysian players for its bid. Whether if this development is true remains to be seen.

To Recap. The North Malay Basin development scheme which consists of 7 clusters of gas field is made up from Kamelia, Bergading, Zatung, Gajah, Melati, Angerik and Kezumba fields with a combined estimated reserve of 1.3trn cubic feet. It is a fast track project with the first gas through an early production system targeted by early 2013 to alleviate the shortage of gas supply in Peninsular Malaysia. Its permanent development scheme is likely to involve a central processing facility with the support of a set of satellite platforms together with a 200km export pipeline.

Surprising. We were surprised with the news and made several calls to local players unfortunately none gave us an affirmative answer. We were expecting the contract to be awarded to domestic players, particularly Bumi Armada which was speculated to team up with Emas for the bid. Then again, we reckon local players lost out due to commerciality i.e Emas with its existing un-deployed vessel could have a strong pricing advantage for a 3 year lease which is relatively short.

Bumi Armada – no change in estimates. Recall that Bumi Armada had put up its tenders for the supply of 4 FPSOs i.e Belud, North Malay Basin (Kamelia field), ONGC’s Cluster-7 and Lam Soon, which is a re-tender bid. While this is negative news for Bumi Armada, we remain confident that the company will secure 2 new FPSO contracts this year although timing of new contracts is the main risk to our estimates. We believe the project pipeline for FPSO continue to stand strong and Bumi Armada has indicated its participation in several pre-qualification exercises for the supply of FPSO which includes 1 for Madura field in Indonesia and 2 for West African market of which one of it is from its existing client, ENI for which Bumi Armada’s FPSO Armada Perdana is hired under a 5+5 bareboat charter for the Oyo field. On the updates for its bid for St. Joseph’s vessel based chemical EOR project, biding is still on-going and is likely to be awarded in April-May. The company had submitted its bid based on client’s requirements and is confident of its chances. The contract is valued at around USD300m (vessel + O&M). Execution will be divided into 2 parts, (i) the FEED for 6 months and (ii) construction for 16 months, implying deployment as early as 2Q2014. There is only one other competing bid led by Delcom (Deleum Berhad’s subsidiary). Maintain Buy with Target Price RM4.49.

19 March 2012

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