After a rocky start to the year, BW Offshore moves to seize energy transition opportunities

After a rocky start to the year, marked by a fatal accident on an FPSO off the Ivory Coast, BW Offshore is targeting a newbuild FPSO investment this year, in addition to buying into the floating offshore wind market in a bid to position itself as an early mover in the offshore energy transition.

BW Offshore has now restarted its FPSO Espoir Ivoirien, located offshore the Ivory Coast, following an incident in January 2021, which resulted in two fatalities.

The accident was caused by leakage of hydrocarbons into a tank where work was being performed. The unit is operated for CNR International by BW Offshore. The vessel’s contract with CNR International is set to expire in 2022.

Following the incident, the production was stopped and the unit was shut down.

In its quarterly and annual report on Friday, BW Offshore said that the FPSO Espoir Ivoirien resumed operation on 13 February 2021.

BW also said that a comprehensive internal investigation led by an independent investigator is ongoing to establish the root causes of the accident and the generic causes that have allowed these root causes to exist.

Furthermore, the internal investigation, which will conclude in March 2021, will lead to corrective actions to fix the root causes and recommendations for wider organisational changes to address the generic cause.

Ahead of releasing its quarterly results, BW Offshore last week warned it would record an impairment to the book value of three FPSOs, amounting to $59.6 million, in the fourth quarter of 2020.

The three FPSOs are Berge Helene, BW Cidade de São Vicente, and Espoir Ivoirien.

Overall impairments for the BW Cidade de São Vicente were $104.8 million, $34.9 million for Espoir Ivoirien, and $71.6 million for Berge Helene.

In addition to these three units, BW said in the report on Friday that, during 2020, impairment charges were also recognised for BW Athena ($36.1 million), FPSO Polvo ($17 million), and Umuroa ($17.1 million).

The company is expecting a more challenging market for redeployments of mature FPSOs going forward and is therefore also considering recycling of some of these units in lay-up.

Looking ahead, BW is targeting a newbuild FPSO final investment decision (FID) in the first half of 2021 with plans to secure equity and debt financing prior to the FID.

BW will be working with known and tested suppliers and yards and the new FPSO will be based on RapidFramework hull.

In addition, the FPSO operator is also investing in the floating offshore wind sector through an agreement with a floating wind technology developer Ideol.

The deal will see BW Offshore obtaining a 50 per cent stake by investing EUR 60 million (about $72 million) and the establishment of BW Ideol, a global integrated floating offshore wind company.

BW Offshore expects to own half of BW Ideol after a contemplated capital raise and listing as a separate company on Euronext Growth, targeted for end-March, with BW Offshore participating as an anchor investor.

The investment and participation in the capital raise will be funded from existing liquidity reserves.

Ideol founders and employees are expected to own about 20 per cent of the shares post listing.

Marco Beenen, CEO of BW Offshore, said: “Over the past year, we have made significant progress in leveraging BW Offshore’s extensive operational and development capabilities to position as an early mover in the offshore energy transition.

“This is reflected in good progress on new infrastructure-like FPSO projects with attractive long-term returns, and by developing partnerships to position us in the forefront of floating offshore wind developments”.

As for its financial performance, BW Offshore was affected by the challenging market conditions last year, which is visible in its quarterly and annual results.

Namely, the company recorded operating revenues of $222.5 million in 4Q 2020 compared to $195.1 million in 3Q 2020 and $228 million in 4Q 2019.

For the full year 2020, BW’s revenues were $886.3 million, a decrease compared to revenues of $947.4 million in 2019.

BW recorded a net loss of $43 million in 4Q 2020, compared to a profit of $14.6 million in 3Q 2020 and a profit of $30.6 million in 4Q 2019.

For the full year 2020, BW sank to a loss of $272.3 million from a profit of $106.1 million in 2019.

At the end of 2020, BW Offshore’s total backlog was $4 billion with a firm backlog of $2.6 billion.

Looking ahead, the FPSO operator expects that there will be a sizeable number of potential contract awards over the coming years.