Bumi Armada posts RM585.48m net loss in Q2 due to impairments

PETALING JAYA: Bumi Armada Bhd suffered a net loss of RM585.48 million during the second quarter ended June 30 compared with a net profit of RM116.59 million a year ago.
In a filing with Bursa Malaysia, the group said it recognised an impairment charge of RM477.2 million and RM1.7 million for the Armada Kraken FPSO and Armada Gema respectively during the quarter, as well as net allowances for impairment losses of RM117.4 million.
"Excluding the non-cash impairment charges, the group would have posted a net profit of RM10.8 million," it said.
Revenue for the quarter fell 5.8% to RM654.04 million from RM694.42 million a year ago due to lower revenue in the offshore marine services segment, which reported a 41.8% decline in revenue due to low activity in the offshore support vessel (OSV) segment.
OSV fleet utilisation during the quarter remained flat at 38% due to soft demand while the subsea construction segment continued to produce stable contributions due to ongoing work in the Caspian Sea.
The floating production and operation (FPO) segment's revenue rose 32.3% to RM446.5 million during the quarter on the back of higher revenue from the Armada Olombendo FPSO, despite recognising compensation payable to the Kraken charterers and lower contribution from the Armada LNG Mediterrana FSU.
For the six months ended June 30, the group reported a net loss of RM537.06 million compared with a net profit of RM164.70 million while revenue rose 14.18% to RM1.25 billion from RM1.10 billion a year ago.
In a separate filing, Bumi Armada, together with EnQuest Heather Limited, EnQuest ENS Limited and Nautical Petroleum Limited (Kraken charterers) have mutually agreed to waive their respective rights under a bareboat charter.
The group said its wholly owned subsidiary Armada Kraken Pte Ltd (AKPL) had entered into an amendment agreement number two (AA2) with the charterers in respect of the bareboat charter contract dated Dec 20, 2013 in relation to the Armada Kraken FPSO for the Kraken Field.
Under the agreement, the parties agreed to waive their respective rights that arose from certain claims and events that occurred prior to the effective date of July 31.
As part of the mutual waivers, AKPL will pay US$15 million (about RM60 million) to the charterers. The sum will be fully paid by Dec 17, 2018.
Bumi Armada has estimated a negative financial impact of US$25 million (about RM100 million) on profit or loss from the amended agreement.
"An impairment assessment has been carried out by the Company based on the terms in AA2. As a result, the company recognised an impairment expense of US$119 million (approximately RM477 million) in the financial statements," it noted.
The group said the signing of the AA2 is expected to mitigate its long term financial exposure under the bareboat charter, in view of the agreement on the basis to calculate the compensation.
The execution of AA2 allows AKPL and the charterers to progress the project on a more defined basis towards final acceptance, in a mutually beneficial manner, and without being encumbered by historical events.
It added that the AA2 reflects the parties' commercial consensus on certain technical requirements under the bareboat charter. The agreement also provides an objective roadmap towards final acceptance and mitigates various exposures under the original contract.