FPSO operator BW Offshore nearly tripled its quarterly profit despite negative impact of a $13 million charge due to termination of an FPSO charter in New Zealand.
In the fourth quarter of 2019 BW Offshore recorded operating revenue of $303.4 million, an increase compared to revenues of $255.4 million in 4Q 2018.
BW nearly tripled its profit in the fourth quarter of 2019 which totaled $30.6 million versus $10.3 million profit in the same period of 2018.
The company said that its FPSO fleet had continued to deliver consistent high uptime in the quarter with an average commercial uptime for the fleet of 99%.
Regarding its Umuroa FPSO, BW said that the client had not paid any contractual commitments since the third quarter of 2019. It is highly uncertain whether any outstanding amount can be recovered as the client is under receivership, BW said.
As a result, the fourth quarter is negatively impacted by $13 million. Demobilization from the field and transportation of the unit back to Singapore is being planned which is estimated to cost in the range of $20 million.
To remind, a contract for BW’s FPSO Umuroa, operating for Tamarind Resources offshore New Zealand, was terminated in October 2019. The effective date for termination was set for December 31, 2019.
Later in October BW said it had identified uncertainties related to payment of outstanding overdue hire and payment of future hire until the termination date in December 2019. BW said it would seek to recover all outstanding hire from Tamarind Resources and its parent company under the provisions of the existing contracts.
‘Outlook for field developments and FPSOs favorable’
According to the company, several years of under-investment has led to declining offshore production of oil and gas. The decrease will likely become more evident in the coming years, as production tied to developments made in the previous investment cycle are increasingly subject to natural depletion.
A tighter global balance of crude oil supply and demand and lower break-even costs from increased efficiencies and significant repricing of oil exploration assets is expected to lead to more projects sanctioned going forward. The market outlook for offshore field developments, and FPSOs in particular, is favorable. Initially, the Company expects an increased focus on incremental investments tied to existing infrastructure, with green-field investments following later in the cycle.
BW Offshore is currently evaluating several field-development prospects, including FPSOs. The Company maintains a commercially disciplined approach to new investments and bid selectively on new projects.
The majority of BW Offshore’s fleet remains on long-term contracts with national and independent oil companies. The fleet should continue to generate significant cash flow in the time ahead.
Offshore Energy Today Staff
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