BW Offshore in insurance settlement for FPSO damaged in 2015 explosion

FPSO operator BW Offshore has signed an agreement with its insurers for an early repair cost settlement for the FPSO Cidade de São Mateus damaged in an explosion in 2015, which killed nine workers. 

At the time of the incident, the FPSO was operating for the Brazilian oil company Petrobras on the Camarupim and Camarupim Norte fields in Espirito Santo, 120 kilometers from the coast.

BW Offshore said on Wednesday that the agreed settlement amount is approximately $250 million and proceeds from the settlement are expected to be received during 1Q 2017. The insurance settlement will be recorded in the 4Q 2016 financial statements.

The 2015 financial statements included a total of $160 million in estimated preliminary insurance revenue for repair of the unit and an equal amount as impairment of the net book value of the asset.

The 4Q 2016 financial statements will reflect approximately $90 million recorded as insurance revenues, which will bring the total recorded amount for insurance revenues for repair of the FPSO Cidade de São Mateus to approximately $250 million, the FPSO operator said.

As a consequence of concluding the repair-evaluation and signing the agreement with the insurers, the company stated it has deemed necessary to record a further impairment to the net book value of the FPSO. It is estimated that this impairment will be approximately $140 million, subject to a final evaluation before the 4Q 2016 report is approved.

The FPSO Cidade de São Mateus is currently in lay-up. Before final discussions are concluded and agreed with the client, it is not possible to establish a firm plan for when the unit will return to the field, BW concluded.

In related news, BW was recently awarded an extension agreement for FPSO Abo with Nigerian Agip Exploration Ltd, a subsidiary of ENI S.p.A..