BW Offshore in arbitration with Addax. Statoil, Petronas not extending FPSO deals

Norwegian FPSO supplier BW Offshore has been informed by Statoil and Petronas that the contracts for two FPSO units will not be extended and will run out next year.

On top of this, the company has initiated arbitration against a client who is not paying an FPSO lease. All this was revealed by BW Offshore on Monday as it presented its third quarter 2016 financial results.

The company operates the FPSO Peregrino for Statoil and Sinochem on the Peregrino oil field offshore Brazil. According to BW Offshore, during third quarter it was notified that Statoil, due to a change in the operating model, will not exercise options for extension of the contract beyond June 2017.

Also, Petronas told BW Offshore it would not extend the contract for the FPSO Berge Helene beyond May 2017. The FPSO is currently located in Mauritania.

“BW Offshore is in dialogue with the client about work to be undertaken for the disconnection and demobilization of the FPSO from the field,” the FPSO owner said.

Furthermore, the company is now working to collect unpaid dayrate from the Sendje Berge FPSO, working for Addax, a subsidiary of Sinopec, in Nigeria.

“The company has for some time not been paid the full contractual rate by Addax Petroleum Exploration Limited for the FPSO Sendje Berge. BW Offshore considers the arguments for not paying full rate unjustified and have started an arbitration process,” the vessel owner said.

During the third quarter the company submitted a claim to the arbitration tribunal of $52.6 million.

“BW Offshore is currently awaiting the outcome of a forthcoming hearing by the arbitration tribunal,” BW Offshore said.

Despite these developments, BW Offshore provided a relatively optimistic outlook, at least for the long term. The company, however, did acknowledge the oil and gas markets remained challenging with field developments still being postponed.

The company’s short- and medium-term expectations for low market activity with few awards were unchanged, however, a positive long- term outlook is maintained as offshore developments remain an “important part of the oil and gas supply to meet future demands as the supply and demand of oil in world markets is rebalancing.”

Apart from the expected expiration of Sendje Berge FPSO contract, BW Offshore has three more uncontracted units: BW Athena, Azurite Indonesia, Belokamenka.

Other than this, BW Offshore has 13 units under long term contract, with the earliest expiring in 2017, the longest in 2024 (optional extension periods excluded).

Also, liquidity-wise, BW Offshore said that, with “strong support from all stakeholders,” the company completed all its previously announced financing initiatives during the third quarter.

“The new long-term financial platform will contribute more than $500 million in improved liquidity in the period through 2020 and give the Company a secure basis for operation until an expected market recovery. This initiative, as well as the continued strong operating cash flow, is expected to cover all medium-term liquidity requirements. Further, all the Company’s firm capital commitments are fully financed,” BW Offshore said.

BW Offshore posted 3Q 2016 net loss of $11.2 million, compared to a loss of $7.3 million a year ago. Operating revenue was $159.6 million, down from $308.7 million a year ago.

Offshore Energy Today Staff