BW Offshore sees profit drop due to FPSO explosion in February

BW Offshore, an Oslo-based provider of floating production systems to the international oil and gas industry, has reported a drop in its net profit for 1Q 2015.

The company’s net profit amounts to $5.8 million compared to $12.7 million in the 1Q 2014.

According to the company, this change relates to lower revenue due to FPSO Cidade de São Mateus being off-hire after the accident that occurred on February 11, 2015.

The company further reports that operating revenues for the quarter amounted to $236.8 million, a decrease of $28.0 million (11%) ($264.8 million).

Operating expenses amounted to $143.7 million, a decrease of $11.7 million (8%) ($155.5 million). EBITDA for the first quarter amounted to $93.2 million, a decrease of $16.0 million (15%) ($109.2 million).

Operations

BW Offshore operates 17 units. The owned fleet consists of 14 FPSOs and one FSO. Average uptime during the first quarter was 94.4% (99.8%). The lower uptime was caused by the off hire of FPSO Cidade de São Mateus.

On February 11, 2015, there was a gas explosion onboard the FPSO Cidade de São Mateus, operating on the Camarupim and Camarupim Norte fields for Petrobras in Espirito Santo Littoral. Production was stopped and the unit has been shut down since the accident. The accident resulted in nine fatalities and 26 crew needing medical attention of a total crew of 74. According to BW Offshore,  the joint investigation with Petrobras was started immediately after the accident. The investigation was completed by end of April and signed by both companies.

In parallel with the investigation damages to and necessary repairs of the unit have been undertaken and are still ongoing. The first phase of the operation has been to stabilise the unit, free process and subsea systems of hydrocarbons, empty the unit of cargo and disconnect the unit for transport to a yard for repairs. The cost of repairs are still being assessed together with impact from impairment to be taken for damages incurred.

BW Offshore carries insurance cover on a fleet wide basis, for its crew and support staff, pollution and clean up and any damage to vessels. In addition, the FPSO Cidade de São Mateus is also covered by a loss of hire insurance. The accident and its consequences will to a large extent be covered by these policies and BW Offshore is working closely with insurers and their loss adjusters in the recovery operations.

Outlook

“The short term outlook for BW Offshore’s products and services has changed due to the drop in oil price. However, more recently we have seen an improvement in project activity related to previously identified prospects,” BW Offshore said.

The company further said that it expects to increase activity on FEED and bidding in the second half of 2015.

BW Offshore still expects outsourcing of production to be a cost effective solution for oil companies to pursue oil development initiatives going forward.

In its first quarter results report, BW Offshore said that its cash flow from the operating units is to a large extent mitigated by the loss of hire insurance for Cidade de São Mateus in the coming year. Redeployment of units coming off contracts will depend on oil price development and related to this, the number of new developments.

The majority of BW Offshore’s fleet remain on long term contracts with national and independent oil companies. “The fleet will continue to generate a healthy cash flow in the time ahead,” the company concluded.

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