Kenanga Research has maintained its earnings forecast for Bumi Armada.
PETALING JAYA: Bumi Armada Bhd
’s proposed venture to explore liquid carbon dioxide (CO2) storage and liquid CO2 carriers is seen as a positive development and is expected to incur lower capital expenditure (capex) requirements compared to its liquefied natural gas (LNG) projects.
On Wednesday, the oil and gas support services provider’s joint venture (JV) firm Bluestreak CO2 Ltd partnered with Dusseldorf-based Uniper (UK) Ltd to explore the implementation of jetty-moored floating liquid CO2 storage facilities and liquid CO2 carrier solutions.
Bluestreak CO2, a 50:50 JV between Bumi Armada and Navigator Holdings Ltd, was established in June 2023 to provide CO2 shipping and injection solutions in the United Kingdom.
The collaboration with Uniper will explore opportunities arising from the UK government’s goal of decarbonising the power sector by 2030 and facilitate the export of CO2 from Uniper’s proposed grain carbon capture project on the Isle of Grain, UK.
In a company update note, Kenanga Research saw the venture as a positive development for Bumi Armada and expects the capex requirements for the liquid CO2 storage and carriers to be lower than for the LNG projects.
“While this is a positive development for Bumi Armada, it is still early to assess the economics of the CO2 projects,” it said.
According to the research outfit, a CO2 carrier vessel could require a capex of between US$100mil and US$200mil, while a floating storage unit could require between US$100mil and US$300mil.
“Bumi Armada’s final capex requirement will depend on the ownership structure of the potential assets. We believe the required capex will be lower than for LNG projects of similar function (storage and carrier),” it noted.
However, the research house said the LNG industry is more mature than the CO2 industry.
“As a result, we believe the project carries less risk when executed in conjunction with its two partners,” Kenanga Research added.
Overall, the research house has maintained its earnings forecast on Bumi Armada, with an unchanged target price of 58 sen per share and a “market perform” rating on the stock.
Kenanga Research continues to favour Bumi Armada given the potential re-rating arising from its improving gearing level, its long-term earnings visibility underpin of a sizeable order book in excess of RM20bil, including potential extensions, and its long-term growth driven by multiple potential floating production storage and offloading (FPSO) and LNG projects.
“However, post-Kraken FPSO recovery, the group’s earnings will be flattish in the absence of any new projects,” it said.
On June 2, 2023, Bumi Armada announced the Kraken FPSO had experienced a production shut-in due to the failure of its hydraulic submersible pump transformer unit, which had a material impact.
However, by July 20, 2023, the FPSO achieved startup and was operating at about 90% of its pre-shutdown levels and since early August 2023, the FPSO has been running at full capacity.
