This article first appeared in The Edge Malaysia Weekly on November 13, 2023 - November 19, 2023
Bumi Armada Bhd’s journey in the last decade is seen as one of the few turnaround success stories among Malaysia-listed oil and gas (O&G) industry players that are worth highlighting.
One of the worst hit among locally listed upstream companies during the 2014/15 oil price crash, Bumi Armada has emerged stronger and posted its best results since its 2011 listing for two consecutive years in 2021 and 2022, brushing off the pandemic, which had affected the wider industry.
With proof of its recovery, Bumi Armada’s share price rose from a near record low of 13.5 sen on March 31, 2020, to 63 sen on March 31, 2023 — representing a compound annual growth rate of 67.1% in the three-year period evaluated for this year’s The Edge Billion Ringgit Club (BRC) corporate awards.
That strong share price performance helped Bumi Armada clinch the BRC award for highest returns to shareholders over three years in the energy and utilities sector for the second year running.
While other large-scale upstream service providers affected by the downturn raised cash by issuing new equities, Bumi Armada opted for no recapitalisation exercise.
Instead, it kept its financial discipline, divested the oversupplied offshore support vessel (OSV) segment, and realigned its focus towards the more technical floating production storage offloading (FPSO) vessels segment.
The result has been fantastic, as attested to by its share price gains even as the group slashed its debt by RM4.89 billion between 1QFY2020 and 2QFY2023, while also recovering RM2.81 billion in reserves to reduce its net gearing to 0.7 times, from 2.9 times at its peak in 1QFY2020.
In the last three financial years, the company’s net profit grew by an average of 22.5% each year, from RM58.62 million in FY2019 to a record RM732.41 million in FY2022, on the back of RM2.41 billion in revenue — its second highest after the RM2.42 billion recorded in FY2018.
Coming out of the challenging period of 2015 to 2018, Bumi Armada has remained among the largest FPSO players in the world, with exposure to seven FPSOs (three of which are wholly-owned) and one liquefied natural gas (LNG) floating storage unit (FSU).
With its balance sheet recovery, Bumi Armada says it is “pursuing new opportunities in targeted markets”. Bumi Armada’s vessels are located in Asean, India, Angola, the UK and Malta.
In June, Bumi Armada said it was likely to see a one-year extension of its 49%-owned Armada Sterling II FPSO in India. Separately, the group is awaiting final acceptance for its 30%-owned Armada Sterling V.
In September, it announced a partnership to develop and commercialise LNG from the Madura gas field, with the first shipment of LNG anticipated to take place three years after making the final investment decision.
It is also making its debut in the upstream exploration and production (E&P) segment in Indonesia, with a production sharing contract signed by its co-bidder; Bumi Armada will provide an FPSO, and potentially a floating LNG (FLNG) or gas pipeline for the projects.
“Our sustainability strategies, which include gas as a transitional energy source, will drive new infrastructure projects,” former chairman Tunku Ali Redhauddin Tuanku Mukhriz said in Bumi Armada’s 2022 annual report before his retirement in May this year. “We will also evaluate carbon capture injection and storage projects.”
It is not all smooth sailing even as the debt reduction exercise continues. In the first half of FY2023, its performance was dragged lower by downtime involving the Armada Kraken FPSO in the North Sea, UK, owing to equipment malfunction.
Net profit fell 14.04% year on year to RM319.78 million, from RM372.01 million, on the back of a 14.13% y-o-y decline in revenue to RM985.31 million, from RM1.15 billion.
Closing at 56 sen on Oct 27, shares in Bumi Armada remain below their 2018 peak of 94 sen and the 2014/15 trading average of RM1.15.
In August, Bumi Armada confirmed that the Armada Kraken FPSO’s operational performance had been restored to pre-shutdown levels.
“Redundancy is expected to be restored when two new hydraulic submersible pump transformers, which are estimated to arrive in September 2023, are successfully installed on the Armada Kraken FPSO,” it had said.
At the time of writing, analysts covering the sector remain bullish on Bumi Armada, with some saying the worst is over for the group and others expecting another record earnings in FY2024. With the floating assets segment still seeing newbuilds, following years of O&G industry underinvestment, investors are certainly keeping a close watch on how Bumi Armada will grow from here.
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