Bumi Armada sees 1Q profit rise despite revenue decline

Malaysian OSV and FPSO leasing company Bumi Armada has posted a rise in net profit for the first quarter of 2019.

Illustration: Armada TGT FPSO / Image supplied by Soco International; Photographer: John Hepler

The company’s net profit was 62.2 million Malaysian ringgit, up from RM 48.7 million a year ago.

“The increase is mainly due to higher allowance for impairment losses of receivables in YTD 2018 and lower depreciation as a result of impairment losses recognized on the Armada Kraken FPSO and certain OSV vessels during the financial year ended 31 December 2018. The increase is also contributed by higher share of results from Karapan Armada Sterling III [FPSO] in YTD 2019 arising from lower tax expense due to recognition of deferred tax assets and lower management fees recognized in YTD 2019. ”

Revenue for the 1Q 2019 was RM491.6 million which is lower compared to last year first quarter’s RM600 million. The company said the decrease in revenue was mainly due to the completion of the Lukoil project in the Caspian Sea in December 2018.

Bumi Armada’s Floating Production and Operation (FPO) business reported revenue of RM425.6 million, down from RM460.3 million in the first quarter of 2018. The decline, Bumi Armada said, is due to lower revenue from Armada TGT 1 FPSO in Vietnam, with the vessel now in its extension agreement contract.

The offshore marine services business (OMS), operating over 40 offshore support vessels, reported revenue of RM66.0 million, down from RM140.0 million.

The decline versus Q1 2018 revenue is due to Armada Installer and Armada Constructor completing their contracts at the end of 2018, Bumi said, adding that the OSV segment was unchanged in Q1 2019, as fleet utilization remained below 40%.

“Offsetting the revenue decline were reductions in expense for cost of sales, selling and distribution cost, and administrative cost. In addition, the Group had a stronger contribution from its joint venture and associates in Q1 2019, versus Q1 2018,” Bumi Armada explained.

Gary Christenson, the recently appointed Executive Director and Chief Executive Officer of Bumi Armada said: “Since the close of Q1 2019 the refinancing of our corporate debt has now been completed and we will monetize under-utilized assets to accelerate debt reduction. In addition, the Group announced a new FPSO project for ONGC’s Kakinada 98-2 oil field with our Indian joint venture company. We are looking to stabilize the financial performance of the Group through various efficiency and performance improvement initiatives. Our focus will be on improving our performance on Armada Kraken, selectively pursuing new FPO projects and strengthening the balance sheet to support growth going forward.”

While Christenson did not elaborate on what he meant by monetization of under-utilized assets, his predecessor Leon Harland said in March the company was reviewing its OSV fleet requirements “and have several vessels under discussion for disposal.”

According to data on Bumi Armada’s website, the company operates a fleet of 47 vessels, comprising 44 OSVs and 3 SC vessels.

Offshore Energy Today Staff

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