Offshore supply vessel Armada Tuah 303
KUALA LUMPUR: The fate of two contracts worth up to RM2bil is in limbo, as Bumi Armada Bhd
moves to suspend the provision of floating, production, storage, and offloading vessel (FPSO) services to Erin Petroleum Nigeria Ltd.
In a filing with Bursa Malaysia, Bumi Armada said its units had issued notices of suspension to the subsidiary of Texas-headquartered Erin Energy Corp, an independent oil and gas player that focuses on energy resources in sub-Saharan Africa.
The bareboat charter contract and operation and maintenance (O&M) contract involving FPSO Armada Perdana are being suspended due to “longstanding delays” in the charterparty payments due to Armada Oyo Ltd as well as “irregular payments” for the O&M services provided by Bumi Armada (Singapore) Pte Ltd.
Bumi Armada did not disclose in the announcement how long the problems had persisted or what was the amount due.
The two Bumi Armada units had inked the contracts with Erin Energy group member Oceanic Consultants Nigeria Ltd on Feb 12, 2014. This was for deploying FPSO Armada Perdana at the Oyo field located 75km off the Nigerian coast.
On March 25, 2014, Oceanic novated its rights and obligations under the two contracts to Erin Petroleum.
Each of the contracts was for an initial period of seven years starting from Jan 1, 2014, with an automatic extension for two additional terms of 12 months each unless terminated by Erin Petroleum.
The combined value of the contracts for the initial period was about US$381mil (RM1.63bil), with a further aggregate value of US$108mil (RM463.38mil) if the extension options were fully exercised.
Bumi Armada, which is believed to be the world’s fifth largest FPSO player, said that on May 16 its subsidiaries had, after repeated attempts to arrive at a mutually acceptable solution to both parties, issued notices of overdue payment and letters of demand to Erin Petroleum. They sought immediate payment of the undisputed outstanding sum.
To date, Erin Petroleum has not responded to their notices and letters of demand.
“The suspension does not relieve Erin Petroleum of any of its own obligations under the contracts,” Bumi Armada added.
The contracts will be suspended from 12pm Lagos time (5pm Malaysian time) on June 21 except for the critical maintenance and other activities to mitigate occupational health and safety and environment risk.
On the financial impact on it, Bumi Armada said the outstanding sum claimed by its two units had been fully provided for in the group’s financial statements.
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“The suspension of operations is not expected to have significant impact on the full-year 2017 financial results of the company, the extent of which cannot be conclusively ascertained at this juncture,” it said.
On its next move, Bumi Armada said the group continued to evaluate all its available options on this matter, including the possibility of working with Erin Petroleum to arrive at an amicable solution.
It said that if that failed, it would proceed with steps to fully enforce its rights against Erin Petroleum based on the advice from external counsel.
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