Ocean Yield mulls options for FPSO as Reliance says no to purchase option

Infrastructure

India’s Reliance Industries has not exercised its option to purchase Ocean Yield’s FPSO Dhirubhai-1 and the unit has now ceased production from the MA field located off the East Coast of India. 

FPSO Dhirubhai-1; Source: Ocean Yield

As previously reported, Reliance had the option to buy the FPSO once the FPSO’s ten-year charter contract on the MA field expires.

The contract expired on Wednesday, September 19, 2018 and, since Reliance has not exercised the purchase option, the FPSO has now ceased production on the field.

The FPSO Dhirubhai-1 is owned by Ocean Yield’s subsidiary Aker Floating Production (AFP).

Ocean Yield said on Wednesday that, as a result, Ocean Yield will consider recording an impairment related to the FPSO in 3Q 2018 between $0-50 million.

The company has earlier recorded a provision of $30 million related to decommissioning costs, which is expected to materialize as cash outlay during H2 2018 and H1 2019. There are still certain outstanding contractual disagreements and outstanding payments between Reliance Industries and AFP.

When it comes to employment opportunity outside India that Ocean Yield had been considering, AFP has been awarded a Front End Engineering Design (FEED) study for the potential use of the FPSO.

The FEED study is estimated to be completed during 4Q 2018. Furthermore, the company has in recent months experienced increased interest for the FPSO from oil companies and will pursue these opportunities in parallel with the FEED project.

Commenting on the FPSO Dhirubhai-1, CEO of Ocean Yield, Lars Solbakken said:”The FPSO Dhirubhai-1 has during the 10-year contract with Reliance Industries had excellent operational utilization and has been maintained to a very high standard. Based on an improved outlook for the FPSO market, we are optimistic that we will be able to find a satisfactory solution for the unit.

“Ocean Yield has a fleet of 55 vessels and an EBITDA charter backlog of $3.6 billion as per 2Q 2018. As such, the company has a robust dividend capacity and shareholders can expect that the dividend for the third quarter will remain unchanged from the second quarter.”