Thursday 28 Mar 2024
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Yinson Holdings Bhd
(Jan 29, RM2.84)

Maintain hold with target price of RM2.85: Yinson Holdings Bhd was finally awarded the contract for the chartering, operation and maintenance of a floating production, storage and offloading (FPSO) facility at the Offshore Cape Three Points Block located in the Tano Basin, approximately 60km off the coast of Ghana, by Italian oil major Eni SpA.

The Sankofa and Gye Nyame discoveries hold in place resources of about 1.2 trillion cu ft of non-associated gas and about 150 million barrels of recoverable oil. We understand that the contract award is only for the crude oil recovery.

The charter will have a value of US$2.5 billion (RM9.07 billion) over a period of 15 years and options worth US$717 million for another five years. It is expected to hit first oil in the third quarter ended Oct 31, 2018, forecast.

This is the first FPSO award since its acquisition of Fred Olsen Production in 2013, and costs circa US$1 billion. Due to its prudent accounting policy, Yinson will not recognise any contributions during the conversion period of about 2.5 years. However, management guides that the FPSO is expected to contribute to the bottom line significantly upon the commencement of production (first full year contribution of about RM150 million accretion to bottom line).

The recovery of non-associated gas, which is yet to be awarded, is a further upside for Yinson.  — AmResearch, Jan 29

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This article first appeared in The Edge Financial Daily, on January 30, 2015.

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