KUALA LUMPUR (June 4): CIMB IB Research has maintained its “Add” rating on Yinson Holdings Bhd at RM5.01 with a higher target price of RM5.90 (from RM5.89), and said Yinson inches closer to securing large floating production storage and offloading (FPSO) contracts in Brazil and Ghana.
In a note today, the research house quoted from energy portal Upstream and said Yinson’s chances at the Marlim floating production storage and offloading (FPSO) bids have improved, after Japan-based Modec decided to scale back the scope of its bid for the Marlim field in Brazil.
“With Modec now only interested in one of the two Marlim FPSOs, it appears that Yinson is on track to secure either the Marlim-1 or Marlim-2 FPSO contracts, because there are no other bidders, as long as Petrobras is agreeable to Yinson’s asking prices. Both FPSOs are scheduled to enter into production in either 2022 forecasts or 2023 forecasts,” the research house added.
Upstream had reported Modec’s move to accept just one of the two Marlim FPSO contracts because its plate is now so full, despite Modec having an upper hand to win the bids for both Marlim-1 and Marlim 2.
It is understood that Modec’s daily charter rate (DCR) proposal is US$650,000 per day daily charter rate (DCR) for Package A, and US$550,000 per day DCR for Package B, which is US$100,000 per day lower than Yinson’s proposed rates for both packages.
Under Package A, Marlim-1 FPSO has a processing capacity of 80,000 barrels of oil per day (bopd) and seven million cubic metres per day of natural gas (mmscmd), while Marlim II FPSO is for package B, having a capacity of 70,000 bopd and four million cmd of natural gas.
Meanwhile, Yinson had submitted its bid to supply FPSO for the Parque das Baleias complex in the northern sector of the Campos basin, Brazil, where the group is facing competition with a joint venture between Italy’s Saipem and Netherlands’ Bluewater.
The Parque das Baleias FPSO is scheduled to enter into production in 2022 and will have the capacity to produce 100,000 bpd, and five million cmd of natural gas over a charter period of 22 years.
The report said Yinson was unlikely to take risks by accepting two FPSO jobs in Brazil, a new market that it has no presence at currently, and may opt for the Pecan FPSO in Ghana as a lower-risk option, since it has an established presence in West Africa and is currently operating the JAK FPSO in Ghana.
In the pursuit of Aker Energy’s Pecan FPSO contract is also down to two bidders, SBM Offshore and Yinson. The Pecan FPSO is located in the Pecan field, in Ghana’s offshore Deepwater Tano-Cape Three Points (DWT-CTP) block, and will have an oil processing capacity of 110,000 bopd and be able to store 1.6 million barrels of crude in its hull.
On Singapore-based liftboats operator Ezion Holdings Ltd (EHL) acquisition, Yinson is still awaiting regulatory approval, may be consummated at just about the same time with FPSO project execution.
“But with major FPSO projects at hand, potentially coinciding with the Ezion buy and the restructuring to follow that, Yinson will have a lot to juggle,” the research house added.
The research house said it had reduced Yinson earnings per share between 6% to 15% for the financial year ending 2020 to 2022, as Yinson had issued US$90 million perpetual securities on March 29, 2019, and issued another US$30 million on April 5, 2019, at a coupon rate of 8.1%.
“We have tweaked up our sum-of-parts (SOP)-based target price from RM5.89 to RM5.90, as we have included the immediate cash proceeds from the US$120 million in perpetual securities issued in March and April 2019, minus the discounted value of expected future repayment on the fifth anniversary of issue,” it added.