By MARK RAO / Graphic By TMR
Bumi Armada Bhd posted larger losses for its second quarter ended June 30 this year (2Q18) as impairment provision rose to RM596.3 million and hurt its profit reporting.
The offshore service provider fell to a net loss of RM585.48 million against the RM116.59 million net profit in 2Q17, while revenue declined 5.8% to RM654.04 million on lower turnover from offshore marine services (OMS).
Bumi Armada, the fifth-largest floating production storage and offloading (FPSO) player globally, recognised a RM477.2 million impairment for its Armada Kraken FPSO, which significantly weighed down earnings in 2Q18.
This comes after its wholly owned unit Armada Kraken Pte Ltd (AKPL) entered into a second amended agreement with EnQuest Heather Ltd, EnQuest ENS Ltd and Nautical Petroleum Ltd for the FPSO charter in the North Sea of the UK. Under the amended agreement, AKPL agreed to compensate the charterers for outstanding cost items to help secure a final acceptance certificate for the project.
Bumi Armada also recognised RM117.4 million in impairments for its OMS business and a RM1.7 million impairment for its unit Armada Gema in 2Q18.
Its ED and CEO Leon Harland said the amended agreement reached between AKPL and the charterers allows the project to progress on a more defined basis, while mitigating long-term financial exposures.
“The signing of the second amended agreement is an important step forward as it finally provides an objective road map to establish the final acceptance of the Armada Kraken FPSO and mitigates some critical exposures under the original contract.
“Nonetheless, we have taken substantial provisions in view of the long-term financial exposures that remain under the contract,” he said in a statement yesterday.
Turnover from the floating production and operation (FPO) business rose 32.3% year-on-year (YoY) in 2Q18 to RM446.46 million on higher contribution from the Armada Olombendo FPSO. The segment was the largest revenue contributor to the group at 68.3%.
Revenue from the OMS business fell 41.8% YoY to RM207.58 million in 2Q18 due to low activity in the offshore support vessel (OSV) segment, which noted a fleet utilisation rate of 38% on soft demand.
OMS revenue was also lower on the high base noted in 2Q17 due to strong contributions from the subsea construction segment, which continued to provide steady revenue in 2Q18 from ongoing work in the Caspian Sea.
For the first half of the year, Bumi Armada posted a net loss of RM537.06 million and a revenue base of RM1.25 billion.
“Our primary focus for the rest of 2018 will remain on managing our costs and strengthening our balance sheet, while selectively pursuing new opportunities,” Harland said.
Bumi Armada’s activity in the OSV segment is expected to remain weak with fleet utilisation only to improve when oil companies increase their exploration drilling activities.