KUALA LUMPUR: Analysts are positive about Yinson Holdings Bhd, which has been awarded two letters of intent (LoIs) by Petroleo Brasileiro S.A. (Petrobras) for a floating, production, storage and offloading (FPSO) vessel in the North Campos Basin, offshore Brazil.
Yinson said the LoIs were for the charter, operations and maintenance of Integrado Parque das Baleias (PDB) FPSO.
“The estimated aggregate value of the contracts is equivalent to US$5.2bil (RM21.7bil). The contract period is for 22.5 years from the date of the final acceptance,” it said.
The LoIs were issued to Yinson Production Pte Ltd, an indirect unit of Yinson.
Following the LoIs, Yinson Bergenia Production B.V, will enter into a charter contract for the provision of the FPSO.
Meanwhile, Yinson Bergenia Servicos de Operacao Ltda will enter into a contract for the asset’s operations and maintenance.
The estimated aggregate value of the contracts is equivalent to US$5.2bil (RM21.7bil).
The contract period is for 22.5 years from the date of the final acceptance.
PDB FPSO will be Yinson’s second vessel to operate in Brazil waters, with the first being FPSO Anna Nery, which was awarded to Yinson by Petrobras in October 2019.
FPSO Anna Nery is currently under construction in Cosco Changxing, China, and is on track to be operational in 2023 in the Marlim field, located in northeastern part of the Campos Basin.
Yinson group CEO Lim Chern Yuan said that the group is well-positioned to take on the PDB FPSO project, as it had successfully strengthened its resources, capacity and expertise in Brazil.
“Brazil is a region of paramount importance to Yinson and we are committed to giving our very best to contribute to the advancement of the country’s energy industry.
“We are pleased that the efforts we have made into building our presence in Brazil have created synergies that will allow our Brazil-based projects to achieve greater efficiencies, creating greater value for all our stakeholders,” Lim said.
Yinson Production Offshore CEO Flemming Gronnegaard said: “The team has gained valuable skills and experience through our existing activities in Brazil and has also been able to adapt and innovate to overcome the challenges brought about by the pandemic and uncertain global economic situation.
“With this experience, we are stronger than ever and ready to demonstrate once again that we can successfully deliver a world-classed FPSO project.”
In a report, Kenanga Research said it is positive about the PDB contract being a step closer towards finalisation.
“We expect charter rates to be US$624,000 (RM2.6mil) per day, translating to a total contract value of over US$5bil (RM20.8bil).
“This would be Yinson’s third FPSO within the region after FPSO Anna Nery and the Atlanta field FPSO,” said the research house.
Following the contract award, Kenanga Research expected a rights issue of at least RM1bil to part finance the equity portion of the project’s capital expenditure (capex).
Meanwhile, RHB Research valued the PDB project at RM2.26 per share, assuming a US$1bil (RM4.16bil) capex, 15% project internal rate of return (IRR), 7% weighted average cost of capital, 80% debt funding, and 100% equity stake.
The research firm said with the PDB project, Yinson’s FPSO order book will be lifted to US$15bil (RM62.4bil).
“The FPSO will have the capacity to process 100,000 barrels of crude oil per day and five million cubic m per day of gas. It is scheduled to start production by the fourth quarter of 2024.
“Yinson’s management guided that capex is US$900mil (RM3.75bil), and the very large crude carriers purchased earlier will be sent to the yard for conversion,” said the research house.
According to RHB Research, Yinson is likely to fully own the project’s equity stake, and finance it with 70% borrowings.
Project IRR could reach the high teens, as cost synergies could be achieved with FPSO Anna Nery.
PDB FPSO will be under finance lease accounting, whereby construction gains will be recognised during the conversion period, and its earnings front-loaded upon the early stages of the charter period.
The research house estimated that the project could deliver construction gains of US$100mil (RM416mil) during the conversion period, and first year net profit of US$80mil (RM333mil) in 2025, post first oil.