PP16832/01/2013 (031128) Malaysia
Initiating Coverage 6 March 2012
Buy (new) Bumi Armada The Armada strikes back Share price: RM4.13 Target price: RM4.88 Initiating coverage with a Buy and RM4.88 target price. Bumi Armada (BA) offers a niche exposure to the Floating Production, Wong Chew Hann, CA Storage and Offloading (FPSO) market. As one of the fastest growing [email protected] FPSO operators in the world, it has set its sights on being the Top 4 (603) 2297 8688 player in terms of FPSO fleet size by 2013. It is also poised to gain traction in Malaysia’s O&G sector, as it leverages on PETRONAS’ Chong Ooi Ming capex programme. BA, which is steadfastly building up franchise [email protected] (603) 2297 8676 values, is a steady growth stock with a 3-year net profit CAGR of 25%.
Bigger, bolder, better. BA is today a giant compared to its previous self. The restructured entity is now a powerhouse with a global presence, covering 4 core operations – FPSO, Offshore Supply Vessel
(OSV), Transportation & Installation (T&I) and Offshore Field Services Stock Information (OFS). It commands an armada of 53 vessels: 5 FPSOs, 46 OSVs, 1 Description: Integrated Oilfield services provider with 4 pipelay barge and SURF vessel operating across the the world. core operations: FPSOs, OSVs, T&I vessels and offshore field services. In an entrenched position to ride global E&P programmes. We see
Ticker: BAB MK innumerable opportunities for BA to capitalize on the: (i) 125 potential Shares Issued (m): 2,928.5 FPSO projects worldwide, (ii) requirement for new, highly technical Market Cap (RM m): 12,094.5 3-mth Avg Daily Volume (m): 3.73 OSVs to support global deepwater programmes, (iii) services for the KLCI: 1,589.22 subsea umbilicals, risers and flowlines (SURF), inspection, repair and Free float (%): 29.6 maintenance (IRM) markets, and (iv) increasing number of offshore
Major Shareholders: % development projects in Malaysia (marginal field and Enhanced Oil Objektif Bersatu Sdn Bhd 42.4 Recovery (EOR) development) and the Caspian region. Ombak Damai Sdn Bhd 11.6 Wijaya Sinar Sdn Bhd 7.3 Set to embark on an aggressive asset expansion plan. We see BA Karisma Mesra Sdn Bhd 5.4 prospecting for new assets for growth. BA will likely double its FPSO
Key Indicator s assets, triple its SURF vessels and add 4 new OSV vessels to its fleet Net cash (RM m): (1,760.6) by 2015. This is possible as it has the balance sheet to support the NTA/shr (RM): 1.20 heavy capex (estimated RM6.4b) for its expansion programme while Net gearing (x): 0.5 keeping its net gearing below the 1.5x threshold.
Histor ical Chart Strong earnings visibility 3 years out. We project a 3-year net profit CAGR of 25%. All divisions will contribute to growth, fueled by new 4.5 BAB MK Equity vessels (FPSO, OSV, pipelay barges) progressively coming onstream
4.2 and higher utilization (ex-dayrate revision) for the existing vessels. Source: Maybank IB 3.9 Bumi Armada – Summary Earnings Table FYE Dec(RM m) FY10A FY11A FY12F FY13F FY14F 3.6 Revenue 1,241. 4 1,543. 9 1,800. 7 2,220. 6 2,504. 3 EBITDA 715.6 845.1 1,048. 7 1,272. 6 1,442. 0 3.3 Recurring Net Profit 350.8 387.3 532.2 627.5 706.9 Recurring Basic EP S (Sen) 12. 0 13. 2 18. 2 21. 4 24. 1 3.0 EPS growth (%) 26. 4 10. 4 37. 4 17. 9 12. 6 Jul -11 Sep-1 1 No v-11 Ja n-12 DPS (Sen) 0.0 2.5 0.0 0.0 0.0
PER 34. 5 31. 2 22.7 19. 3 17. 1 Performance: EV/E BITDA (x) 21. 3 16. 4 13.9 11. 8 10. 4 52-week High/Low RM4.33/RM3.03 Div Yiel d (%) 0.0 0.6 0.0 0.0 0.0 P/BV( x) 13. 8 3.4 3.0 2.6 2.3
1-mth 3-mth 6-mth 1-yr YTD Net Gearing (%) 359.0 49. 9 61.6 63. 0 54. 4 Absolute (%) 4.0 11.3 na na 0.7 ROE (%) 40. 1 10. 9 13.3 13. 5 13. 2 ROA (%) 10. 8 9.3 9.2 9.2 9.1 R e la t ive (% ) 0.8 3.8 na na (3.1) Consensus Net Profit (RM m) - - 585.0 706.5 794.4
Ki m Eng Hong Kong i s a subsi di ar y of Ml a ayan Banki ng Ber had 6 March 2012 Page 1 of 60 Bumi Armada
Table of contents Page
Key investment merits 3
Introduction: Bigger, bolder, better 4
Snapshot of Bumi Armada’s operations • Floating Production, Storage & Offloading (FPSO) 7 • Offshore Supply Vessel (OSV) 12 • Transport & Installation (T&I) 16 • Offshore Field Services (OFS) 16 • Revenue and EBIT breakdown 17
Floating, Production, Storage & Offloading (FPSO) • Fundamentals 20 • Opportunities 26
Offshore Supply Vessel (OSV) • Fundamentals 29 • Opportunities 38
Transport & Installation (T&I) • Fundamentals 39 • Opportunities 40
Offshore Field Services (OFS) • Fundamentals 42 • Opportunities 45
FInancials • Financial projections 48
Valuation 51
Peers’ v aluations – FPSO operators 52 Peers’ v aluations – OSV operators 52 Risks 53 Financial statements 55
Appendix : Captains & Commanders of the Armada 57
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Key investment merits
Introduction. The Bumi Armada of today is a transformed entity. The Group has been restructured and now has four businesses: (i) FPSO, (ii) OSV, (iii) T&I and (iv) OFS, with a global presence in each segment. The company is driven by a dedicated, experienced and professional management team, compri si ng talent from mul ti pl e nati onal ities.
Solid business model. We like the FPSO space. It provides steady visibility (contracts and earnings) with reasonable IRRs. Competition is limited given the high investment and technical hurdle requirements. Bumi Armada’s OSV operation, relatively new, modern and modulated to the high-end vessel segment is a positive, for it provides respectable utilisation and day rates. Bumi Armada’s stint in the T&I and OFS divisions has been brief so far but has delivered the desired results.
Well-positioned to push for new contracts, locally and globally. Prospects are bright for Bumi Armada to ride on the global O&G capex upcycle, as it capitalises on the growing demand for new FPSO and OSV charters, as well as growing requirements for brownfield developments. In the domestic (i.e. Malaysia) space, the prospect of leveraging on PETRONAS’ deepwater, marginal field and enhanced oil recovery (EOR) field projects is high. It has both the operational foresight and financial structure to leverage and support its expansion programmes.
Powering up - w here growth and aspirations meet. We opine that Bumi Armada has the balance sheet to fund 3 new SURF vessels, 5 FPSOs and 8 OSVs over the next three years without straining its cashflow and gearing levels. This is a sensible aspiration, which would propel Bumi Armada to become the fourth largest FPSO operator globally with a competitive edge to boot.
A tow ering growth stock with rew arding returns. With a 3-year net profit CAGR forecast of 25%, its relentless pursuit of excellence will secure Bumi Armada the status of fastest-growing operator among its global peers. However, given prospects for high growth, we believe that i t is unl i kel y that Bumi Armada will reward sharehol ders wi th meaningful di vi dends i n the foreseeabl e future.
High conviction: valuations with compelling growth prospects. We value Bumi Armada at RM4.88, using the sum-of-part (SOP) valuation methodology. At our target, Bumi Armada would have a market capitalisation of RM14.3b, a valuation that would see it become the largest FPSO player worldwide by market value (ahead of SBM’s RM10.3b), while outpacing its contemporaries in growth and profit margins.
Ki m Eng Hong Kong i s a subsi di ar y of Ml a ayan Banki ng Ber had 6 March 2012 Page 3 of 60 Bumi Armada
Bigger, bolder, better
Bumi Armada – remembering the old days. The Bumi Armada of yesterday was just a shadow of its present incarnation. The previous entity, listed on 25 June 1997 and delisted six years later on 18 April 2003 (with a market capitalization of RM441m), was primarily engaged in just two main business activities: (i) offshore support vessel (OSV) operations, and (ii) offshore construction, installation & maintenance services. Operations then were predominantly domestic-centric, supported by 25 vessels, 2 tanker support vessels and a Floating Production, Storage and Offloading (FPSO) system.
The present day – rejuvenated and ready to ride the waves. T he group has since been restructured and the Bumi Armada of today is a much larger and more di versi fied entity wi th a gl obal reach. True to its name, it really has burgeoned into an armada, with a fleet of 5 FPSOs (including two undergoing conversion), 46 OSVs, one pipe-laying barge and another SURF vessel, making it the jointly fifth-largest FPSO operator in the world and the third-largest OSV operator in Southeast Asia. Meanwhile, its business has grown to encompass four segments: (i) FPSO, (ii) OSV, (iii) Transport & Installation (T&I) and (iv) Offshore Field Services (OFS) with two support units: Fleet Management Services (FMS), and Engineering, Procurement and Construction (EPC).
Usaha Tegas Group (UT) is the largest shareholder. UT, a privately- owned holding company, presently holds a 42.4% stake, held through Objektif Bersatu Sdn Bhd (OBSB). The other four substantial shareholders that hold a cumulative 27.5% stake are: (i) Ombak Damai Sdn Bhd (ODSB) - 11.6% (ii) Wijaya Sinar Sdn Bhd (WSSB) - 7.3% (iii) Karisma Mesra Sdn Bhd (KMSB) - 5.4% (iv) Wijaya Baiduri Sdn Bhd; (WBSB) - 3.2%
A well-managed set-up, driven by experienced management. Bumi Armada is led by an experienced, dedicated and culturally diverse senior management team that presides over an agile organisation. The group has proved it can attract worldwide talent (with over 20 nationalities) to operate across multiple countries while its flat organisational structure gives it the ability to react efficiently and quickly to business threats and opportunities, both domestically and internationally. Hassan Asad Basma, the CEO of Bumi Armada, has an extensive 30 years of experience in the O&G industry with 18 years’ working knowledge in Asia.
6 March 2012 Page 4 of 60 Bumi Armada
Business model – Pre and post restructuring
BAN Haven OSVs and related logistics; • Offsh ore installation, •25 OSVs, servicing and •2 tankers maintenance •and 1 FPSO
Restructuring
•Tripled FP S O f leet s ize •Newer, younger and bigger OSVs •Disposal of Haven
Floating Production Offsho re Sup port Transport and Oilfield Services Engineering, Fleet Management Storage and Vessel Installation Services (OFS) Procurement and Ser v i ces Offloading (FPSO) (OSV) (T &I) Con struction
Own s and leases 5 Own s a fleet o f 46 Pipelay, heavy lift, Con verted and sold an Solely in house EPC In -h ouse management FPSOs OSVs subsea installation, FSO to Petrofac fo r the and project an d o perations of fleet: • 2 in Nigeria • 26 AHT/ AHTS floater, mooring Sep at fiel d management • h as access to over •1 in Vietnam • 8 accommodation in stallation and marine • Services cover all • Executed the “Steel 1,300 crew members • 2 to start o peratio ns in barg es/ boats sp read support services asp ects o f the o il field on Water” new build • O ffi ces an d sh ore Balnavesfield Australia • 12 o thers • 1 DLB in th e Casp ian life cycle, from fleet expan sion bases in Malaysia, & D1 field Ind ia • Acquired a SURF exp loration to programme Singapore, In dia, vessel- Armada Hawk development, • Oversaw conversion of Brazil, the Con go, production and FPSOs and Mexico , Nigeria an d Leg end abandonment construction and re Turkmenistan integration of Armada Business Units Installer (DLB)
Suppo rt Uni ts
Sources: Company, M aybank-IB
6 March 2012 Page 5 of 60 Bumi Armada
SECTION 1: EXISTING OPERATIONS
6 March 2012 Page 6 of 60 Bumi Armada
A snapshot of Bumi Armada’s operations
(i) The provision of FPSO services
A growing force in the FPSO world. Bumi Armada, ranked jointly 5th in the world by fleet size (lease units), is the first to own and operate a FPSO in Malaysia and is touted to be the only operator worldwide to- date to have redeployed the same FPSO (Armada Perkasa) three times across two continents (i.e. Asia, Africa).
Building its niche in the segment for small-sized, conversion FPSOs. Bumi Armada owns & operates three FPSOs (Armada Perkasa, Armada Perdana and Armada TGT1) on firm, long-term charters. It is currently outfitting another 2 units, the Armada D1 & Armada Claire (Balnaves), to be deployed in India (4Q 2012) and Australia (1Q 2014) respectively. Type-wise, all of its FPSOs consist of converted units and in terms of processing capacities, fit into the category of small-sized FPSOs (< 80,000 bpd of oil, 0.8m bbls storage).
Snapshot of global independent FPSO operators by fleet size (Units) Existing Fleet On Orderbook Idle 1 18
15 6 4 2 12
2 9 1 6 12 11 1 9 2 1 7 3 4 11 4 4 2 3 222 2 1 1 1 0 SBM Modec BW Teek ay BluewaterBumi Armada OSX Maersk Petrofac Fred Olsen Saipem Sevan Tank er Pac ific Aker F P
Sources: Company, M aybank-IB
Existing FPSO contracts
Armada Nigeria: A fren 2008 - 2013 (2018) Perkasa
Armada Nigeria: NAE 2009 - 2019 Perdana
Armad a Vietnam : Hoang Long JOC 2011 - 2018 (2026) TGT 1
Armad a In dia:ONGC 2012 - 2019 (2025) D1
Armad a Australia: Apache 2014 -2017 (2021) Claire
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Sources : Company, M aybank-IB
6 March 2012 Page 7 of 60 Bumi Armada
Arguably one of the fastest growing FPSO players in the field. Bumi Armada’s FPSO fleet has expanded rapidly in recent years, with acquisitions averaging one new FPSO a year between 2007 and 2011. It refurbished the Armada Perkasa for a 3rd contract in 2007 and secured contracts for Armada Perdana and Armada TGT1 in 2009. In 2011 Bumi Armada won two more contracts, chartering the Armada D1 to ONGC in India while the Armada Claire was contracted to Apache for its Balnaves field in Australia.
Bumi Armada’s present FPSO fleet FPSO Narrative Armada Per kas a & Currently on operation i n Nigeria. Armada P erdana is Armada Perdana chartered to ENI’s subsidi ary; NAE f or the O yo field while Armada P erkasa is leased to A fren f or the O kor o Set u field with firm 10 year contracts till 2019.
Petroleum consult ants Net herland, S ewell & Assoc, Inc. (NSAI), have rec entl y certified gross 2P reserves in the O koro Setu field at 19. 5m barrels (bbls) of oil (as at Dec 2010) and 626m-2, 200m bbls for O yo (Apr 2011). To-date, onl y 15. 2m and 3. 6m bbl have been produced respecti vel y.
Armada TGT 1 Chartered t o P etroVi etnam for the Te Giac Trang (TGT) field in Vietnam. Production began on 22 Aug 2011; the contract period is till 2018 with the potential for extension up to 2026. A 2nd well is expect ed t o be added in 2012.
Armada D1 On 10 Aug 2011, Bumi Armada signed a charter with ONGC to lease an F PSO f or the D1 field in India. T he USD 620m contract is fi xed for 7 years (2019) with annual extension options f or anot her 6 years (2025). Bumi Armada has a 49. 99% st ake i n t he FP SO with the rest held by Forbes & Company Lt d
Armada Claire Bumi Ar mada has recently signed a contract with A pac he Energy Lt d in S ept 2011 to lease Armada Claire t o t he Balnaves development in Australia. With 14m-19m bbls of reserves, expec tations ar e for 1st oil bef ore 2014. Contract val ue of USD 445m (RM1. 46b).
Rainbow River Rainbow River is an Aframax tanker on which Bumi Armada has t he option to c onvert int o an FP SO.
Source: Company, IMA, May bank-IB
Proven and prospered, ev en during the credit crisis. Operationally, Bumi Armada has proven its technical excellence, track record and execution capabilities in the FPSO business. It has been able to deliver vessels on time, fully funded and within budget even during the global financial crisis in 2008. The Armada Perkasa, Armada Perdana and Armada TGT1 vessels have met all contractual uptime performance requirements to-date.
Arguably among the most efficient FPSO operators in the world. From a financial perspective, Bumi Armada is among the better-run operators in the FPSO circle. Its EBIT margins of 27-32% are the highest vis-à-vis its peers 9-26%. Comparatively, it has the advantage of a lower cost base structure vis-à-vis its European counterparts. This is due to its effective cost management (i.e. firm cost controls, facility to source for funds and tankers at decent rates, close proximity to yards) and ability to execute projects with minimal cost overruns.
6 March 2012 Page 8 of 60 Bumi Armada
Vessel 1: Snapshot of FPSO Armada Perkasa Vessel detail s Terms Details Area of operation: On contract till 2018, in Okoro Setu field Nigeria Contract amount (USD m): 150 Duration: 5-plus-5 year fi xed-time charter. History: Deployed at B unga Kekwa, (97-04) & Baram, (05-06)
Performance St atistics Ship Dimensions Production capacit y (bpd ‘000): 30. 0 Length (m): 221.2 Storage capacit y (bbl ‘000): 298.4 Breath (m): 32. 2 Ave. daily production (bpd): 16. 1 Draft (m): 17. 5 Dwt (‘000 tonnes) 58. 6 Hull age, t ype and conversion yard: 1975, Single hull, K eppel Si ngapore
Sources : Company, Afren, May bank-IB
Vessel 2: Snapshot of FPSO Armada Perdana Vessel detail s Terms Details Area of operation: On contract till 2019, in Oyo field Nigeria Contract amount (USD m): 400 Duration: 10 year fi xed-time charter. History: Petromin’s Histria Crown, sold for USD 22m
Performance St atistics Ship Dimensions Production capacit y (bpd ‘000): 40 Length (m): 308.7 Storage capacit y (bbl ‘000): 1,100 Breath (m): 46. 0 Ave. daily production (bpd): na Draft (m): 22. 6 Dwt (‘000 tonnes) 156.5 Hull age, t ype and conversion yard: 1984, Single hull wit h side impac t protection, Keppel Si ngapor e Sources : Company, M aybank-IB
Vessel 3: Snapshot of FPSO Armada TGT1 Vessel detail s Terms Details Area of operation: On contract till 2026, in TGT field Vietnam Contract amount (USD m): 700 Duration: 7-plus-8 year fi xed-time charter. History: Great East ern’s Jag Layak, sold for USD 44m
Performance St atistics Ship Dimensions Production capacit y (bpd ‘000): 55 Length (m): 274.0 Storage capacit y (bbl ‘000): 620 Breath (m): 47. 8 Ave. daily production (bpd): na Draft (m): 22. 8 Dwt (‘000 tonnes) 147.0 Hull age, t ype and conversion yard: 1996, D ouble hull, K eppel Si ngapor e
Sources : Company, Various, May bank-IB
6 March 2012 Page 9 of 60 Bumi Armada
Vessel 4: Snapshot of FPSO Armada D1 (undergoing conversion) Vessel detail s Terms Details Area of operation: On contract till 2025, in D1 field India Contract amount (USD m): 620 Duration: 7-plus-6 year fi xed-time charter. History: Ondimar’s Monte Umbe, selling price USD 21m
Performance St atistics Ship Dimensions Production capacit y (bpd ‘000): 50 Length (m): 246.0 Storage capacit y (bbl ‘000): 580 Breath (m): 42. 0 Ave. daily production (bpd): na Draft (m): 14. 0 Dwt (‘000 tonnes) 107.2 Hull age, t ype and conversion yard: 1997, D ouble hull, K eppel Si ngapor e
Sources : Company, M aybank-IB
Vessel 5: Snapshot of FPSO Armada Claire (Griffin Venture- undergoing conversion) Vessel detail s Terms Details Area of operation: On contract till 2021, in Balnaves field Australia Contract amount (USD m): 445 Duration: Four-plus-four year fi xed-time c harter. History: BHP’s Griffin V ent ure, deployed at Griffin field (1994-2009)
Performance St atistics Ship Dimensions Production capacit y (bpd ‘000): 80 Length (m): 240.7 Storage capacit y (bbl ‘000): 750 Breath (m): 41. 8 Ave. daily production (bpd): na Draft (m): 22. 9 Dwt (‘000 tonnes) 102.1 Hull age, t ype and conversion yard: 1993, D ouble hull, K eppel Si ngapor e
Sources : Company, M aybank-IB
Vessel 6: Aframax Rainbow River: (Purchase option secured, conversion candidate for next FPSO project) Vessel detail s Terms Details Area of operation: na Contract amount (USD m): na Duration: na History: GNM’s Rainbow Ri ver, purchase price RM68m
Performance St atistics Ship Dimensions Production capacit y (bpd ‘000): na Length (m): 246.0 Storage capacit y (bbl ‘000): na Breath (m): 42. 0 Ave. daily production (bpd): na Draft (m): 14. 7 Dwt (‘000 tonnes) 107.2 Hull age, t ype and conversion yard: 1999, D ouble hull, awaiting yard announcement
Sources : Company, M aybank-IB
6 March 2012 Page 10 of 60 Bumi Armada
Bumi Armada: Deployment of its FPSO
Canada Northern Europe Armada Pe rkas a, Armada TGT1, Okoro Se tu, Nige ria T e Giac Tra ng ( TGT ), (2 008 -2 013/1 8) Vietnam (201 1-2 018 /26)
Fa r East Mi deast/ Gulf Of Mexico SW Asia
South East Asia
Africa Brazil
Arma da Pe rdana, Oyo Nige ria Australia/ NZ (20 09-20 19) Armada D 1, Armada Claire , D1 field India Balnaves, Austra lia (201 2-2 019 /21) (201 4-2 017 /21)
Sources : Company, M aybank-IB
6 March 2012 Page 11 of 60 Bumi Armada
(ii) The provision of OSV services
A large and modern fleet. Bumi Armada has a large and modern OSV fleet with cross-border operational capabilities at both green and brownfields. It owns 25 Anchor Handling Towing Support (AHTS) vessels, 8 accommodation workboats workbarges, 3 mooring launch vessels, 3 Straight Supply Vessels (SSVs), 3 platform supply vessels (PSV), 2 utility vessels, a standby vessel and an oil recovery vessel. The biggest operator in Malaysia, 3rd in SEA. With a fleet of 46 OSVs, Bumi Armada is the largest fleet operator in Malaysia and 3rd in Southeast Asia, by size and competitiveness. According to Infield Services Limited, Bumi Armada is recognised as a 1st tier OSV player (i.e. a sizeable fleet capable of servicing large operators and projects). Its other accolades include being the first domestic operator to own and operate dynamic positioning (DP) AHTS for deepwater projects (Kikeh). 70% waiver on Malaysia tax due to Section 54A. Bumi Armada is one of a select few OSV operators that enjoys Section 54A status under the Malaysia’s Income Tax Act. This grants the group a 70% waiver on i n co me ta x from i ts M ala ysi a n -fl ag ge d ve sse l s. Has a young fleet; 8 years average. Most of the vessels are deployed in Malaysia (28 units). In the overseas market, 16 of its vessels are deployed in Africa (i.e. Nigeria: 10, Congo: 1), South & Central America (i.e. Venezuela: 1, Mexico: 1, Brazil: 2) and Asia (i.e. Brunei: 1). The fleet is young, with an average age profile of 8 years. 54% of its vessels are 6 years old or less. 2 contracted newbuilds are under construction. Decent utilization rates. Bumi Armada has successfully chartered its vessels at decent rates and at decent utilization levels over the past three years. In terms of vessel-type, the accommodation workboats/ barges are the most employable, with high utilization rates of 80-91% in 2008-10. Meanwhile, the AHT and AHTS segment is the most volatile, with utilization ranging between 66% and 98%. In 4Q 2011, Bumi Armada’s OSV fleet enjoyed a commendabl e 96% utili sation rate.
AHTS: Dayrates and utilization level (2008 – 2010) Year DCR range (USD per bhp) Utilization rate (%) No. of OSVs (unit)
2010 1.32 3.85 65. 7 23
2009 1.22 2.82 86. 9 18
2008 1.15 3.57 95. 1 14
Sources : Company, M aybank-IB
Accomodation workboat/ barge: Dayrates and utilization level (2008 – 2010) Year DCR range (USD per bed) Utilization rate (%) No. of OSVs (unit)
2010 63. 9 257.5 80. 0 8
2009 63. 9 257.5 91. 2 8
2008 58. 4 174.6 91. 1 6
Sources : Company, M aybank-IB
Other OSVs: Dayrates and utilization level (2008 – 2010) Year DCR range (USD per bhp) Utilization rate (%) No. of OSVs (unit)*
2010 1,076 5,000 73. 4 9
2009 534 5,628 61. 9 19
2008 569 6,902 85. 2 16
Sources : Company, M aybank-IB; * excl udes Ar mada 5, Ar mada 6 and Ar mada Tugas 1 that are under jointly-controlled entity; Ar mada Cent ury Ltd
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OSV: Operators in South East Asia (fleet size) Nor Offshore Otto ASL Strato Mermaid Chuan Hup Tr inity O ffshore Tgoff Anjong Vietsovpetro Pelican P. Radiance Petra Perdana Br itOil Eastern Offshore Sealink CH Offshore Swiber Sc omi Jaya Pacific Richfield Swissco RK Alam Maritim Ezra BumiBumi Armada Armada PACC Swire
0 10203040506070 Number of vessels
Sources : Company, Infi eld, May bank-IB
OSV: Competiveness landscape
70 Swire
60 PACC
50
40
Ez ra 30 Great Offshore Swis sc o RK Pacific Richfield Size (Current+ New build fleet) build New (Current+ Size CH Offshore Jaya 20 Greatship Scomi Swiber Brit O il Sealink Pelic an Eastern Offshore Petra Perdana Pacific Radiance 10 Vietsovpetro Ajang Tanjung Offshore Trinity Offshore Chuan Hup Mermaid Otto Marine ASL Strato NC Nor Offshore 0 O DS mark et presen ce s core
Source: Infield
6 March 2012 Page 13 of 60 Bumi Armada
Bumi Armada: Overview of OSV fleet No. Vessel Type Built Age bhp beds DP Status charter Location Charterer 1 Armada T uah 6 AHT 1997 15 4,000 - - Short Labuan 2 Armada T uah 8 AHT 2002 10 4,840 - - Long Kemaman PTSC, Vietnam 3 Armada T uah 9 AHT 2002 10 5,040 - - Long Kemaman EMEPMI 4 Armada T uah 10 AHT 2003 9 4,000 - - Long Kemaman PTSC, Vietnam 5 Armada T ugas 4 AHT 2005 7 5,040 - - Long Nigeria Afren 6 Armada T uah 20 AHTS 2004 8 5,040 - - Short Kemaman 7 Armada T uah 21 AHTS 2005 7 5,040 - - Long Labuan Shell 8 Armada T uah 22 AHTS 2005 7 5,040 - - Long Nigeria Afren 9 Armada T uah 23 AHTS 2006 6 5,040 - - Long Kemaman EMEPMI 10 Armada T uah 24 AHTS 2006 6 5,040 - - Unemployed Kemaman 11 Vent ures T uah Satu** AHTS 2007 5 6,000 - DP1 Long Kemaman 12 Vent ures T uah Dua* * AHTS 2007 5 5,000 - DP1 Long Kemaman 13 Armada T uah 25 AHTS 2007 5 5,040 - DP1 Long Kemaman Petrof ac 14 Armada T uah 26 AHTS 2007 5 5,040 - DP1 Long Labuan Murphy Oil 15 Armada T uah 80 AHTS 2008 4 8,000 - DP1 Short Labuan 16 Armada T uah 82 AHTS 2009 3 8,000 - DP1 Short Labuan Murphy Oil 17 Armada T uah 81 AHTS 2010 2 8,000 - DP1 Long Nigeria Afren 18 Armada T uah 83 AHTS 2010 2 8,000 - DP1 Unemployed Tj. Langsat 19 Armada T uah 84 AHTS 2010 2 8,000 - DP1 Unemployed Tj. Langsat 20 Armada T uah 85 AHTS 2010 2 8,000 - DP1 Short Kemaman 21 Armada T uah 100 AHTS 2006 6 9,000 - DP2 Long Labuan Murphy Oil 22 Armada T uah 101 AHTS 2007 5 9,000 - DP2 Short Nigeria 23 Armada T uah 102 AHTS 2008 4 12, 000 - DP2 Long Brazil Petrobras 24 Armada T uah 104^ AHTS 2009 3 12, 000 - DP2 Short Nigeria 25 Armada Tuah 105 AHTS 2009 3 12,000 - DP2 Short Venezuela Petromin/ PDVS A 26 Armada Goodman Accom. wor kboat 1991 21 n.a 95 - Short Labuan DESB 27 Armada Topman Accom. wor kboat 1991 21 n.a 95 - Short Labuan 28 Armada I man Accom. wor kboat 1998 14 n.a 140 - Long Labuan Inoilco 29 Armada Salman Accom. wor kboat 2002 10 n.a 132 - Long Labuan Nauti ka 30 Armada Firman Accom. wor kboat 2004 8 n.a 200 - Long Kemaman Talisman 31 Armada Firman 2 Accom. wor kboat 2008 4 n.a 200 DP2 Short Nigeria Superior Energy, US A 32 Armada Firman 3 Accom. wor kboat 2008 4 n.a 200 DP2 Long Mexico Trese, Mexico 33 Mahakam Accom. wor kbarge 2004 8 n.a 300 - Long Congo Diamond 34 Armada Mutiara 2 Mooring launc h 2008 4 750 - - Long Labuan Shell 35 Armada Mutiara 3 Mooring launc h 2009 3 750 - - Long Miri Shell 36 Armada Mutiara 4 Mooring launc h 2009 3 800 - - Long Miri Shell 37 Armada Aman Standby vessel 1996 16 3,600 - - Long Kemaman PETRONAS Maritime 38 Armada 5*** SSV 1984 28 2,600 - - Unemployed Nigeria 39 Armada 6*** SSV 1984 28 2,600 - - Long Nigeria 40 Armada T ugas 1*** Utility vessel 2003 9 2,500 - - Unemployed Nigeria 41 Armada Tugas 3 Utility vessel 2005 7 3,200 - - Short Kemaman 42 Armada Tugas 2 Oi l r eco ver y vess el 2003 9 3,000 - - Long Brunei Nauti ka 43 Armada Hydr o*** SSV 1988 24 1,060 - - Unemployed Nigeria 44 PSV 1 PSV 2012 1 n.a - - Long Brazil Petrobras 45 PSV 2# PSV 2012 1 n.a - - nm nm nm 46 MPSV 1# MPSV 2012 1 n.a - - nm nm nm Note: * * Ow ned by Bumi Ar mada’s JV , Offs hore Marine Ventures Sdn. Bhd, *** Owned by Bumi Ar mada’s J V,Ar mada Century Ltd. # Under construction Sources : Company, M aybank-IB
6 March 2012 Page 14 of 60 Bumi Armada
Bumi Armada: Deployment of OSVs
Gulf Of Mexico 1 South East Asia
Venezuela Mahakam, 1 Cong o 10 1 Af ric a 29
Brazil 2
Legend
Number of OSVs in the region
Sources : Company, M aybank-IB * 1 PSV and 1 MPS V under cons truction
Bumi Armada: AHTS’ capacity (by bhp) Bumi Armada: Accommodation vessel capacity (by bed) 160,200 1,362 1,362
120, 200 962 76,200
23 8 8 vessels vessels vessels 18 6 14 vessels vessels vessels
Average 2008 2009 2010 2008 2009 2010 bhp / AHTS 5,443 bhp 6,678 bhp 6,965 bhp
Sources : Company, M aybank-IB N ote: Excludes JVs (2 vessels) Sources : Company, M aybank-IB
6 March 2012 Page 15 of 60 Bumi Armada
(iii) Transportation & Installation (T&I) services
Bumi Armada ventured into this segment in 2009. Thi s d i vi si on primarily provides pipelay, heavy lift, subsea installation, floater and mooring installation and marine spread support services.
Asset-wise, Bumi Armada owns and operates a derrick lay barge (DLB), namely Armada Installer, which is currently leased to Petronas Cari gali Sdn Bhd (PCSB) in the Caspian Sea, off Turkmeni stan on an 8-year contract since 2010. Armada Installer is one of only two DLB currently operating in the Caspian region.
Track record with proven capabilities. Armada Installer, built in 2009, is capable of laying 4”-48” diameter pipes with 800 tonnes of lifting capability. The vessel, which can operate in water depths of between 8- 300m was commissioned and has been in operation since 2Q 2010. It has concluded her maiden work, completing the laying of: (i) 2 lengths of 12” diameter pipe of 7 km each,
(ii) 72 km of 12” diameter pipe and 4” diameter piggy back pipe, and
(i ii ) 72 km of 26” di ameter pipe. New asset acquisition. Bumi Armada has also acquired the Armada Hawk, a 2nd generation dynamic positioning (DP2) subsea installation vessel, which allows it to offer subsea umbilicals, risers and flowline (SURF) capabilities and services. Armada Hawk recently completed the Sepat field installation work and will be deployed to the D1 field in 2012- 13. Expanding coverage. In addition to SURF installation, the vessel will also allow Bumi Armada to bid for inspection, repair and maintenance (IRM) projects. We expect Bumi Armada to acquire a pipelay vessel to expand its services in Brazil, West Africa and India.
(iv) Offshore Field Services (OFS)
This is Bumi Armada’s most recent venture, and is a key part of its strategic focus for the Malaysia market. It leverages on PETRONAS’ domesti c programmes to: (i ) devel op marginal fi el ds through innovati ve solutions, and (ii) rejuvenate existing fields through Enhanced Oil Recovery (EOR) to optimize production and arrest the declining state of the existing fields. Recurring opportunities. OFS entail s the provi si on of various specialized services required in the offshore mature/brownfield, EOR and the risk-based services contracts (RSC) markets. Bumi Armada currently offers services, either directly or through partnerships or alliances in the exploration (survey), development (facilities and installation), production (FPSO) and abandonment (T&I) phases of the marginal oil field, and brownfield projects.
First project – Sepat field. Bumi Armada’s initiation in this segment came from the conversion and sale of an FSO to Petrofac for the Sepat field, off Terengganu in 2011. The project management work was completed on schedule in Oct 2011 in a record 8 months. Bumi Armada recognized about RM21m in EBIT from this project alone, based on a 10% margin.
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Snapshot of revenue and EBIT breakdown
FPSO division is the largest contributor to group earnings, having overtaken the OSV division in 2010. It has generated 39-45% of group revenue and 32-38% of group EBIT over the past 3 years.
The influence of OSV operations has been on a steady decline. Contribution to group revenue and EBIT fell from 55% and 52% in 2009 to 31% and 26% respectively in 2011. The reduction in contribution from the OSV division to group earnings has been more pronounced with the emergence of the more lucrative T &I di vi si on, whi ch made its mai den contri buti on in 2010. T&I reported RM268m in revenue and RM149m in EBIT for the year, accounting for 22% and 36% of Group revenue and EBIT.
For 2011, Bumi Armada has taken on an even more diversified earnings profile with maiden contribution from the new OFS segment which undertook the conversion of the FSO Sepat. OFS contributed RM211m in revenue and RM21m in EBIT accounting for 14% of total revenue and 5% of EBIT respectively.
Bumi Armada: Revenue breakdown (by division)
T&I OFS 22% 14% T&I FPSO FPSO FPSO 39% 45% 44% 16% OSV 55% OSV 34% OSV 31%
FY 2009 Revenue: FY 2010 Revenue: FY 2011 Revenue: RM1,241.4m RM732.1m RM1,543.9m Sources : Company, M aybank-IB
Bumi Armada: EBIT breakdown (by division) OFS 5% T&I T&I 36% FPSO 26% FPSO FPSO 43% 43% OSV 48% 52% OSV OSV 21% 26%
FY 200 EBIT: FY 2010 EBIT: FY 2011 EBIT: RM467.1m RM294.4m RM518.3m Sources : Company, M aybank-IB
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Steady EBIT margins trend. On a blended basis, Bumi Armada’s EBIT margin has been consistent, averaging around 34-40% over the past 3 years. Its 2011 EBIT was negatively impacted by a confluence of one- off items: (i) the Armada Installer was dry docked in 3Q for upgrading, (ii) an estimated RM22m in listing expenses, (iii) RM6m in fair value changes of call options and (iv) higher depreciation (RM78m) due to additional vessels (i.e. FPSO and OSV).
Operationally, the FPSO division had consistently delivered reasonable EBIT margins of 28-33% in 2009-11. The EBIT margin for OSV typically mirrors that of its FPSO operations, albeit with a lower 21-25% range. The T&I division commands the highest EBIT margin among the three core operations. Despite Armada Installer being dry docked, the segment still generated 48% EBIT margins in 2011.
Bumi Armada: EBIT by division Bumi Armada: EBIT margin by division FPSO (LHS) OSVs (LHS) T&I (LHS) OF S (LHS) FPSO O SVs T&I OFS Bl end ed EBI T marg in (RHS) ( %) 10.0% 500 50 21.0 400 40 117.2 148.5 55.3% 48.4% 300 30 116.8 200 88.9 20 27.7% 24.6% 21.2% 24.2% 99.6 100 89.4 179.2 200.2 10 27.1% 28.3% 32.4% 32.9% 53.6 92.8 0 0 2008 2009 2010 2011 2008200920102011
Sources : Company, M aybank-IB Sources : Company, M aybank-IB
Earnings breakdown by geography. Bumi Armada operates across 4 continents, from the rich offshore oil fields in the Gulf of Mexico, Brazil and Venezuela, to West Africa (Angola, Nigeria and the Congo), the land locked Caspian Sea, Vietnam and resource rich Australia.
Asia and Africa anchor earnings. Geographically, Asia (ex-Malaysia) and Africa were the 2 major contributors to group revenue in 2010 at 43% and 35% respectively. Malaysian operations came in third with a 15% share, followed by Latin America (7%). No geographical breakdown was provided in 2011.
Bumi Armada: Revenue breakdown – by region
M'sia 30% Asia M'sia 43% Africa 41% 42% Asia M'sia 17% 15% Africa 47% Asia Africa 17% Americas 35% 6% AmericasAmerica F Y 2008 Revenue: 7%s FY 2009 Revenue: FY 2010 Reven ue: RM519.8m RM732.1m RM1,241.1m 7%
Sources : Company, M aybank-IB
6 March 2012 Page 18 of 60 Bumi Armada
SECTION 2: OPPORTUNITIES
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FPSO: Fundamentals and prospects
1. Industry’s fundamentals
The fundamentals for the FPSO sector are favourable. Acti vi ti es are returning to more normalised levels after a dismal 2009, underlying the positive macro (i.e. oil price rebound, higher E&P spending) and micro drivers (i.e. increased drilling activities). Fleet utilization has been robust. The number of idle FPSOs has fallen considerably and field developments have been pacing up.
Africa, Asia and the Americas are the epicenter of FPSO activity. These three regions play host to 62% of the world wide FPSO fleet, and we believe they will remain the frontiers for FPSO operators. Key drivers. Growth in these regions will be driven by a combination of geological bounty, security concerns and domestic consumption factors which will render the development of offshore fields the inevitable trend.
FPSO: Fleet utilization rate and idle units
(Unit s) (%) Idle units (LHS ) U tilis at ion rates (RHS ) 12 100
Ave. Utilisation -94% 10 95 8
6 90
4 85 2
0 80 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: ODS-P etrodata
FPSO contracts awarded since 2009 Company Field Oil major Country Type Award date SBM Aseng Total Guinea Leased 2009 Petrobras Papa-Terra Petrobras Brazil Owned 2009 Bumi Armada TGT Hoang Long Joint O perati ng Co (HLJOC) Vietnam Leas ed 2009 EOC Chim S ao Premier Oil Vietnam Leas ed 2009 Saipem Aquila ENI Ital y Leas ed 2009 Bluewat er Nan Hai CNOOC China Leas ed 2009 SBM Baleia Azul Petrobras Brazil Leased 2009 Bluewat er Kitan ENI Timor Leste Leased 2010 Modec Guara Petrobras Brazil Leased 2010 BW Offshore Athena Ithac a UK Leased 2010 SBM Tupi NE Petrobras Brazil Leased 2010 Hyundai Goliat ENI Norway Owned 2010 Sevan Huntington E. ON UK Leas ed 2010 BLT Pagerungan Kangean Indonesi a Leas ed 2010 Petrof ac Cendor Phase 2 Petrof ac Malaysi a Owned 2010 Daewoo CLOV Total Angola Owned 2010 Petrobras Tupi x8 Petrobras Brazil Owned 2010 OSX-2 Waimea OGX Brazil Leas ed 2011 Petrof ac Berantai Petro/ Petronas Malaysi a Owned 2011 BP Quad 204 BP UK Owned 2011 SBM Offs hore Bloc k 15/06 ENI/ S onangol Angola Leas ed 2011 Teekay Knarr BG Norway Leas ed 2011 Bumi Armada Balnaves Apac he Australia Leas ed 2011 Bumi Armada D1 ONGC India Leas ed 2011 Source: Pareto Research
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The current global supply and demand outlook is promising, and offers new opportunities for growth in the industry. The chart below summarises the current supply and demand picture. The supply side consists of all producing and ordered units while the demand side is calculated on the basis of outstanding projects, i.e. firm tenders, planned and possible.
FPSO: Supply and demand – based on existing projects only (Units) 250 Producing FPSOs Idle units re employed High demand Bas e Low demand 250
200 200
150 150
100 100
50 50
1990 1992 1994 1996 1998 20002002 200420062008 2010 2012 2014 2016
Source: ODS-P etrodata
Choice between leased and owned FPSOs among oil companies Leas ed FP SOs Ow ned F PSOs Afren 1 Santos 2 Murphy 2 Kangean 2 Addax 2 Talisman 3 CNR 4 PTTEP 1 1 Pr emier 1 1 ConocoPhillips 1 1 BHP 1 1 Petronas 1 4 Maersk O&G 2 0 Hess 2 1 Statoil 2 2 EN I 2 6 PetroVietnam 3 1 Woodside 3 1 Shell 4 3 Chevron 5 3 BP 6 1 ExxonMobil 7 3 Total 9 0 Ot her 13 19 CNOOC 14 1 Petrobras 24 19
Sourc es: I nternational Mariti me Ass ociat es I nc, May bank-IB
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2. Snapshot of FPSOs currently deployed
There are 160 FPSOs in the world now. Of the total inventory, 149 units are currently in service or available worldwide while 11 units are currently off field, and available for reuse. Utilization rate is high, at 93%. The Asia Pacific region (Asia and Oceania) has the largest count, with 47 FPSOs in operation. This is followed by America: North, Central & Latin (39), Africa (37), Europe (22) and the Mediterranean & Middle East (4).
12 new FPSOs ordered since a year ago, March 2011. According to International Maritime Associates, Inc (IMA), 12 units of new FPSOs have been ordered since March 2011 and these vessels are scheduled to hit the market from 2013-2015.
Current deployment of global FPSO fleet: 149 units in the field
2 Canada 22 Northern Eu rop e
14 3 Fa r Ea st 5 Mediterranean Gulf Of Mexico
20 37 1 32 Mideast/ Sout h E as t Asia SW Asia Brazil Africa
13 Australia/ NZ
Legend Number of FPSOs deployed in the region Sources : International Mariti me Ass ociat es I nc, May bank-I B
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3. Outlook
Current order backlog for FPSOs worldwide stands at 40 units, comprising 16 newbuilds and 24 conversions. Of the 40 units, 3 units are on speculative orders without field contracts. Brazil currently dominates orders for 21 FPSOs, which include 8 serial pre-salt units. The underlying growth in Brazil is largely due to:
i) Petrobras’ plans to develop a new pre-salt province entailing at least 40 large scale FPSOs and
ii ) co mp lia n ce wi th l o cal con ten t cl au se s fo r FP S Os (u p to 65 %)
FPSOs in the pipeline – 40 units on order
5 Northern Europe
1 Mediterranean 1 Gulf Of M exico
1 4 2 21 Mideast/ Sout h E as t A sia SW Asia Brazil Africa
2 Australia/ NZ
3 Speculative units without contracts in hand Legend
Number of FPSOs to be deployed per region
Sources : International Mariti me Ass ociat es I nc, May bank-I B
6 March 2012 Page 23 of 60 Bumi Armada
The medium-term outlook. Projection-wise, 200-250 new orders for FPSOs are expected to enter the market over the next 5 years. The orders are categorized into 2 core groups for: (i) visible and (ii) future emerging projects.
(i) Visible proj ects: In the planning pipeline are 125 firm projects that potentially require FPSOs should the projects go to development. FPSO is the only likely production solution for 100 of these projects. The remaining 25 projects could require either FPSOs or other types of producti on sol utions (i .e. tensi on-l egged platform (TLP), semi-submersibles, SPAR). With a few exceptions, all the projects are declared discoveries, some of which will require multiple FPSOs for development.
(i) Future emerging projects: A reasonable estimate is that 75 to 125 FPSO projects will emerge over the next 5 years that are not now visible. This estimate is based on an assessment of the number of projects in the current planning list and was not visible a few years ago.
4. Sensitivities of projects
Insensitive
Based on the analysis of the 125 potential FPSO projects, it is estimated that about 30% are relatively insensitive to short-term market conditions.
The decision to proceed will be based on long-term oil price assumptions and potential of the project to build reserves.
The need to replace reserves and the opportunity to exploit large hydrocarbon complexes provide continuous momentum for project development.
This grouping comprises big projects involving large reservoirs offshore Brazil and West Africa.
Sensitive
40% of the 125 projects are considered opportunistic projects, which require a robust oil price environment to proceed.
They generally involve projects with relatively small reserves and non-major oil operators.
These groupings are projects located in South East Asia.
Somewhat sensitive: 50/50
30% of the visible 125 FPSO projects are considered somewhat sensitive to short term market conditions, where to some degree, underlying short to mid-term crude oil prices are taken into account in making an investment decision.
These projects are spread over a wide spectrum of geographical areas and generally involve fields with mid-size recoverable reserves, heavy oil or difficult access.
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Most likely scenario: 100-140 units by 2015. In our view, we see orders for 100 to 140 FPSOs over the next 5 years, averaging 20-28 new units p.a. from 2012-2015. This includes new units and redeployments, which will generate capital expenditure (capex) of USD65b-85b over this period. The bulk of the variation between the 3 scenarios is in the small- to mid-size FPSO orders.
An 80:20 ratio for newbuild and conversion vs. redeployments. We opine that 80% will be satisfied via newly built or converted units while the remaining 20% of the FPSO projects will be on redeployment basis. All redeployment will be of small- to mid-sized FPSOs.
Forecasted FPSO new orders over the next 5 years – 3 scenarios Low case Reasonabl e case High case
Oil price: USD70-90/ bbl Oil price: USD90-110/ bbl Oil price: > USD110/ bbl Types of FPSO Capex Unit Capex Unit Capex Unit Capex (USD’b) (USD’b) (USD’b) (USD’b) Large FPSOs New c onverted units wit h 150-250,000 bpd 1.20 26 31. 2 28 33. 6 30 36. 0 Topsides pre-salt hulls 0.80 8 6.4 8 6.4 8 6.4
Midsize FPSOs New c onverted units wit h 80-150, 000 bpd 0.60 24 14. 4 29 17. 4 34 20. 4 Topside spec hulls 0.25 3 0.8 3 0.8 3 0.8 Modified r edeployed FP SOs 0.30 3 0.9 4 1.2 5 1.5
Small FPSO s New converted units below 80,000 bpd 0.40 25 10. 0 34 13. 6 42 16. 8 Modified r edeployed FP SOs 0.15 11 1.7 14 2.1 18 2.7 Total 100 65. 4 120 75. 1 140 84. 6 Sources : International Mariti me Ass ociates, Inc, May bank-IB
28-80% growth on the horizon. The next 5 years’ forecast (2011-15) of 100-140 units new FPSO order is a 28-80% increase when compared against actual orders over the past 5 years (2006-10). The strong growth rate may partly be attributed to the: (i) depressed global financial and commodity markets in 2008-09 and (ii) FPSO market at the pre-inflection stage, with growth accelerating YoY. Our expectation is that FPSO orders will grow at an increasing rate as the need for new oil supply sources grows and major deepwater finds continue.
Forecasts of FPSO orders over the next 5 years – by size (Units) Large FPSOs Midsize FPSOs Small F PSOs Series4 160 140
120 120 100 60
78 48 80 36
36 42 30 40
34 36 38 0 Past five years Low scenario: Base scenario: High: scenario: USD 70-90 oil USD 90-110 oil USD 110-150 oil
Sources : International Mariti me Ass ociat es, I nc, May bank-IB
6 March 2012 Page 25 of 60 Bumi Armada
5. Opportunities for Bumi Armada
A promising roadmap – aiming for Top 4. Bumi Armada targets to be the fourth-largest FPSO operator by end-2013. In order to achieve this feat, it needs to have a minimum of 8-9 FPSOs in its armada, which implies the addition of 3-4 units to its existing fleet over the next 24 months.
A maj or force by 2013. This is a reasonable target, in our view considering the myriad prospects in the FPSO market. Growing its FPSO fleet by 3-4 units would only: - meet 2-4% of the needs of 100-140 new projects expected to come onstream over the next 5 years,
- account for 5-11% of the global forecasted small-sized FPSO orders by 2015 (based on 36 to 60 projects),
- account for 27-36% of global FPSO orders, on a base case scenario (low scenario, 30% sensitivity on small FPSOs; 11 units). Target, focus and criteria. Based on the set criteria, we opine that Bumi Armada will most likely focus on:
(i) small-sized FPSO projects, (ii) converted FPSOs,
(iii) Asia Pacific (i.e. Asia and Oceania) and Africa markets, and
(iv) Oil companies that typically lease FPSOs. 25 potential projects identified. Based on our screening criteria listed above, we have identified 25 potential projects, located in 12 countries: Angola (1), Australia (1), Cameroon (1), Gabon (1), India (3), Indonesia (4), Malaysia (5), Nigeria (2), Thailand (1), The Philippines (1), Tunisia (1) and Vietnam (4). In terms of time-line:
25 potential projects oncoming projects that fit Bumi Armada Year Country Field 2012 (8 projects) India Cluster 7 oil field (C 7) Indonesi a Madura BD, B ukit Tua (2 units) Malaysia Gumusut-Kakap (temporary) Malaysi a PM301/PM325 (K amelia) Malaysi a PM302 (Bunga Dahlia and Ter atai) Malaysi a SB 302 (B elud) Vietnam Dong Do/ Thang Long 2013 (5 projects) Angola Block 15/06 Indonesi a Badi k Thailand B6/27 Vietnam Blk 102/106, Lac Da Vang (2units) 2014 (12 proj ects) Australia Lady Nora Cameroon Etinde IE/IF India Dhirubhai, KG-DWN-98/2 ( 2 units) Indonesi a Ande Ande Lumut Gabon Dussafu Ruches Nigeria Aje, Bilabri/Orobiri (2 units) Vietnam Dai Nga Malaysia N3/Spaoh The Philippines West Linapuc au Tunisia Cosmos Source: IMA
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Snapshot of projects that pass Maybank-IB’s selection screening criteria Status Country Field Operator W ater depth First oil (m) possible Bidding/ fi nal design India C7 ONGC 85-90 2013 Bidding/ fi nal design Indonesi a Madura BD Husky/CNOOC 55 2014 Bidding/ fi nal design Indonesi a Bukit Tua Petronas 100 2014 Planned or being studied Malaysia Kamelia Petronas/ H ess <200 2014 Planned or being studied Malaysia Bunga D ahlia and Teratai Petronas 65-70 2014 Bidding/ fi nal design Malaysia Belud Hess 155 2014 Bidding/ fi nal design Vietnam Dong Do/ Thang Long PetroVi etnam/Petronas 65 2013 Planned or being studied Indonesi a Badi k Anadar ko 70 2013 Planned or being studied Thailand B6/27 PTTEP/Nippon Oil 35 2013 Planned or being studied Vietnam Blk 102/106 Petronas 25-30 2013 Planned or being studied Vietnam Lac Da Vang PetroVi etnam 48 2013 Planned or being studied Australia Lady Nora Woodside 80 2014 Planned or being studied India Dhirubhai Reliance 1194 2014 Planned or being studied India KG-DWN-98 ONGC 225 2014 Planned or being studied Indonesi a Ande A nde Lumut Genti ng O&G 100 2014 Planned or being studied Gabon Dussafu Ruches Harvest Natural Resources 115 2014 Planned or being studied Nigeria Aje Chevron/ Yinka 90 2014 Planned or being studied Nigeria Bilabri/ Orobiri Peak 40-300 2014 Planned or being studied Vietnam Dai Nga Idemitsu 120 2014 Planned or being studied Malaysia N3/ Spaoh Petronas 80 2014 Planned or being studied Tunisia Cosmos Chinook Energy 120 2013 Sources : International Mariti me Ass ociates, Inc, May bank-IB
The FPSO tenders that we gauge Bumi Armada has entered into to date are in India, Indonesia, Vietnam, Malaysia, Angola and Nigeria.
FPSO tenders that Bumi Armada could have a high prospect of winning Country Operator Description India Oil & Natural Gas • We do not rule out Bumi Ar mada expandi ng further into the I ndian FP SO mar ket . ONGC’s Corporation (ONGC) Cluster7 FP SO t ender is a likely projec t, whic h is at the ‘bidding/ final design stage’ st age.
• ONGC requires an FPS O that c an handle 30, 000 bpd of oil and 63mmsc fd of gas wit h st orage capacit y of 0. 5m bbl and operate up to 100m water depth.
• It is no s ecret t hat 8- 10 prospecti ve contractors took part in a pre-bid meeti ng by ONGC. The not able names apart from B umi are: (i) Malaysia- based M3N ergy, (ii) Singapore-bas ed Tanker Pacific, (iii) India’s ABG Shipyard, (iv) Pipavav Shipyard and (v) Mercator.
• ONGC has anot her project in India, KG-DWN-98/ 2, a marginal field of fshore A ndhra Pradesh on India’s Eas t Coast, that requires an FPS O. Pr oduc tion is slat ed for 2014/ 16. However, t he projec t had sever al false starts i n t he past . This project is at the ‘planned or bei ng studi ed’ st age.
• W e rate Bumi Arm ada’ s ch ances for the Clu ster 7 FPS O proj ect as high.
Indonesi a Husky/CNOOC • Bumi Ar mada could penetrat e Indonesia’s FPSO mar ket this year via Hus ky E nergy’s tender for an FP SO t o devel op its M adura BD fi eld off East J ava.
• Husky requires an F PSO t hat can handl e 8, 000 bpd of condens ates and 110 mmscfd gas wit h storage capacit y of 370,000 barrels. The FPSO is required t o handle s our gas while operat ors face strict bidding requirements in t erms of both l ocal cabot age laws and financial performanc e bonds. T he c harter period offered is a firm 10- year ter m with up to 5 annual extensions .
• It has been report ed that Bumi Armada’s competit ors are BW Of fshor e, M3nerg y, Tanker Pacific and EMAS. W e gauge Bumi Armad a’s chan ces to be fair for this project.
Sources : International Mariti me Ass ociates, Inc, May bank-IB
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FPSO tenders that Bumi Armada could have potentially participated in to-date (continued) Country Operator Description Vietnam PetroVi etnam/ • We expec t the Lam Son Joi nt O perati ng Company F PSO c ontr act t o be awarded i n 2012. The PETRONAS FPSO will develop 2 oilfields in the Cuu Long basin field.
• This project is in t he ‘ bidding/ fi nal design’ stage. The field, co-owned by P etroVietnam and PETRONAS, requires a FP SO with up to 18, 000 bpd of oil processing capacit y and st orage space for 350,000 barrels. The FPSO will initially process oil from the Thang Long fields, followed by the Dong Do field.
• This is a 7-year fixed-term contract with the option to extend for 3 years. We understand that Fred Olsen Production is the favoured bidder. It has recei ved a Letter of Intent due to its competiti vel y-priced bi d. However the c ontrac t has not yet been fi nalised.
• There are 3 other projects in Vietnam; (i) Dai Nga, (ii) Blk 102/106 and (iii) Lac Da Vang, which require FPSO, MOPU/ FSO or fi xed plat form as producti on s olutions. These pr ojects ar e scheduled to hit first oil in 2013-2015. These projects are at t he ‘ planned or being st udied’ st age.
Angola ENI • There are 5 projec ts in Angola, which are at t he biddi ng or final design s tage. T hey are: (i) Block 14 – Negage, Lucapa, (ii) Bloc k 18 – Plati na, C humbo, Cesi o, (iii) Block 31 – Ceres, Heve, Urano, Titania, Terra, Miranda, Cordelia, Portia, Dione, Leda, O beron, T ebe, (iv) Bloc k 15/ 06 hubs – Ngoma/ S angos/ C abaca Nort e/ Nzanza/ Cinguvu/ Mpungi/ Cabac a S out heast and (v) Block 16 – Chisonga.
• These projects are at the ‘bidding/ final design stage’ stage. B ased on Bumi Armada’s t echnical track record li mits, we opi ne t hat the Bl oc k 15/ 06 hubs appear t o be the most likely target f or Bumi Armada due to the shallow water dept h (470-1, 420m); t he ot her fields are in ultra-deep wat ers (1, 300- 2,220m).
• For this particular fi eld, the chanc es of a wi n ar e higher, in our opinion, as 2- 3 FPS Os ar e likel y t o be utilised. W e ar e optimisti c of Bumi Armad a’s chan ces in clinch ing this contract.
• We have identified 4 ot her projects in Angola, which are at t he planning s tage and whic h ar e currently being studied. They are the: (i) Block 32. (ii) Block 17/ 06, (iii) Block 18/ 06 and (iv) Block 33. Still, Block 15/ 06 remains the most likely target due t o the favourable environment (eas y to moor), wat er dept h (470-1,420m) and existing relationshi p wit h ENI . The projec t is expected to kick in by 2013 (earliest).
Nigeria Chevron/ Yinka, Peak • Bumi Ar mada’s pros pec ts in Nigeria are likel y t o be most favourable f or the Aje fiel d, owned by Chevron/ Yinka. This field however is still at the planning stage. The water depth is favourable at 90m with the fi eld targeted t o achieve first oil by 2014. Apart from Aje, there are 10 ot her fi elds i n Nigeria, which are c urrentl y being st udied.
Malaysia PETRONAS/ Hess/ • Up to 4 FP SO pr ojects c ould be awar ded this year in Malaysia. They are: Shell (i) SB 302 (Belud), (ii) PM301/PM325 (K amelia), (iii) PM302 (Bunga Dahlia and Teratai) and (iv) Gumusut-K akap (a temporary FPSO wit h s hort-midterm charter)
• The first 3 are “fast-trac ked” projec ts brought forward to boost Malaysian gas suppl y needs; first gas/oil is targeted f or 2014 while t he l ast would be a short-term contract.
• Belud FPSO - It has been reported t hat the M3nergy and EMA S consortium s ubmitt ed the lowes t bid in a rec ent tender for the B elud FPSO , offering the FP SO Lewek Arunot hai whose charter was prematurel y ter minat ed in Thailand’s Arthit fiel d in 4Q2011. However, considering the FPS O Arunothai’s chequered operating hist ory, H ess is reported to have off ered B umi and MI SC a second chanc e t o matc h t he c ons ortium’s bid.
• Kamelia and Bunga Dahlia & Teratai FPSOs - Bot h the Kamelia and B unga Dahlia/Terat ai projects will require floating solutions for field development. With both fields targeted to achieve first gas by 2014, we expect contr act awards by this year. Should M3Nergy win the Belud job, we reckon either Bumi or MISC c oul d win one of these.
• Spaoh FPSO. The Spaoh field aka NC3 will likely use an FPSO or fixed platform. Further apprais al is being planned. T his field will hit first oil by 2014/16. Sources : International Mariti me Ass ociates, Inc, May bank-IB
6 March 2012 Page 28 of 60 Bumi Armada
OSV: Fundamentals and prospects
1. Industry’s fundamentals
OSV market currently going through an overbuilt period. Ve sse l supply for now outstrips demand by 1.6x and the overhang situation was at its crest i n 2010, owing largel y to the infl ux of orders for AHTS and platform supply vessels (PSV) during the 2005-2007 period. Fueled by the arrival of new vessels entering the market. 1,193 newbuilds comprising AHTS and PSVs entered the market in 2006-10, exacerbated largely by the AHTS segment (707 units), which outstripped the PSV (486 units) market by 1.45x.
The 5,000bhp AHTS market was the hardest hit. The oversupply state in the AHTS market is more prevalent in the small vessel segment (5,000bhp) and less on the higher specs (8,000-12,000bhp). The PSV segment is slightly better off than the AHTS market, owing to the higher investment requirement and lower volume.
Increasing number of vessels lying idle; utilisation rate at its lowest in 2010. The number of idle vessels reached its zenith in 2010, doubling its immobilized fleet YoY. The prevalent situation has brought down utilization rates for AHTS and PSVs from a peak of 86-88% in 2006 to 70-72% in 2010. Old vessels (>15 years) experienced lower utilization (40-55%) compared to newer builds (<10 years; >60%).
OSV: Global AHTS demand, supply & utilization OSV: Global PSV demand, supply & utilization (Units) (%) (Units) (%) 1600 100 1200 100
90 1000 1200 90 800 80 80 800 600 70 70 400 400 60 200 60 0 50 0 50 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Demand (LHS) Supply (LHS) Demand (LHS) Supply (LHS) Utilisation (RHS) Malaysia Flag (RHS) Utilis ation (RHS) Malaysia Flag (RHS) Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
OSV: Supply overhang in the AHTS segment OSV: Supply overhang in the PSV segment (U nits) (Units) 1,800 1,300 1,600 1,200 1,100 1,400 1,000 1,200 900 1,000 800 700 800 600 600 500 400 400 2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017 Demand Total s upply Demand Total supply Effective supply Effective supply ex 30 ex y.o.s Effective supply Effective supply ex 30 ex y.o.s Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
6 March 2012 Page 29 of 60 Bumi Armada
OSV: Increasing numbers of vessels idle OSV: Utilisation rates (old vs new) (Utilisation) (Units) AHTS PSV Built in/ before 1991 Built on/ after 2005 150 100
120 90
90 80
60 70
30 60
0 50 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11
Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
2. Outlook
Positive trends over the next 18-24 months. T h e ve sse l m a rke t fo r the 5,000bhp AHTS segment remains weak and oversupplied but the 8,000-12,000 bhp AHTS segment is seeing moderate progress in rates as several recent contracts have secured decent charter rates.
Newbuilds tailing off. 338 orders committed in the past few years will enter the market in 2011-14. Overall, newbuild deliveries are tailing off as the pace of orders has significantly slowed down.
PSVs are in demand. Newbuilding activities so far are nominal, largely confined to the larger specification vessels (i.e. 8,000-12,000bhp AHTS) and PSVs with higher DWT (>3,000t dwt).
OSV: Snapshot of newbuild for AHTS OSV: Snapshot of newbuild for PSV
(Units)Under 9,999 10,000-14,999 15,000-17,999 (bhp) (Units) <3,000 3,000-3,999 (bhp) 250 18,000+ bhp' 000/unit 25 4,000+ dwt' 000/unit 120 6
200 20 100 5
80 4 150 15 60 3 100 10 40 2 50 5 20 1
0 - 0 0 2001 2003 2005 2007 2009 2011 2013 2001 2003 2005 2007 2009 2011 2013
Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
6 March 2012 Page 30 of 60 Bumi Armada
OSV: Global OSV newbuild by order to-date OSV: Newbuilds (2006 – 2014) (Units) AHTS PSV Newbuild vessels AHTS (Del iv ere d) PS V (Delivered) M'sia AHTS M'sia PSV PSV (On co mi ng ) AHTS (On coming) 300 350 327 312 250 300 29 1 250 200 22 4 200 150 16 6 16 4 150 100 100 10 4
50 50 36 4 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20 06 20 07 2 00 8 2009 2010 20 11 20 12 2 01 3 2014
Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
Dayrates have stabilized. Dayrates after going through the floor have stabilized, as the market gradually absorbs the overbuilt situation. The low orderbook/fleet ratio of less than 20% supports our view that the current momentum will continue into 2012. We expect day rates to trade sideways and only improve over the next 18 months.
A cyclical recovery in motion. We expect a cyclical recovery in demand for offshore vessels. The strength in oil prices is a key secular driver for OSV demand for it encourages further offshore exploration and drilling activities. OSVs will be required to support growth. Our house economist forecasts oil price to average USD100/bbl in 2011 (WTI) and USD110/bbl in 2012. WTI crude ended last Friday at USD106/bbl after touching a year high of USD109/bbl the week before.
All good things come to those who wait. Putting things into perspective, the demand and supply disconnect for offshore vessels should normalize in the later part of 2012. Utilisation rates are on the rise, with the steepness of the increase depending on the type of vessels.
OSV: Global AHTS term fixtures OSV: Global PSV term fixtures (U SD ‘ 000 /da y) (USD ‘000/day) 4,000+ dwt 3 ,00 0- 3 ,999 dw t 15,0 00 bh p 1 0,0 00-1 4,9 99 bh p 4 ,00 0-9, 999 bh p 50 70 45
60 40
50 35
30 40 25
30 20
20 15 10 10 5
2 0012002 20 03 2 00 4 200 5 20 06 2 007 200 8 2 009 20 10 20 0120 02 20 03 2 004 2 005 2 00 6 2 007 200 8 20 09 201 0
Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
6 March 2012 Page 31 of 60 Bumi Armada
OSV: AHTS 4,000 – 6,000bhp dayrates vs. utilisation OSV: PSV 3,000 – 3,999 t dwt dayrates vs. utilisation
(USD ‘ 000/d ay) Day rate U tili satio n (%) (USD ‘0 00/da y) Da y rate U tili sati on (%) 25 100 70 100 90 90 60 20 80 80 50 70 70 15 60 60 40 50 50 30 10 40 40
30 20 30 5 20 20 10 10 10
2001200 2 2 003 2004 200 5 2 006 2 007 20 08 200 9 201 0 2 0012 002 2003 200 4 200 5 2 006 2 007 200 8 2009 2 010
Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
OSV: AHTS – average age profile (13.9 years) OSV: AHTS – average age of idle vessels (21.7 years)
15% 0‐19 yrs 0‐19 yrs 31% 34%
21% 20‐29 yrs 20‐29 yrs 64%
30 yrs+ 35% 30 yrs+
Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
OSV: PSV – average age profile (12.6 years) OSV: PSV – average age of idle vessels (25.0 years)
13% 0‐19 yrs 29% 0‐19 yrs 40% 14% 20‐29 yrs 20‐29 yrs
73% 30 yrs+ 31% 30 yrs+
Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
6 March 2012 Page 32 of 60 Bumi Armada
OSV: Global market share by vessel demand OSV: Global market share by vessel supply AHT AHT 6% 7% PSV PSV 39% 39%
AHTS AHTS 55% 54%
Sources : ODS-Petrodata, Maybank-IB Sources : ODS-Petrodata, Maybank-IB
OSV: Global supply & construction OSV fleet
AHT ROV Ac c omo Support dation Constru Supply 7% Ves sels 28% 17% ction Vessels 83% 17% PSV 39% Derrick 8%
D iving Support Pipelay/ 15% AHTS Derrick 54% Pipelay Others 25% 7%
Sources : ODS-Petrodata,, May bank-IB
OSV: Global demand – construction vessels by type
C ons tru Supp ly AHT ROV Accom o ction Vess els 3% Sup port dation 31% Ves sels 88 % PSV 13% 12% 13%
AHTS 84%
Pipel ay/ Diving Derric k Sup port Pipelay 19% 37 %
Sources : ODS-Petrodata,, May bank-IB
OSV: Global demand for AHTS, PSV and construction vessels – by region
Asia Pac Asia Pac Asia Pac 12 % 11% 13% 15 % Eu rope Europe Europe 29 % N. America 11% N. America N. America 41 % 11% Caspian & CIS Caspian & CIS 22% 25 % C&S Americ a C&S A merica C&S America Med & Mid East 10% Med & Mid East 21% Me d & Mid East West Africa West Africa 21% West Af rica 11 % 4% 1% 4% 22% 13 %
3% 1 ,003 AHTS 716 PSVs
Sources : ODS-Petrodata,, May bank-IB
6 March 2012 Page 33 of 60 Bumi Armada
a) South East Asia’s OSV outlook
Malaysia, Indonesia and Vietnam are most likely to provide the most opportunity for PSVs in the region as the number of operational platform installations in the region is expected to increase incrementally over the next five years.
Although the majority of installations are currently in shallow water locations offshore these countries, the region is reflective of the global offshore industry in that it is moving increasingly towards deep and ultra-deepwater fields particularly offshore Malaysia.
South East Asia platform capex by region (2011 – 15) Brunei Myammar 3% Malaysia 5% 27%
Cambodia 1%
Vietnam 21% Indonesia 26% Thailand Phillipines 12% 5%
Sources : Infield Systems Li mit ed, M aybank-IB
b) Malaysia’s OSV outlook
Malaysia is well-positioned as a regional deepwater centre. Malaysia’s deepwater activities, actively promoted by PETRONAS, are expected to feature prominently in the industry’s exploration and production (E&P) development as it is one of the most effective ways to increase reserves and production. Deepwater to contribute 1/3 of Malaysia’s production. PET RONAS expects the deepwater sector to contribute 30-40% of Malaysia’s O&G production over the next 10 years, in line with the growing trend in the region. A total of 17 deepwater production sharing contracts (PSC) have been awarded to-date, covering 119,000sq km. At present, only one is at the production stage. Deepwater blueprint offers visible roadmap. We gather that 8 deepwater projects will be implemented. The Kikeh field is Malaysia’s first deepwater production field, which was successfully commissioned on 17 Aug 2007 with an oil production rate of 120,000 bpd presently. The Gumusut-Kakap field is up next, by 2013. PSVs to support deepwater projects. With the Gumusut-Kakap and Malikai deepwater projects projected to come onstream soon, there will be a need for PSVs to support the field production activities.
6 March 2012 Page 34 of 60 Bumi Armada
As well as upcoming shallow water projects. Deepwater projects aside, 65-70 new platform structures are required for shallow waters in 5 years. 22 new open shallow water blocks, covering over 240,000 sq km are open and available for data review. Based on PETRONAS’ announcement, there is a need to construct 65-70 (small and large) fixed structures and platforms for its domestic operations over the next 10 years.
Malaysia’s deepwater reserves potential Metres below s ea level 0
200 Kamunsu 401 m bbl Gumusut-Kakap 400 Malikai 650 m bbl 108 m bbl 600 Jangas 800 81 m bbl
1,000
1,200 Pi san gan 56 m bbl 1,400
1,600 Ubah Crest 215 m bbl 1,800
2,000 Sources : PETRONAS, May bank-IB
Malaysia’s implementation of deepwater projects
2007 Future development field projects
Kikeh
Gumusut/Kakap
Malikai
Indicative First Oil Kebabangan Exploration Strategy Exploration Jangas Appraisal & Reservoir Evaluation Ubah Crest Field Development Studies Preliminary Engineering Project Implementation Pisangan
Kamunsu
Source: PETRONAS
6 March 2012 Page 35 of 60 Bumi Armada
Malaysia’s planned oil production: Shallow and deepwater fields Deepwat er f ields Shal low water fields 100% 80% 60% 40% 20% 0% 2010A 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Source: PETRONAS
PETRONAS’ deepwater blocks worldwide
OBO (Greenland) 2 blocks ●
North Sea OBO (Vietnam) 1 block
COB (Malaysia) OBO (Mauritania) 7 blocks 1 block OBO (Egypt) CBO (Mauritania) 2 blocks 2 blocks
CBO ( Cuba) Gulf of Mexico 4 blocks ● COB (Myanmar) ● ● JOB (Malaysia) ● 3 blocks ●● 1 c lus ter West Africa ● ● ●
Offshore Brazil OBO (Cameroon) ● OBO (Indonesia) 2 blocks ● OBO (Malaysia) 3 blocks 11 blo ck s Deep water ho tspot Emerging hotspot Carig ali operated bl ock (CO B) ● COB (Mozambique) ● Operated by others (OBO) OBO (Mozambique) 1 bl oc k ● Joint operated block (JOB) 3 blocks
Source: PETRONAS
6 March 2012 Page 36 of 60 Bumi Armada
c) West Africa’s OSV sector outlook
Positive. The West African market will hold a great deal of positive n e ws fo r OS V pl a ye rs, i n pa rti cul a r co mp an ie s wi th hi gh cl a ss A HT S . New platform-driv en growth. This is attributable to the rise in platform projects over the next 5 years through new platform installations, primarily in offshore major countries such as Angola, Nigeria as well as emerging countries like Gabon and Ghana.
West Africa platform capex by region (2011 – 15) Gabon Eq. Guinea 3% Angola 6% 35%
Congo 6% Ghana Cameroon 4% 6%
Ivory Coast 1% Sierre Leone 3% Nigeria 36%
Sources : Infield Systems Li mit ed, M aybank-IB
d) Latin America’s OSV sector outlook
Brazil to anchor growth. There is expected growth in O&G investment for platforms and subsea assets in Latin America over the next 5 years. Majority of the capex will be concentrated in Brazil, taking up 68% of the capex i n the regi on. As well as Mexico and Venezuela. Mexico and Venezuela will also see increasing demand for PSVs with new platform installations as well as increase in the cumulative base of existing operational platforms as PDVSA and PEMEX increase shallow water platform investments.
Latin America platform capex by region (2011 – 15) Argentina
V enez uel a 1% 13%
Brazil 68%
Trinidad 5%
Peru 1% Mexico 11% Chile 1%
Sources : Infield Systems Li mit ed, M aybank-IB
6 March 2012 Page 37 of 60 Bumi Armada
e) Offshore accommodation market outlook
Growing demand to support brownfield projects. The bulk of accommodati on servi ces wi ll be requi red in the shal low waters and demand here i s beni gn due to i ntermedi ate envi ronmental condi ti ons, driven by aging infrastructure. However, high-end vessels capable of working in intermediate and harsh conditions should see some growth in demand in later years.
Vessels with DP hardware will be preferred. It is anticipated that more and more DP2 and DP3 high-end vessels will enter the market looking to capture the niche market. Region-wise, Brazil will require high-end accommodation vessels for its ultra-deepwater works. In North Asia, development at the South China Sea and Bohai Bay by Chinese NOCs and the international partners will likely underpin accommodation activities. In South East Asia (Malaysia, Indonesia, Thailand), majority of the forecasted demand is targeted for IRM services. Notwithstanding that, platform installations are also expected to drive demand for this type of vessel.
3. Opportunities for Bumi Armada
We view the PSV and accommodation workbarge/boat markets as a compelling opportunity for Bumi Armada. Africa and Latin America (notably Brazil) will likely be its key markets for its future fleet expansion programme.
8-10 new vessels planned. We expect Bumi Armada to add 8-10 new vessels, a balanced combination of PSVs, MPSVs and accommodation units over the next 2 years to capitalize on the strong demand for higher spec OSVs. Prospects for securing good charters are high. One of the PSV (to be buil t by Nam Cheong for USD30m wi th an end-2012 deli very date) will be contracted for the Gumusut-Kakap deepwater project on a long term basis, which is expected to come onstream in 2013. This initial win establishes Bumi Armada as a deep water PSV vessel operator and bodes well for its prospects for further deepwater jobs. Expecting high utilization for newbuilds. We opine that utilization rates for the newbuilds (PSV and accommodation workbarges) will be high and contracted on long-term charters. Utilisation set to improv e for the existing vessels too. Utilisation rates for its existing fleet of vessels are also expected to improve in 2012, in our view, as demand picks up. Utilisation rates, in our view are expected to increase by 0.5-1.0% per month throughout 2012 with a target utilization rate of around 80% from 70% presently.
6 March 2012 Page 38 of 60 Bumi Armada
T&I: Fundamentals and prospects
1. Industry’s fundamentals
The Caspian region offers robust potential. T he regi on, accounti ng for 20% and 45% of the world’s oil and gas reserves respectively, is one of the most important drivers of O&G production growth.
O&G developments in Russia (notably the Vladimir Filanovsky development) and Kazakhstan (Kashagan field) are expected to drive these regions to become big buyers of topsides in the near future. Turkmenistan, bordering Kazakhstan in the north and Iran in the south, also offers potential.
Majority of the demand is expected to be for pipelay vessels (derrick lay barges (DLB), in particular for the interlinking cluster developments in Kazakhstan and Azerbaijan (Kashagan and Azeri projects) as well as Turkmenistan and Russia.
Key Caspian Sea development projects Project Country Reserves Start-up Est. Peak Est. Peak Operator Production (mmboe) date Production Date facilities ('000 bpd)
Kashagan Kazakhstan 10, 285 2013 1,500 2023 NCOC Artificial Island ACG Azerbaijan 4,367 1997 1,030 2011 BP Fixed platform Shah Deniz (gas) Azerbaijan 2,930 2006 510 2018 BP Fixed platfor m Se ver n yi R ussi a 2,608 2010 370 2024 LuK oil Fixed platfor m Livanov Turkmenistan 1,664 2006 250 2021 PETRONAS FPSO/ fi xed platf orm SOCAR Assets* Azerbaijan 1,190 1949 410 1981 SOCAR Fixed platfor m Khval ynskoye (gas) Kazakhstan-Russia 898 2016 90 2018 LuK oil Fixed platfor m Cheleken Turkmenistan 833 1972 125 2015 Dragon oil Fixed platfor m Kalamkas Mor e Kazakhstan 720 2018 160 2021 NCOC Fixed platfor m Pearls Kazakhstan 463 2018 100 2023 CMOC Fixed platfor m Sources : Wood Mackenzie, Maybank IB; * St ate Oil Company of Az erbaijan
DLB vessel demand in the Caspian region
Turkemenistan 13%
Russia 22% Azerbaijan
54%
Kazakhstan 11%
Sources : Infield Systems Li mit ed, M aybank-IB
6 March 2012 Page 39 of 60 Bumi Armada
A duopoly market; with good day rates and long-term charters. With the Caspian Sea almost a closed off market, as harsh winters, render the region landlocked for much of the year, having a vessel within the market is a key competitive advantage for operators. Only two pipelay vessels are currently available in the region, one operated by Momentum Group (Israfil Huseynov) and another by Bumi Armada (Armada Installer). Given the limited number of players, dayrates and utilization rates are expected to remain healthy over the next five years.
Caspian Sea heavy lift demand & supply Caspian Sea pipelay demand & supply
( Vessel Days) Lay demand Lay supply (Vessel Days) Heavy Lift Demand Heavy Lift Suppy 16 600
14 500 12 400 10 8 300
6 200 4 100 2 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Infield Systems Li mited Source: Infield Systems Li mit ed
2. Opportunities for Bumi Armada
Armada Installer is on a firm 8-year charter to PCSB on attractive terms. Petronas Carigali Sdn Bhd (PCSB) has guaranteed a minimum number of hire days for the vessel. We estimate 60-70% utilization of the vessel for the duration of the contract. This makes vessel cost payback likely. We note that the guaranteed minimum hire days clause kicks-in only in the fourth quarter of each final year (Oct-Dec).
Armada Installer can also bid for other jobs simultaneously. More importantly, Bumi Armada is free to bid the vessel for works from the other operators, i.e., Dragon Oil, BP, Lukoil etc., during the remaining days ex- maintenance time. 7 projects are in various stages of completion and another 3 major projects have been lined up in the immediate future, providing Armada Installer great earnings visibility.
Enter the Dragon. Of particular interest to investors would be the Cheleken field where Dragon Oil plans to spend USD1b from 2012 to 2015. Its upcoming projects encompass multiple jack-up platforms, at Zhdanov A & B and Lam D, E, F and G, and this greatly solidifies the visibility of the Armada Installer’s order flow.
Anticipating higher utilization rates for the Armada Installer. There could be much opportunity for Bumi Armada in the Dragon Oil T&I projects as the Armada Installer (which is 2 years old) is arguably a better candidate, being a younger and more modern vessel compared to its rival; Israfil Huseynov – a 20-year old pipelay barge. With elevated earnings. We estimate that clinching such jobs would lift Armada Installer’s utilization up beyond the 90% threshold (from 70% currently), effectively raising revenue by RM9m p.a., based on an average rate of USD70,000/day for 62 operating days.
6 March 2012 Page 40 of 60 Bumi Armada
New assets to drive T&I earnings. Bumi Armada acquired the Acergy Hawk (now named Armada Hawk) in June 2011. Thus far the vessel has worked on riser installations for the FSO Sepat and will spearhead bids for SURF installation and IRM projects in Asia. We expect Bumi Armada to add a third vessel, similar to the Armada Hawk in 2012, which would contribute about RM60m-90m in revenue p.a., assuming USD70,000 dayrates. Moreover, Bumi Armada can fit an existing AHTS – Tuah 104 with an A-frame to undertake T&I works.
Major projects worldwide SURF contracts 2010 2011 2012 2013 Contract Value Contract Value Contract Value Contract Value (USD m) (USD m) (USD m) (USD m) 1 Bloc k 17-CLOV 1,300 Greater Gorgon 945 Egina 1,300 Wahoo 928
2 Roncador 3 520 Lula N ordest e 650 Caricoa 960 Bloc k 31 S out h E ast 920
3 Laggan Tor more 250 Liwan 585 Tweneboa 850 Brows e LNG 783
4 Mars B 230 Block 15-06 460 Cernambi 656 Leviat han 750
5 Tamar 420 Guara-P has e 2 544 Wheatst one LNG 657
6 Guara-P has e 1 416 Gehem 450 Franco-FPSO 2 592
7 Barzan Phase 1 400 Ichthys 450 Iara-FPSO 1 496
8 Jack/St. Malo 300 Franco-FPSO 1 448 Moho Bilondo 2 320 9 Big Foot 230 Gendalo 360 Florim 288 10 Lucius 220 Shtokman 300 Rosebank 240
11 Prelude 180 Nsiko 300 Shenandoah 230
12 Papa Terra 150 Baleia Azul 288 Jubilee FPSO 1 220
13 Clair Ridge 90 Freedom 160 Pluto LNG 2 198
14 Waimea –O SX 1 68 Myammar M-9 131 Vito 190 15 West Nile D elta 125 Abadi LNG 126
16 Pipeline 100
17 Mad dog 100
18 Waimea 68 Total 2,300 5,114 7,197 6,812 Sources : Ins tok, Maybank-IB
Major subsea markets world wide Malaysia’s subsea market by definition (USD' m) Angola Australia Brazil (U SD' m) SUR F Subsea Equipment 12,000 1, 200 1, 093 Nigeria U K GOM 10,000 1, 000
8,000 800
6,000 600 559 404 4,000 400 276 254 243 2,000 157 166 200 111 - 0 2010 2011 2012 2013 2014 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F
Source: Ins tok Source: Ins tok
6 March 2012 Page 41 of 60 Bumi Armada
OFS: Fundamentals and prospects
1. Industry’s fundamentals
PETRONAS’ capex blueprint denotes growth. PETRONAS is projected to spend about RM250b in capex over the next 5 years (2011-15). This equates to an average investment of RM50b p.a., which is 25% higher than its 2010’s spending. The bulk of its capex spending will be redirected to domestic field development as it intensifies exploration and development activities in the deepwater, shallow, brown and marginal fields to lift production.
PETRONAS’ domestic strategy. On its E&P efforts, PETRONAS will focus on: (i) unlocking stranded resources by fast-tracking the development of marginal fields projects, (ii) improving enhanced oil recovery (EOR) efforts to optimise existing fields’ resources, and (iii) intensifying exploration efforts to further grow its hydrocarbon resources.
PETRONAS’ 3-prong strategy
Source: PETRONAS
PETRONAS’ targeted fields
Source: PETRONAS
6 March 2012 Page 42 of 60 Bumi Armada
2. Outlook: Marginal field developments
Positive outlook. The countries in Asia Pacific, such as Malaysia, Indonesia, Thailand, Vietnam and India offer the most promising prospects, in terms of marginal field development. The growth is driven by Government incentives.
Marginal field development plans in Asia Pacific Country Marginal fields Outlook Malaysia 90 hots pots identified, 25 Positi ve outl ook. Several proj ects have been announc ed (S epat, Berant ai). More t o follow. to be developed Indonesi a 160 O&G fields i dentified Positi ve outl ook. Government has identified 100 oil fiel ds and 60 gas fields for devel opment.
Thailand 40 O &G fi elds identifi ed Positi ve outl ook. M arginal fields are attracti ng more inves tors.
Vietnam 20 O &G fi elds identifi ed Positi ve outlook. The government is developing marginal fiel ds in Cuu Long basin i n an eff ort t o boos t producti on. Australia 10 O &G fi elds identifi ed Positi ve outlook. N ew i nnovati ve conc epts have been devel oped t o explore marginal fi elds, whic h are economicall y viable. New Zealand 165 new marginal fields Positi ve outlook. Government is keen on r apid development of smaller, economically marginal fiel ds identifi ed to meet countr y’s energ y deficit. India 165 new marginal fields Positi ve outl ook. 44 fields have been monetized. 90 fiel ds are in t he proc ess of being put t o identifi ed produc tion. China 30 O &G fi elds identifi ed Moderat e outlook. Progress on marginal fields has been restricted due t o unf avourable P SC conditi ons and tight government controls. Sources : Origin Business E ngi neering B .V., Maybank-IB
Marginal field development to see rapid progress in Malaysia. PETRONAS will adopt the fast track approach to execute its marginal field projects, as it aims to secure 1st oil and/or gas as fast as possible (within a 12-month period) with minimal capex and infrastructure requirement. Development will be through innovative solutions.
PETRONAS will develop 25 domestic marginal fields as it seeks to reverse declining output of Malaysia’s existing reserves. The marginal oil fields have 30m barrels of oil reserves and unlocking these fields is expected to raise Malaysia’s crude oil production by 55,000 bpd (+10%). The capex required to develop a marginal field is around USD800m and the breakeven cost is estimated at USD70/ bbl.
Marginal fields to be developed via the RSC model. The marginal field programmes will be developed via Risk Sharing Contracts (RSC) and not the conventional Production Sharing Contracts (PSC) accorded to oil majors participating in Malaysia’s major O&G fields. The RSC is aimed at making the project viable and attractive for smaller independent oil companies (IOCs).
PETRONAS has kicked off marginal field development, more to emerge. The first two pilot projects, Berantai and Sepat, have been rolled out and we anticipate 2 more (Balai and Bentara) to be awarded soon. It is understood that at least 5 more hydrocarbon discoveries are being looked at. The fields under consideration are said to include the Cenang and Tembikai gas discoveries near Talisman Energy operated Block PM 314. The other finds – Diwangsa, Rabung, Korbu, Desaru and Jambu could also be on the table.
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3. Outlook: Enhanced Oil Recovery (EOR) projects
Enormous potential. Existing brownfields also offer an abundance of opportunities. EOR potential in Malaysia is massive and is estimated to be approximately 1b stock tank barrels. Existing fields will be rejuvenated through enhanced oil recovery (EOR).
166,000 bpd, 1,000 idle wells, 955m bbls, 37 fields... Malaysia aims to boost brownfield production by 166,000 bpd (+30% increase to current total production) come 2020 using new EOR technologies. There is an est. 955mboe trapped in 37 brownfields with 1,000 idle wells. 60% of total EOR potentials in Malaysia reside in 6 reservoirs. They are the Tapis, Guntong Upper, Guntong Lower, St Joseph, Tiong, and Dulang fields. The crucial factor would be boosting the average recovery factor to 45-55% from the current average of 36%.
Snapshot of Enhanced Oil Recovery (EOR)
200 Tapis Lower J Total potential: 955 MMstb Group 1: Number of reservoirs: 37 570 MMSTB (60.4%) Average size: 26 MMstb
150 Guntong Upper I
CO2 miscible St. Joseph B/G Wa t e r Fl o o d 100 HC miscible Other potential reservoirs: Tiong J - 20/21 Others 374 MMSTB (39.6%) Guntong Lower I
50 D ulang E-12/3 (pilot stage) Dulang E - 14 (pilot stage)
0 Sourc e: P ETRONAS
...3x times larger than marginal field plans...The ultimate goal, according to PEMANDU, is to add 220,000 bpd of oil from EOR initiatives and marginal fields – accounting for 1/3 of domestic production. The greater emphasis on brownfields stems from the “relatively” easier, faster and lower incremental cost per barrel of increased production. The ultimate winner we feel will be the company able to deliver executable, cost effective and quick to deploy solutions.
...with RM45.9b capex committed. Petronas & Shell’s EOR projects for St. Joseph, South Furious (SF30), Barton and the Baram Delta Operations (BDO) call for USD12b (RM36b) in investments to develop the 9 fields of Sarawak and 4 fields in Northern Sabah. Meanwhile, Exxon will be rehabilitating the Tapis (RM3.2b), Guntong, Tabu, Palas, Seligi, Irong Barat and Semangkok fields (RM3.6b) and 2 mature gas fields, Jerneh & Lawit Bintang (RM3.1b) off the peninsular.
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4. Opportunities for Bumi Armada
(i) Angsi EOR proj ect. This is a fast-track project. PETRONAS has set a target to commence operations by Sept 2013. It requires a vessel-based sea-water reverse osmosis (SWRO) plant (CEOR floater) with the capacity to desalinate 150,000bpd of seawater to increase oil recovery rates by another 20%. Water Standard to team up with local operator(s). US-based Water Standard won the oilfield desalination project and will likely partner an FPSO operator for this job. Conversion work is expected to take 16 months to complete. Potential winners. Bumi Armada, SapCrest Kencana Petroleum, Uzma and Deleum are the names mentioned. We think Water Standard could team up with one to two local partners due to the massive capex and job scope. Angsi: An immediate target for PETRONAS’s CEOR vessel
Sources : PETRONAS, May bank-IB
(ii) St Joseph EOR. This is a similar project to Angsi but requires a smaller SWRO unit. The project requires the vessel to handle an initial 10,000bpd water and chemical injection during the pilot phase (12 months). If this is successful, the vessel will undergo modification to triple its injection capacity to 30,000bpd.
Requires a 30,000bpd SWRO now with an Angsi size unit to follow . Unlike the Angsi field, the main asset (i.e. vessel) will be owned by Shell with the winner earning project management fees. However Shell intends to source a larger vessel when the economic viability of the project has been ascertained, to support the full field injection of 15,000bpd.
Relocation from Angsi to Sabah? We understand from discussions with O&G service providers that chemical alkaline surfactant polymer treatments are normally carried over a 3-4 year period. Based on the 150,000bpd processing capacity required for the ‘Angsi SWRO unit’, we estimate the vessel hull size could at least be an aframax tanker (market price RM60m- 70m per unit). Considering the modifications and quantity of topside equipment required we think it likely the same floater
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will be utilised at both fields, consecutively, allowing the capex to be depreciated gradually. Bidders and potential winners. Bumi Armada and six other operators (BW Offshore, MISC, M3nergy, SapuraCrest, Deleum and Tanjung Offshore) have been invited by Shell to bid for an EPCIC contract to supply a CEOR vessel for the St Joseph pilot project off Sabah. However, only two bidders remain – Bumi Armada and Deleum.
Snapshot of 13 BDO & North Sabah oilfields to be developed South Fu rious 30 St. Ba rton Baronia J oseph B ar onia B arat Betty So uth Bokor Fu rious Tukau
Sikau Ba ka u Siwa West Lutong EOR Project Sabah 1. USD12b investment over 30 years 2. To d eve lo p 9 fie lds in th e Ba ram D elta, S arawak and 4 fiel ds in N orth Saba h 3. To re co ver 756 m bbl of oil or 90-1 00k bop d 4. To i mpr ove av erage rec overy factor to 50 % 5. To e xte nd fiel ds’ pro ductive l ife to b eyond 2 040 Sarawak
Source: Maybank IB
(iii) Tanjung Baram. Meanwhile, the Tanjung Baram EPS project, awarded to a foreign party, is running into complications and will likely miss the first oil production target (1,000-3,000bpd) set for Jul 2012. A re-tender could recur should the issue remain unresolved.
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SECTION 3: FINANCIALS, VALUATION, RISKS
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Financials
Registered robust profits in the past. Bumi Armada delivered a RM277m net profit in 2009 (+85% YoY), RM351m in 2010 (+25% YoY) and RM387m in 2011 (+10% YoY). These translate to a robust 3-year historical net profit CAGR of 37% (2009-11). Poised to break new ground. Looking ahead, we expect the earnings trajectory to continue its climb, at least over the next 3 years, on the back of stronger profits from all core divisions, namely FPSO, OSV and T&I operations.
Set to enj oy strong and sustained growth. We project a strong 3- year net profit CAGR of 25%, forecasting that Bumi Armada will deliver a net profi t of RM532m in 2012 (+37% YoY), RM628m in 2013 (+18% YoY) and RM707m in 2014 (+13% YoY).
Growth will be driven by: (i) 3 new FPSOs progressiv ely coming onstream. We expect Bumi Armada to secure 3 FPSO contracts in 2012-13 (i.e. Malaysia, India and Angola). We expect the group to own a fleet of 8 FPSOs by end-2013, elevating it to becoming the fourth-largest FPSO operator worldwide by then. (ii) OSV expansion and higher utilisation rates. We project Bumi Armada will take delivery of 2 PSVs in 2012 and another 4 newbuilds in 2013-14. Expectation is for these new vessels to generate revenue of RM29m-RM213m p.a. in total, lifting OSV’s topline by 6-28% respectively in 2012-13.
In terms of utilisation rates, we expect a progressive step-up, from 79% in 2012 (+7-ppt YoY) to 83% in 2013 (+4-ppt YoY). Growth will largely be driven by higher charter days for its 8,000-12,000 bhp AHTS and PSVs.
(iii) T&I’s Dragon Oil contract and contributions from new vessels. In the T&I segment, we have assumed Bumi Armada will secure the Dragon Oil T&I contract in the Caspian Sea. Bagging this project will elevate utilisation of Armada Installer from 70% to above 90%.
With Bumi Armada taking delivery of Armada Hawk in 2H 2011 and another SURF vessel by 2012 to participate in the IRM projects in Asia, we project growth of the T&I EBIT at RM184m-RM190m p.a. in 2012-14 respectively, and at RM117m in 2011 to (iv) OFS division is the wild card. With the delivery of the one-off Sepat FSO project, Bumi Armada aims to move to a recurring income business model via the Angsi SWRO vessel projects. We expect this project, to be awarded by 1H12, to generate EBIT of RM56m p.a..
Optimised earnings impact from 2015. Putting things into perspective, we expect Bumi Armada to enjoy the full effect of its underlying strong earnings-generating assets in 2015. This will notably come from the 3 new FPSOs, as the O&M charter rates kick in.
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Snapshot of assets growth FYE Dec (RM m) 2010A 2011A 2012F 2013F 2014F Assets (unit) - FPSO (contract signed) 3 5 7 8 8 - OSV 37 46 48 50 50 - T& I 1 2 3 3 3 Total 41 53 56 61 61 Utilisation rat e (% ) OSV - AHT 87 87 73 77 77 - 5,000 bhp AHTS 70 83 85 85 85 - 8,000 – 10,000bhp AHTS 50 45 73 83 83 - 12,000 bhp AHTS 100 100 100 100 100 - Wor kbarge/ boat 80 74 88 95 95 - PSV - 90 90 90 90 - Others 73 83 80 80 80 T&I - Armada Inst aller 70 75 92 92 92 - Newbuild (2) - 95 95 95 95 Sources : Company, M aybank-IB
Not ruling out further upside potential. We do not discount the possi bil ity of Bumi Armada addi ng another new smal l -to medium-si zed FPSO beyond the projected 3 units, which would effectively lift its FPSO fleet size to above 8 units. In our modeling, we have also not imputed the expectation of any other production floaters (i.e. FSO). Overall, we opine Bumi Armada has the balance sheet, skill sets and appetite to undertake this. Has the ability for growth. Our forecasts suggest that Bumi Armada’s net gearing level will range between 0.5x and 0.6x in 2012-14. This is below the internal threshold of 1.5x set by management. Hypothetically gearing up to 1.5x in 2012 could effectively lift borrowings by RM3.5b (i.e. 3-4 FPSOs). Has the balance sheet to take up another FPSO. We estimate that taking on the extra debt will still be sufficient for Bumi Armada to fund the expansion for a small-sized FPSO. As a benchmark, the capex to construct/convert a small-sized FPSO from a tanker (<80,000 bpd capacity) would range between USD300m-USD500m. The cost to modify an existing smaller unit is estimated at USD100m-USD250m.
Segmental breakdown FYE Dec (RM m) 2010A 2011A 2012F 2013F 2014F Revenue 1,241. 4 1,543. 9 1,800. 7 2,220. 6 2,504. 3 - FPSO 553.4 609.2 743.9 965.4 1,097. 4 - OSV 419.7 481.9 622.6 686.1 688.4 - T& I 268.3 242.3 334.2 334.0 344.8 - OFS 0.0 210.5 100.0 235.0 373.8
EBIT 467.1 518.3 621.8 745.7 835.2 - FPSO 179.2 200.2 227.5 260.6 330.2 - OSV 88. 9 116.8 175.0 207.2 221.0 - T& I 148.5 117.2 183.8 183.7 189.6 - OFS 22. 7 21. 0 13. 0 40. 8 69. 3
Sources : Company, M aybank-IB
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Significant capex going forward. Bumi Armada will spend heavily on capex (RM6.7b in total, in 2011-15) to fund its expansion programmes. As such, we do not expect significant dividend payout in the near term.
Bumi Armada: Capex profile (RM b) FPSO OSVs T&I Others RM6.7b 1. 5 1. 3 1. 1 0.4 0.2 0. 2 0. 9 0.3 0. 1 0. 7 0.5 0. 5 0. 8 0. 3 0.7 0.5 0. 1 -0.1 2008 2009 2010 2011-14 1.2 1.4 1.1 Sourc es: Company, Maybank-IB
Progressive div idend policy. Management intends to adopt a progressive dividend policy in determining the level of dividend payment, with the level of cash, gearing, debt profile, retained earnings, capex and investment plans to be taken into consideration.
Projected capex for FPSO orders: Capex to build/convert FPSOs varies widely, depending on unit size, complexity and application. Large FPSOs: A large 150,000+ bpd FPSO intended for use offshore Africa or Brazil can cost USD1b to USD2.2b.
As benchmarks, capex for the Clov FPSO is USD1.8b, Usan USD1.6b, Pazf lor U SD2. 1b and the P62 and P63 F PSOs are around U SD 1b.
Given the expected mix of future orders of large FPSOs, the notional c apex of USD 1.2b is a reas onable av erage cost to build suc h a unit . Mid-size FPSOs: An 80,000-150,000 bpd unit can range from USD0.4b to USD1.4b. As benchmarks, capex for the P.C. de Itajai conversion is estimated around USD400m. Goliat, designed for harsh environment is USD1.1b, Quad 204 is USD1.3b.
The notional capex of USD0.6b to build or convert or convert a unit and USD0.3b to modify/upgrade an existing vessel is representative of the average capex for midsize FPSOs. Small-size FPSOs: A >8,000 bpd unit can range from USD300m to USD500m. As benchmarks, the Chim Sao capex was USD400m. Cost to modify a smaller unit is around USD100m - USD200m.
The cost to modify/ upgrade East Fortune for Berantai is about USD345m. Modifying/ upgrading Glas Dowr for Kitan is around USD120m-USD150m, the OSX1: USD200m.
The notional capex of USD0.4b to build or convert a small FPSO and USD0.2b to modify/ upgrade an existing vessel.
Source: International Mariti m Associ ates, Inc
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Valuations
Target price: RM4.88. Our target price is based on a sum-of-parts (SOP) valuation.
The FPSO, OSV, T&I and OFS (i.e. SWRO unit) operations are valued based on discounted cash flows (DCF), using a WACC of 4.5%. DCF is a reasonable method, in our view, considering that FPSO contracts are typically chartered out on a long-term basis (7 years + option period) while the OSVs, T&I and OFS vessels tend to see 1-8 year contracts.
We value the OFS’ EPCC operations on price-earnings multiples.
We ascribe a scrap value to their assets (i.e. FPSO, OSV, T&I and OFS) based on an estimated scrap steel tonnage.
At our RM4.88 target price, Bumi Armada would be trading at 26.8x 2012 PER which is not excessive in our view, considering we are expecting a strong 3-year net profit CAGR of 25%.
SOP valuations Terminal growth rate Value Value Division Methodology (RM’m) (RM/share) FPSO 6,585 2.25 DCF OSV 4,871 1.66 DCF T & I 3,528 1.20 DCF DCF on SWRO unit and OFS 385 0.13 10x PER on EPCC Scrap value 638 0.22 FPSOs, OSVs, T&Is
Net debt (1,760) (0.60) 2011 Total 14, 291 4.88 Source: Maybank-IB
Key assumptions to our WACC estimate are laid out in the table below, where we have applied a 4.0% risk-free rate, 6.5% market risk premium and 1.0 beta. We have assumed a long-term: (i) 80:20 debt- to-equity structure and (ii) cost of debt of 3.0%
Assumptions and basis used for WACC discount rate Risk free rat e Rf 4.0% 10- year government bond yield Long-term cost of debt Kd 3.0% Average 3.0% eff ecti ve i nter est rat e (Maybank IB’s forecast) Market risk Rm 10. 5% Maybank IB’s in- hous e assumpti on Beta β 1.0 Target capit al ratio - Debt / (debt + equit y) Wd 80% Target gearing - Equity / (debt + equit y) We 20% 1 – target gearing Cost of equit y Ke 10. 5% = Rf + (Rm – Rf) β WACC Wc 4.5% = Kd (1-tax) (W d) + Ke (W e) Source: Maybank IB
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Peers valuations: FPSOs FPSO op er ato r p eer co mp ar i so n (C al end eri sed ) Company Market Cap 3-yr EPS 3- yr EBITD A EV/ EBITD A EV/ EBIT PER Div yield Gearing ROE P/ BV (USD m) CAGR (%) CAGR (%) (x) (x) (x) (%) (x) (%) (x)
2011 2012 2013 2011 2012 2013 2011 2012 2013 SBM Offs hore 3,446. 6 25. 0 11. 8 6.7 6.3 5.7 68.4 9.9 9.1 8.1 7.6 6.7 6.2 0.9 21.1 1.9 BW Offshore 985.0 76. 0 37. 9 8.7 6.2 5.2 21.0 14.3 11.3 nm 9.1 7.1 8.7 1.1 8.5 1.2 Modec Inc 868.4 28. 6 nm 18. 7 16.5 11. 4 nm 29. 3 24. 4 22. 7 16. 0 11.9 1.8 0.4 8.5 1.0 Fred Olsen 143.8 nm nm 5.5 4.8 4.3 17.2 18.6 16.7 nm nm nm 7.4 0.0 0.5 0.8 Sevan 127.5 nm nm 22.3 12.8 nm nm 12.6 nm nm nm nm - 1.5 0.9 0.7 EOC 117.5 8.7 4.2 7.3 6.3 6.5 12. 6 10. 1 11. 0 4.9 3.2 3.4 - 1.9 11. 0 0.2 Simple Aver age 11. 5 8.9 6.6 29. 8 15. 8 14. 5 11. 9 9.0 7.3 Selected peers aver age ( weighted) 7.7 6.3 5.4 44. 7 12. 1 10. 2 8.1 8.3 6.9 Sources : Bloomberg, Maybank-I B Note: * Acquired Prosaf e Produc tions in Dec 2010, 2011- 13 net profit CAGR: 20%
Peers valuations: T&I and OSV operators FPSO operator peer comparison (Calenderised) Company Market Cap 3-yr EPS 3- yr EBITD A EV/ EBITD A EV/ EBIT PER Div yield Gearing ROE P/ BV (USD m) CAGR (%) CAGR (%) (x) (x) (x) (%) (x) (%) (x)
2011 2012 2013 2011 2012 2013 2011 2012 2013 Saipem (T&I) 22, 212.53 13. 2 12. 5 8.9 8.4 7.1 12. 7 12. 1 10. 2 18. 2 16. 3 13.9 2.2 1.0 21. 06 3.6 Technip (T&I) 11, 908.49 19. 3 17. 4 8.7 8.2 6.3 10. 8 10.4 7.9 17. 2 17.2 13.6 1.0 1.0 21.06 2.5 Subs ea 7 (T&I)* 8,176. 78 148.6 160.4 8.9 7.1 5.0 13. 6 10.0 6.9 18. 7 16.3 11.8 0.8 0.1 8.47 1.4
Farstad (O SV) 1,149. 6 19. 2 9.4 7.6 7.4 6.9 11. 9 11. 4 10. 7 11. 5 10. 3 8.7 3.0 0.8 8.57 1.0 Ezra (OSV) 889.6 20. 9 41. 1 18. 3 13.5 11. 3 25. 5 17. 6 14. 6 16. 7 10. 8 8.0 0.4 1.1 8.50 1.0 Solstad (OSV) 723.8 110.9 20. 6 10. 9 7.7 6.8 27. 0 15.1 12.9 11. 6 9.0 3.1 1.9 7.41 0.9
T&I average 8.8 7.9 6.2 12. 4 10.8 8.4 18. 1 16.6 13.1 OSV average 12. 3 9.6 8.3 21. 5 14. 7 12. 8 14. 1 10. 9 8.6 Sources : Bloomberg, Maybank-I B Note: * Acquired Acergy
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Risk factors
Bumi Armada’s wide ranging business profile opens the group to a broad spectrum of operational, geographical and environmental risk. Operating in multiple countries and compliance with additional local regulations may hamper operations and increase operating costs. Below is a non exhaustive list of the major risk factors confronting Bumi Armada. Oil price levels affect long-term investment plans. Oil majors’ investment plans are dependent on long-term oil price expectations, which can be affected by low and/or volatile oil price levels. We have seen oil field exploration/developments shelved when the oil price fell below USD50/bbl (average) in 2008, and there is no certainty this will not recur. Our economics team projects an average USD100/bbl crude oil price (WTI) in 2012 (2011: USD95/bbl).
Currency fluctuations. Revenue from customer contracts, capex and operating cost is largely denominated in USD which do provide for some form of a hedge (but not in full). In addition, Bumi Armada reports results in RM, which leaves the group open to foreign currency movements especially fluctuations of the USD against the RM. We estimate that a 1 sen strengthening or weakening of the RM against the USD to impact bottomline by RM2m (with 0.4% of its earnings in RM).
Financial leverage. Bumi Armada has and will maintain a significant level of leverage in line with the industry norm. Refurbishments are made before each redeployment of FPSOs and the vessels will require extensive repairs at regular intervals to meet the operating certification needed. High debt service and other contractual obligations will render Bumi Armada highly sensitive to any interruption in cashflows. Contractual requirements. FPSO contracts can encompass turnkey contracts for the vessel’s construction, conversion and refurbishment.
Turnkey: FPSO conversions and refurbishment projects involve significant procurement of equipment, supplies and equipment. Risk include lack of supply of, or higher than expected cost of materials, equipment and manpower.
Delivery: FPSO contracts have strict delivery schedules and failure to adhere to set dates could result in lower daily charter fees or even late penalties.
Dependence on external parties: FPSO operators can be heavily dependent on vendors throughout the process, from equipment and manpower to even yard space.
Cost overruns: Historical FPSO projects’ cost overruns were often tied to increases in price or requirements of manpower, fabrication materials (e.g. steel) or additional requirements or changes in orders from clients (VO). Unless protected by a price escalation clause, Bumi Armada may face reduced earnings or even losses.
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Performance: Post deployment, the FPSO would be required to maintain a pre-agreed commercial uptime, technically possible operating days less allowance for maintenance and emergencies. Failure to meet the set targets could result in reduced charter fees, suspension of charter fees or even penalties being imposed.
Early termination: Lease contracts are structured to provide the lessor with flexibility. Firm contracts are only offered for the estimated time required to exploit reserves but vessels have to be configured with the potential full period in mind. Should the termi nati on of the contract occur and Bumi fail to redepl oy the vessels on time, Bumi could suffer both reduced income and even impairment charges on its FPSOs
External factors/events: This comprises weather and natural hazards (typhoons, tsunamis, etc), pirate attacks (more likely kidnap of crew and shutdowns versus hijacks) and policy changes of governments. Regulatory risks. As Bumi Armada operates worldwide, it must adhere to the offshore O&G industry regulations across multiple areas:
Local content: Several emerging countries are attempting to boost local industries i.e. fabrication, process equipment, etc. by introducing local content clauses. This includes Nigeria, Angola, Brazil and Malaysia, which require portions of the system to be fabricated at the local facilities.
Environment: Bumi Armada’s single hull FPSOs cannot operate in a number of regions (North America and Europe) and the number of areas are set to increase. Aside from hull requirements, rules relating to waste storage and discharge, carbon emissions, etc. will have an impact on Bumi Armada’s operating expenses.
Cabotage: Bumi Armada’s vessels (FPSOs and OSV) must comply with each country’s licences, permits and certifications. Failure to comply could result in fines or vessel seizure. For example, Nigeria requires annual renewal of all license and imposes fines of up RM300,000 per OSV.
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Financial statements
INCOME STATEMENT (RM m) BALANCE SHEET (RM m) FY Dec 2011A 2012F 2013F 2014F FY Dec 2011A 2012F 2013F 2014F
Turnover 1,543.9 1,800.7 2,220.6 2,504.3 Net Fixed Assets 4,201.2 5,274.3 6,247.5 6,840.7 Cost of goods sold (883.1) (984.8) (1,226.2) (1,383.6) Invts in Assocs & JVs 151.3 207.6 264.3 332.0 Gross profit 660.8 815.9 994.4 1,120.7 Other LT Assets 423.3 423.3 423.3 423.3 Other operating (exp)/inc. (142.5) (194.1) (248.7) (285.6) Cash & ST Invts 1,248.5 990.5 1,539.2 1,554.1 EBIT 518.3 621.8 745.7 835.2 Other Current Assets 912.0 965.5 1,053.2 1,112.4 Net int (exp)/ Inc (109.2) (113.0) (138.2) (155.7) Total Assets 6,936.2 7,861.3 9,527.5 10,262.5 Associates & JV 26.8 56.3 56.7 67.7 Exceptional gain/ (loss) (27.7) 0.0 0.0 0.0 ST Debt 447.4 447.4 447.4 447.4 Pretax profit 435.9 565.2 664.3 747.2 Other Current Liab 353.1 373.1 405.7 427.8 Tax (70.6) (27.0) (30.8) (34.3) LT Debt 2,559.8 3,000.0 4,000.0 4,000.0 Minority interest (5.7) (6.0) (6.0) (6.0) Other LT Liab 33.2 33.2 33.2 33.2 Net profit 359.7 532.2 627.5 706.9 Shareholders Equity 3,528.0 3,987.0 4,614.5 5,321.4 Net profit ex EI 387.3 532.2 627.5 706.9 Minority Interest 14.7 20.7 26.7 32.7 Total Cap. & Liab 6,936.2 7,861.3 9,527.5 10,262.5 EBITDA 845.1 1,048.7 1,272.6 1,442.0 Sales Growth (%) 24.4 16.6 23.3 12.8 Share capital 2,928.5 2,928.5 2,928.5 2,928.5 EBITDA Growth (% ) 18.1 24.1 21.4 13.3 Net Debt 1,758.7 2,456.9 2,908.2 2,893.3 EBIT Growth (%) 10.9 20.0 19.9 12.0 Working capital 1,360.0 1,135.6 1,739.3 1,791.2 Effective Tax Rate (% ) 16.2 4.8 4.6 4.6 Gross gearing 85.2 86.5 96.4 83.6
CASH FLOW (RM m) RATES & RATIOS FY Dec 2011A 2012F 2013F 2014F FY Dec 2011A 2012F 2013F 2014F
Net profit 387.3 532.2 627.5 706.9 Gro ss Ma rg in (% ) 4 2 . 8 45.3 44.8 44.8 Dep. & amortization 326.8 426.8 526.8 607.8 EBITDA Margin (% ) 54.7 58.2 57.3 57.6 Chg. In working capital (596.6) (33.6) (55.0) (37.1) EBIT Margin (%) 33.6 34.5 33.6 33.3 Other operating CF 212.6 (50.3) (50.7) (61.7) Net Profit Margin (%) 25.1 29.6 28.3 28.2 Operating CF 330.2 875.1 1,048.7 1,215.8 ROAE (% ) 17.6 14.2 14.6 14.2 Net capex (1,058.7) (1,500.0) (1,500.0) (1,200.0) ROA (%) 9.3 9.2 9.2 9.1 Chg in LT investment 0.0 0.0 0.0 0.0 ROCE (%) 9.7 10.2 10.2 10.2 Chg in other assets (1,058.7) (1,500.0) (1,500.0) (1,200.0) Div Payout Ratio (%) 17.9 0.0 0.0 0.0 Investment CF (1,167.6) (1,500.0) (1,500.0) (1,200.0) Interest Cover (x) 4.7 5.5 5.4 5.4 Net chg in debt (410.4) 440.2 1,000.0 0.0 Debtors Turn (days) 60.3 70.4 68.6 71.5 Chg in other LT liab. 2,218.5 (73.2) 0.0 0.0 Creditors Turn (days) 90.7 63.1 60.2 63.1 Other financing CF 0.0 0.0 0.0 0.0 Inventory Turn (days) 0.6 0.6 0.6 0.6 Financing cash flow 1,808.1 367.0 1,000.0 0.0 Current Ratio (x) 2.7 2.4 3.0 3.0 Net cash flow 970.7 (258.0) 548.7 15.8 Quick Ratio (x) 2.7 2.4 3.0 3.0 Net Debt/Equity (x) 0.5 0.6 0.6 0.5 Capex to Debt (%) 0.4 0.4 0.3 0.3 N.Cash/(Debt)PS (sen) (60.1) (83.9) (99.3) (98.8) Opg CFPS (sen) 31.6 31.0 37.7 42.8 Free CFPS (sen) (24.9) (21.3) (15.4) 0.5
Sources : Company, M aybank-IB
6 March 2012 Page 55 of 60 Bumi Armada
SECTION 4: APPENDICES
6 March 2012 Page 56 of 60 Bumi Armada
Appendix : Directors & Management
Board of Directors Name Designation Remarks Dato’ Sri Mahamad Fathil bin Non-Independent Non Entrepreneurial experience across multipl e sec tors Dato’ Mahmood Executi ve Chairman Directorships in numerous companies Diploma, Ins titut e of Management S pecialist, fellow, British I nstitut e of Management, UK Dato’ A hmad F uad bi n Md Ali Non-Independent Non Over 20 years experienc e in fi nance, accounting auditing & c ons ultanc y Executi ve Deput y Involved in the O&G industry since 2000 Chairman ACCA, Member of MICPA , P ublic Acc ountant in MIA Saiful Aznir bin Shahabudin Independent Non Over 10 years experienc e in general management, c orporate finance & Executi ve Director privatization CEO of Sharikat Permodal an Kebangsaan Berhad MBA, Chicago U niversity, B BA, Wes tern Michigan Uni versit y, US A Alexandra Elisabeth Johanna Independent Non 16 years in C orporat e B anki ng and I nvest ment Banki ng at ABNAMRO B ank Maria Schaapveld Executi ve Director Head of Europe for RBS during 2008 Degree, Politics, Philosophy & Economics , Oxford U niversity, UK and Masters in Development Economics ,Eras mus Uni versit y, N etherlands Andrew Philip Whittle Independent Non 40 years of tec hnic al and managerial experience i n the petrol eum explorati on Executi ve Director and production indus try worldwi de f ocusi ng on South East Asia/ Austr alia Member of the A merican Ass ociation of P etroleum Geologists, the S ociet y of Professional Well Log Anal ysts and the P etroleum E xpl oration S ociet y of Australia Bachelor of Science, First Class Honours in Geology, Uni versit y of A delai de, Australia Chan C hee Beng Non-Independent Non 30 years experience in inves tment banking, fi nanci al management and Executi ve Director accounting Joined Usaha Tegas in 1992, s erves as executi ve direct or and sits on the B oard of Directors of Usaha T egas relat ed companies Degree, Economics & Accounti ng, Newcastl e, ICA EW, UK Farah S uhanah Ahmad S arji Non-Independent Non Legal experienc e in both the government s ervic e and private sect or Executi ve Director Managing part ner of own law firm since 2003 BA in Law, Kent Uni versity, Barrister at Law Middl e Temple, UK Lim Ghee Keong Non-Independent Non Over 20 years experienc e in treas ury and credit management Executi ve Director Group Treasurer of Usaha Tegas Degree, Busi ness Administrati on, Hawaii Uni versit y, US A Hassan Assad B asma Chief E xecuti ve Offic er Over 30 years of experience in t he O&G sect or, 17 years in Asi a Previ ousl y at K vaerner E&C Singapore & Far E ast Si ngle Buoy Mooring B. Sc, Engineering, Manc hest er Ins titut e of Science & Tec hnology Uni versit y, UK Shahrul Rezza Hassan Chief Financial Officer Over 15 years of c orporate finance/ fund r aising and financial management experience Joined B umi Armada i n 2005, was previousl y with Us aha Tegas B. Sc, Economics, Brist ol Uni versit y, UK Source: Company
6 March 2012 Page 57 of 60 Bumi Armada
Senior Management Name Designation Remarks Hassan Assad B asma Chief E xecuti ve Offic er Over 30 years of experience in t he O&G sect or, 17 years in Asi a Previ ousl y at K vaerner E&C Singapore & Far E ast Si ngle Buoy Mooring Shahrul Rezza Hassan Chief Financial Officer Over 15 years of c orporate finance/ fund r aising and financial management experience Joined B umi Armada i n 2005, was previousl y with Us aha Tegas Andrew Day Lamshed Sr. VP, Floating Over 25 years of experience in t he O&G sect or produc tion s ystems MBA, Monash U nivesit y, Bac helor of E ngineering, Ballarat College, A ustralia Wee Yam Khoon Sr. VP, OSV Co-founder of Bumi Armada Navigation, 33 year veteran of Bumi Armada One the most experienced Malaysians regarding OSVs Massimiliano Bellot ti, Sr. VP, T&I Over 14 years of experience in O &G management, engineering & constructi on M.Sc Aircraft Design, D elft Uni vesity, Degree i n Aircraft Engineering, Pisa University Adriaan P etrus V an De K orput Sr. VP, Projects Veter an of Bl uewater Of fshore Producti ons S yster ms B. V. M.Sc Management, Brussels Univesity, Bs. Sc Mechanics, Rijswijk, Netherlands Jonathan E dward D uc ket t Sr. VP, Corporate Over 18 years experienc e in res earch, pl anni ng & strat egy planning BA, B usiness A dmin, The A merican College, London Madhus udanan Madas er y B alan Chief Talent Officer Over 22 years of HR experience i n O &G and ot her industries M. Arts Public Administration, numerous ot her degrees from Indi a Noor Az mi bin Abdul Malek VP, B AE Over 20 years experienc e in engineering B. Sc, Mechanical Engineering, Colorado S tat e Uni versit y Noval D’avila Paredes VP, Corporate HSEQ Over 16 years experienc e in HS EQ in Brazil MBA, Finance, Ibmec , Mast er in Produc tion Engineering, Rio Federal Uni versity Choong Guan Huat VP, S trategic Over 18 years experienc e in procurement and pr oject management Procurement Advanced Diploma, Busi ness Admin, U K, Certified P urchasi ng Manager, US A Source: Company
6 March 2012 Page 58 of 60 Bumi Armada
APPENDIX 1
Definition of Ratings Maybank Invest ment B ank R esearch us es t he following rating s yst em: BUY Total ret urn is expec ted to be above 15% in the next 12 mont hs HOLD Total ret urn is expec ted to be bet ween -15% t o 15% i n the next 12 mont hs SELL Total return is expec ted to be below -15% in the next 12 months
Applicability of Ratings The res pecti ve anal yst mai ntai ns a cover age universe of st oc ks, t he list of which may be adjust ed accordi ng to needs. Investment ratings ar e onl y applicable t o the stoc ks which f orm part of the coverage uni verse. Reports on companies which are not part of the cover age do not carry invest ment ratings as we do not acti vely follow developments i n these companies.
Some common terms abbreviated in this report (where they appear): Adex = Advertising Expendit ure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Rati o To Growth CAGR = Compounded Annual Growth Rat e FY = Financi al Year PER = PE R atio Capex = Capital E xpenditure FYE = Financial Y ear E nd QoQ = Q uarter-On-Quarter CY = Calendar Y ear MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equit y DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Int erest And Tax P = Price WACC = Weighted Average Cost O f Capital EBITDA = EBIT, Depreciati on And Amortisation P.A. = Per Annum YoY = Year-On-Y ear EPS = Earnings Per Share PAT = Profit Aft er Tax YTD = Year-To-Dat e EV = Enterprise Value PBT = Profit Before T ax
Disclaimer This report is for information purposes only and under no circumst ances is it to be consi dered or intended as an off er to sell or a solicitation of an off er to buy the s ecurities referred to herei n. I nves tors shoul d note that i ncome from suc h sec urities, if any, may fluct uat e and that eac h securit y’s price or val ue may rise or fall. O pinions or recommendations contained herei n are i n for m of tec hnical rati ngs and fundament al ratings. Technical ratings may differ from f undamental r atings as tec hnic al valuations apply diff erent met hodologies and are purel y bas ed on price and volume-relat ed i nfor mati on extract ed from B ursa Malaysi a S ecurities Berhad i n t he equit y anal ysis. Accordingl y, investors may receive bac k less t han originally invest ed. P ast performanc e is not necessaril y a guide to f uture perfor mance. This report is not intended t o provide personal invest ment advice and does not t ake into account t he s pecific invest ment objecti ves , the financial sit uati on and the particular needs of persons who may recei ve or read this report. I nvest ors shoul d ther efore seek financial, legal and other advice regarding the appropriat eness of investing in any s ecurities or the investment strat egies discuss ed or recommended in this report. The inf ormation contained herei n has been obtai ned from sources believed t o be reliabl e but suc h sources have not been independently verified by Maybank I nvest ment Bank B erhad and consequentl y no repres ent ation is made as to the accurac y or c omplet eness of t his report by Maybank Investment Bank Berhad and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or c onsequenti al losses or damages that may arise from the us e or relianc e of this report. M aybank I nvest ment Bank Berhad, its affiliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to ti me have positions or be mat erially inter ested in the s ecurities r eferred t o herein and may f urther act as market maker or may have ass umed an underwriting commit ment or deal with suc h securities and may also perform or seek t o perf orm investment banking servic es, advisory and other services f or or relating to thos e companies. Any inf ormation, opini ons or recommendati ons contai ned herei n are subj ect to change at any ti me, wit hout prior notice. This report may contai n forward looking stat ements which are often but not al ways identified by the us e of words such as “anticipat e”, “believe”, “esti mat e”, “intend”, “plan”, “expect”, “forec ast”, “predict” and “project” and st at ements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achi eved and other similar expressions. Suc h forward looking s tat ements ar e based on ass umptions made and inf ormation currentl y availabl e to us and are subject t o certain risks and uncert ainties t hat could cause the actual results to diff er mat erially from those expressed in any f orward looking stat ements. Readers are cautioned not t o place undue relevanc e on t hes e forward- looking statements. Maybank I nvest ment Bank Berhad expressl y disclaims any obligation t o updat e or revise any such f orward looking statements to refl ect new inf ormation, events or circumstances af ter the dat e of this publication or to reflect the occurrence of unanticipated events. This report is prepared f or the us e of Maybank Invest ment Bank B erhad's clients and may not be repr oduc ed, alt ered in any way, transmitted to, copied or distribut ed t o any other part y in whole or in part in any form or manner wit hout the prior express written consent of Maybank Investment Bank Berhad and Maybank Investment Bank Berhad accepts no liability whatsoever for the actions of third parties in this respect. This report is not direct ed to or intended f or distribution t o or us e by any person or entit y who is a citizen or resident of or located i n any locality, state, countr y or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
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APPENDIX 1
Additional Disclaimer (for purpose of distribution in Singapore) This report has been produc ed as of t he date hereof and t he infor mati on herein maybe subject t o change. Kim Eng Research Pt e Lt d ("KERPL") in Singapore has no obligation t o update s uch infor mati on f or any recipient. R ecipients of this r eport are t o cont act KERPL in Singapore in respect of any matt ers arising from, or in connection with, t his report. If t he recipient of this report is not an accr edited i nvest or, expert investor or institutional investor (as defined under Sec tion 4A of the Singapore S ecurities and F utures Act), KERP L shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. As of 6 March 2012, KER PL does not have an int erest i n the s aid company/companies .
Additional Disclaimer (for purpose of distribution in the United States) This research report prepared by Maybank I nvest ment B ank Ber had is distributed in t he United St ates (“US”) to Major US Institutional Invest ors (as defined in Rule 15a-6 under the Sec urities E xchange Act of 1934, as amended) onl y by Ki m E ng Securities US A, a broker- deal er registered in the US (registered under Sec tion 15 of the S ecurities E xc hange Ac t of 1934, as amended). All responsibility for the distribution of this r eport by Kim Eng Securities USA in the US shall be borne by Kim Eng. All resulti ng trans actions by a US person or entit y shoul d be effec ted through a registered broker-dealer i n the US. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herei n may not be eligible for sale in all jurisdictions or to certain categories of investors. This report is not directed at you if Kim Eng S ecurities is prohi bited or restricted by any legislation or regulati on in any jurisdiction from making it available to you. Y ou shoul d satisf y yourself before reading it that Kim Eng S ecurities is per mitted t o provi de res earch material c onc erning inves tments to you under rel evant legislation and regul ations . Without prejudice t o t he foregoi ng, the reader is to note that additional disclai mers, warnings or qualifications may appl y if t he reader is receivi ng or accessi ng this report in or from other than M alaysia. As of 6 March 2012, Maybank Invest ment Bank Berhad and the covering analys t do not have any int erest in any companies recommended in this Mar ket themes report. Anal yst C ertification: The views express ed i n t his research report accurat el y reflec t the anal yst's personal views about any and all of the subject s ecurities or issuers; and no part of t he researc h anal yst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or vi ews expr essed in t he r eport.
Additional Disclaimer (for purpose of distribution in the United Kingdom) This doc ument is being distributed by Ki m E ng Sec urities Limited, which is aut horised and regulat ed by t he Financial S ervic es A uthority and is for Inf ormational Purposes onl y. T his doc ument is not int ended for distribution to anyone defined as a Ret ail Client under the Financial Servic es and Mar kets Act 2000 within the UK. A ny inclusi on of a third part y link is f or t he reci pients convenienc e onl y, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report shoul d be consi dered as constit uting legal, accounting or tax advice, and that for accurat e guidanc e recipients shoul d cons ult with t heir own independent t ax advisers.
Published / Printed by
Maybank Investment Bank Berhad (15938-H) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136 http://www.maybank-ib.com
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