This article first appeared in The Edge Financial Daily, on March 25, 2016.

KUALA LUMPUR: Bumi Armada Bhd’s incoming chief executive officer (CEO) Leon Andre Harland might have his job cut out for him amid a call for him to review the group’s RM26 billion floating, production, storage and offloading (FPSO) contracts.

JF Apex Securities Bhd analyst Lee Cherng Wee said following the termination of the group’s RM1.46 billion Armada Claire FPSO contract in Australia by Woodside Energy Julimar Pty Ltd, it was best that Harland reviewed the rest of the contracts.

He said this would reassure investors because there has been scant information from Bumi Armada apart from the recent announcement of the termination notice and filing of the suit against Woodside.

“Harland should review the contracts to eliminate the danger of any of them being called off. He should engage with clients and discuss their financials. This could be a reassurance measure for investors that the contracts are progressing and intact.

“So far, Bumi Armada has not given any information aside from its law suit announcement,” Lee told The Edge Financial Daily in a phone interview.

Lee said Bumi Armada was in a slightly challenged position now with the termination, and was a little concerned that although its order book stood at RM26 billion, there was a possibility of more cancellations.

“The appointment (of Harland) comes at a difficult time for the company but we view it as positive, given the 46-year-old Dutch national’s hands-on experience in FPSO,” he said, upgrading JP Apex’s call to “hold” with an unchanged target price of 90 sen.

“The recent recovery of oil price to US$40 (RM161.60) a barrel is a slight improvement in the overall sentiment on the oil and gas industry,” he said.

Asked about earnings, Lee said Bumi Armada could see a turnaround after reporting a loss of RM241 million for the financial year ended Dec 31, 2015 (FY15). He forecasts a net profit of RM293.1 million for FY16.

“The group has several ongoing projects costing a few billion ringgit which will contribute to its revenue. I would say their contracts are still intact. It just needs reviewing after the Armada Claire termination,” Lee said.

Affin Hwang Investment Bank Bhd viewed Harland’s appointment as positive which ended Bumi Armada’s 15-month search for a new CEO after his predecessor Hassan Assad Basma left in January 2015 due to family matters.

“We see the appointment of Harland, an industry stalwart in the FPSO leasing business, as representing Bumi Armada’s continuing commitment to its core floater business segment’” it said in a note yesterday.

Year to date, Bumi Armada’s share price has dropped 22.55%, closing at 79 sen yesterday.