FPSO redeployment uncertainty puts BW Offshore into impairment mood again

FPSO operator BW Offshore has warned of impairment to the value of five FPSO units due to lower expectations for longer extensions on current contracts and limited potential for future redeployment.

BW Offshore revealed on Monday it has decided to record an impairment to the book value of the FPSOs BW Athena, Espoir Ivoirien, Sendje Berge, Petróleo Nautipa, and Umuroa amounting to $66.6 million in the fourth quarter of 2021. The first and the last of these five FPSOs are in cold lay-up in the UK and Indonesia, respectively.

A little over a year ago, an accident on the FPSO Espoir Ivoirien led to the death of two workers, while the vessel was operating offshore Ivory Coast for CNR International. The vessel was shut down for 30 days following the incident and it restarted operations in February 2021. The vessel’s fixed contract period is set to end this year with options until 2036.

The Sendje Berge unit late last year was awarded a contract extension, which will see it continuing operations for Addax Petroleum in Nigeria until the fourth quarter of 2022.

The Petróleo Nautipa is operating offshore Gabon for Vaalco but is set to be replaced by an FSO unit upon the expiration of its contract in September 2022.

As explained by the owner, the impairment reflects a reduced expectation of longer-term extensions to current contracts for the listed vessels that are still in operation, as well as a limited potential for future redeployment for the same units and for the FPSOs that are in lay-up.

In addition, the company will record an impairment of $23.8 million related to the previously announced sale of Joko Tole and associated loss from the transaction. The sale of this vessel was announced in January 2022 as part of BW’s strategy to transition to floating energy infrastructure investments.

On the other hand, BW Offshore will further reverse a previous impairment of $4.2 million related to the sale of Cidade de São Vicente, which the company sold to a yard in India last week for recycling. The vessel was sold for a cash consideration of $12.8 million.

Furthermore, BW Offshore said it will also record a gain of $14.9 million from the sale of shares in BW Energy in October 2021.

The impairments and gain will be included in the fourth-quarter earnings and annual 2021 accounts which will be published on 28 February 2022.

BW Offshore experienced a similar situation in February last year when it had recorded an impairment to the book value of three FPSOs, amounting to $59.6 million, in the fourth quarter of 2020 amid continued uncertainty regarding redeployment. The three FPSOs were Berge Helene, Cidade de São Vicente, and Espoir Ivoirien.