KUALA LUMPUR: Bumi Armada Bhd has yet to finalise the execution of the US$1.18 billion (RM3.76 billion) contract to supply one floating production, storage and offloading (FPSO) vessel to Husky-CNOOC Madura Ltd (HCML) after several delays.
In a filing with Bursa Malaysia yesterday, Bumi Armada said HCML and a consortium comprising Bumi Armada’s wholly-owned subsidiary, Bumi Armada Offshore Holdings Ltd, and its joint-venture company, PT Armada Gema Nusantara, have “mutually agreed” to amend the letter of intent (LoI) to further extend the period of the contract.
The contract will be terminated should both parties fail to sign by Nov 27, about two weeks from now, unless another extension is agreed upon.
The execution of the contract has been delayed for the third time.
“The parties have finalised clarifications and are procuring relevant internal approvals to execute the contract,” said Bumi Armada.
Bumi Armada’s announcement is part of a series of mutually agreed extensions that have been agreed upon by HCML and the consortium to extend the period of execution of the contract.
The further delay in the execution of the contract does not paint a positive picture of Bumi Armada, whose order book is currently at RM31.7 billion. The stock price fell back to its historical low of RM1.37, down two sen at at 4.40pm, with an intraday low of RM1.36.
Bumi Armada’s share price has been on a decline since the beginning of the year, losing 44.87% to date. It closed down 2.16% to RM1.36 yesterday, giving it a market capitalisation of RM7.98 billion.
To recap, the Jakarta-based oil and gas firm HCML and the consortium had agreed to sign a 10-year charter contract for a FPSO, with an option for a five-year annual extension worth an aggregate US$147 million.
Bumi Armada first received a LoI dated Aug 8 from HCML that the FPSO lease contract is to be finalised and signed within 45 days from the date of the LoI, unless an extension is mutually agreed by both parties.
On Oct 14, HCML and the consortium agreed to extend the execution of the contract to Oct 31. The parties again agreed to extend the period for the signing of the contract to Nov 6.
This article first appeared in The Edge Financial Daily, on November 13, 2014.