Dommo Energia extends charter for FPSO operating on Tubarão Martelo field

Brazilian oil company Dommo Energia has extended the charter of the OSX-3 floating production, storage, and offloading (FPSO) vessel working at the Tubarão Martelo field (TBMT) offshore Brazil.

Dommo Energia said on Monday that it had executed a new amendment to the charter agreement with the owner of the vessel, OSX 3 Leasing B.V., to extend the existing charter for a period of up to 20 years.

Furthermore, along with the new charter Dommo Energia and OSX 3 canceled the option to acquire TBMT that was held by OSX 3 following the judicial recovery.

Under the terms of the previous charter agreement, which had been negotiated as part of the company’s restructuring of its debt while still under judicial recovery, OSX 3 had the option to notify the company at any time of its intent to remove the vessel from TBMT and acquire TBMT for $1,00 under certain conditions.

The new charter was negotiated by the parties in order to give Dommo Energia the necessary long-term commitment to keep investing in TBMT to further increase its production capacity which currently stands at around 6,000 bbls/day.

The charter payment under the new deal is $47.2 million per year – equivalent to a $129,315 daily rate.

In order to secure a long-term charter and cancel the call option, Dommo Energia will make a payment upon signing of the new charter to OSX 3 of $50 million and another payment of $15 million on or before September 30, 2019.

Field revitalization

As a result of the new charter, Dommo Energia will be able to resume its planned and approved investments in TBMT. The revitalization consists of the upper completion of the fifth well, 4HP, which was already drilled and needs to be connected to the FPSO, as well as workover activities in the four producing wells, known as 2HP, 6HP, 8H, and 44HP.

The goal of the revitalization is to increase the production of TBMT to an estimated 10,000 bbls/day by late 2019.

The company estimates the cost to be $80 million, which should be disbursed over the next 12-18 months and will be funded from existing cash balances and future cash generation.

As for the Tubarao Martelo field where the FPSO is operating, it is located within BM-C-39 and BM-C-40 blocks of the Campos Basin in water depths of 110m, approximately 95km from Rio de Janeiro.

The field was declared commercial in April 2012, and drilling activities began in the second quarter of 2012. In December 2013, the first production from the field occurred from the TBMT-8H well. The field is 100 percent owned by Dommo Energia.