Bumi Armada's 2Q Revenue Falls 12.2% to $99.7M as FPSO, FGS Incomes Dip

Bumi Armada Berhad, a Malaysian offshore energy facilities and services provider, posted a revenue of $99.7 million (MYR 402.9 million) in the second quarter of 2016 (2Q 2016), down 12.2 percent from last year's $113.6 million (MYR 459.1 million), with the fall attributed to lower contributions from its floating production storage and offloading (FPSO) and floating gas solutions (FGS) businesses, the company said Friday in the release of quarterly results.

Revenue from the FPSO and FGS units declined 28.1 percent due to the loss of revenue from Armada Claire during the quarter, lower conversion activities as new projects near completion prior to sail away, and lower contribution from Armada Perkasa. Bumi Armada's revenue would have been lower if not for a 15.4 percent increase in income from offshore marine services (OMS) in the corresponding period on the back of improved utilization in the offshore support vessels (OSV) business as well as subsea construction work related to the Lukoil project in the Caspian Sea.

The company registered a net loss of $128.3 million (MYR 518.3 million) in 2Q 2016, compared to a net loss of $72.2 million (MYR 291.5 million), with the wider loss attributed to non-cash impairment charges amounting to $142.4 million (MYR 575.5 million), a significant portion of which is related to the Armada Claire FPSO.

"The current climate of relatively lower oil prices continues to challenge our industry and Bumi Armada has also been impacted by the loss of earnings from Armada Claire, challenges to get regular payments from our FPSO clients in Nigeria and continued weak demand for OSV services," Leon Harland, CEO and executive director of Bumi Armada said in the press release.

Meanwhile, despite taking non-cash impairments, particularly for FPSO Armada Claire, Bumi Armada is sticking to its position that the termination of the contract by Woodside Petroleum Ltd.'s unit Woodside Energy Julimar Pty Ltd. was unlawful and it will continue to claim damages for the unlawful termination.

Looking ahead, Bumi Armada believed that the underlying fundamentals of the company remain positive. The firm said the impending operations of 4 new FPSO/FGS projects would provide a step-change in its financial results from 2017 onwards.

"In the OSV business, which is most exposed to reduced exploration and development activities by the oil companies, rates remain weak. Notwithstanding this, we have managed to slightly increase the utilization of the fleet in 2Q 2016, and we continue to focus on keeping the business as cost efficient as possible and operating cash flow positive. We do not however, expect to see a major improvement in the OSV segment over the short-term," Harland said.

In the meantime, the Bumi Armada CEO said the company would "remain focused on bringing our new major projects on stream and converting our backlog of $5.4 billion (MYR 21.9 billion) of firm FPSO and FGS contracts into day-to-day income.”