In the energy sector, oil and gas stalwart Bumi Armada Bhd bags the accolade for the highest returns to shareholders over a three-year period. Bumi Armada shares chalked up a three-year compound annual growth rate (CAGR) of 29.2% as it rose from 19 sen as at end-March 2019 to 41 sen at end-March 2022, largely maintaining its gains from a year ago.
However, Bumi Armada’s fortunes only changed for the better after having gone through a rough patch from FY2016 to FY2018, when the company racked up about RM4.5 billion in accumulated losses. The bleeding was a result of Bumi Armada’s fortunes being intertwined with oil prices, which largely determine the level of exploration activity.
To recap, Brent crude oil hit record highs of US$145 per barrel in mid-July 2008, but tumbled to US$26 in February 2016. The grounds it regained were wiped out following the outbreak of Covid-19 as the Brent slumped below US$20 a barrel in April 2020, the lowest level since early 2002. As the global economy reopened, prices recovered, topping US$100 a barrel after Russia attacked Ukraine, before easing closer to US$90 from late August this year.
During the period of depressed oil prices, Bumi Armada trimmed its fat, hived off several ageing offshore support vessels (OSVs), which were dragging earnings down, and focused on its other core competency, floating production storage and offloading (FPSO) vessels.
Bumi Armada is among the largest owner-operators of FPSOs in the world with its fleet of eight vessels (four of which are wholly owned with the remaining four partly controlled), namely Armada Sterling, Armada Kraken, Armada LNG Mediterrana, Karapan Armada Sterling III, Armada Olombendo, Armada Sterling II and Armada TGT1. Armada Claire is targeted for disposal this year.
According to its 2016 annual report, Bumi Armada had a fleet of 49 OSVs, compared to three OSVs at present. It hived off 20 OSVs in FY2021, and three in January this year. From Bumi Armada’s annual report for 2021, its OSV utilisation rate was at 61% in contrast to 54% in FY2020, and 50% in FY2019. However, to its credit, Bumi Armada has maintained its FPSO uptime at 99% since FY2019 through to FY2021.
Net profit in FY2021 was a record RM659.23 million from RM2.24 billion in turnover, in contrast to RM58.62 million net profit on RM2.07 billion in turnover in FY2019. Net profit in FY2021 got a shot in the arm from lower finance costs, higher share of results of joint ventures and associates, and higher operating income in FY2021.
In its notes which accompany its financials for the fourth quarter of FY2021, Bumi Armada says that, “The sturdier oil price augurs well for the oil and gas sector, which is witnessing increasing activities across the entire value chain, including the floating offshore solutions segment. The group expects the existing portfolio of the floating production and operations business to be stable in 2022 and will be exploring new opportunities in targeted markets.”
As at end-June, Bumi Armada had a firm order book of RM13.1 billion, with options on extensions valued at RM9.4 billion. With its strong order book, Bumi Armada’s outlook seems promising. For its six months ended June 2022, Bumi Armada chalked up net profit of RM372.01 million on the back of RM1.15 billion in revenue.
As at end-June, Bumi Armada had deposits, cash and bank balances of RM717.38 million. On the other side of the balance sheet, it had long-term debt commitments of RM5.07 billion and short-term borrowings pegged at RM1.3 billion.
While Bumi Armada’s borrowings are on the high side — its gearing is at 1.2 times — the company’s prospects seem bright and it is still being touted as the front runner to bag several FPSO contracts.
News reports have it that Bumi Armada could bag a new FPSO charter contract in Angola, with TotalEnergies’ Cameia FPSO project, located on Block 21 offshore Angola, and is a contender for Eni’s Agogo FPSO on Blocks 15 and 16 offshore Angola as well. Other than the two jobs in Angola, Bumi Armada is also understood to be eyeing FPSO contracts in Block 29 in Mexico being undertaken by Repsol.
One of Bumi Armada’s strengths lies in its 34.68% shareholder, businessman Tatparanandam Ananda Krishnan, who is among the richest individuals in the country and has in the past funded the company when banks were limiting their exposure to oil and gas. That alone keeps the stock on investors’ watch list.