Dommo Energia may miss FPSO OSX-3 charter payments

Brazil’s Dommo Energia might default on two payments for the charter of the FPSO OSX-3 in Brazil.

FPSO OSX-3 / Image source: OSX
FPSO OSX-3 / Image source: OSX

Dommo Energia in November 2018 executed an amendment to the OSX-3 charter agreement with the owner of the vessel, OSX 3 Leasing B.V., to extend the existing charter for a period of up to 20 years. The charter payment under the deal agreed last year was $47.2 million per year – equivalent to a $129,315 day rate.

The oil company on Tuesday said it was finalizing the revitalization of Tubarão Matelo field offshore Brazil, a project that would require significant capital expenditures during the following 60 days to finalize.

Dommo Energia said it might need to utilize a larger portion of its oil sales revenue to complete the revitalization plan, “which [Dommo] believes is ultimately in the interests of all parties concerned.”

“If this situation does arise, [Dommo Energia] is likely to default on the charter payment for the next offload (currently scheduled for the end of December) and potentially the following offload in 1Q 20.”

Dommo Energia explained that the default on the OSX-3 payments might be necessary to avoid any risk of liquidity constraints as Dommo Energia completes the revitalization.

“Dommo Energia and OSX3 intend to discuss potential amendments to the terms of the [bareboat charter agreement] to align the charter payments due under the BBCA with the company’s own projected cash flows and operating and capital expenditures. The Company will keep the market updated regarding the outcome of these discussions,” Dommo said.

Following the updated charter deal last year, Dommo Energia said the charter gave it the necessary visibility and long-term commitment to keep investing in Tubarão Matelo Field to further increase its production. The main objective is to increase TBMT’s production to an estimated 10.0 kbbls per day in the beginning of 2020.

Dommo expects the project will cost it $77.9 million, which should be disbursed within the next 12 to 18 months and will be funded from existing cash balances and future cash generation.

In a recent quarterly report, Dommo said that the Revitalization comprised of two campaigns and contemplated in the first phase – in progress – the completion of 7-TBMT-4HP, which was drilled but not connected to the FPSO OSX-3, the workover of 7-TBMT-2HP and the acquisition of a backup ESP. The second phase addresses the remaining three producing wells and will consist of workover activities as they become necessary.


Offshore Energy Today Staff

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