Century Energy Services, a Nigerian oil and gas service company has struck a $40 million deal with Kuala Lumpur-based Bumi Armada for a floating production, storage and offloading vessel.
In a filing with Bursa Malaysia, Bumi Armada said its wholly-owned subsidiary Armada Oyo Ltd (AOL) has entered into an agreement with Century Energy Services Ltd (CESL) for the sale of Armada Perdana FPSO.
Century Energy plans to redeploy the FPSO to another field in Nigeria. The Armada Perdana FPSO was initially operated on the Oyo field in Nigeria.
Since its previous charterer, Erin Petroleum, and its parent company Erin Energy Corporation, filed for bankruptcy under Chapter 11 of the US Bankruptcy Code in April 2018, the FPSO has been out of contract in Nigeria.
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According to people with knowledge of the deal, the purchase price comprises a deposit of $5.5 million to be paid by Century Energy to Bumi’s subsidiary Armada Oyo.
Of this amount, $4.5 million of this has already been paid with the remaining $1 million payable before the end of 2019. A further $11.6 million will be used to settle amounts owing.
Bumi said $5 million on or before the earlier of six months after the vessel is delivered to Century Energy or when oil is first produced from the field to which the vessel is redeployed.
The remaining balance of $17.9 million will be paid within two years of first oil. To secure the unpaid portion of the purchase price, Bumi will hold a mortgage over the Armada Perdana.
Once the sale has been concluded, Bumi said it will be absolved from its demobilisation obligations. The gain to be recognised in the financial statements for the financial year ending 31 December 2019 will be about $5 million.
Bumi Armada suspended operations on Armada Perdana in June 2017 after irregular payments from Erin Petroleum Nigeria Ltd but allowed continuing oil produced to flow into Armada Perdana and a one-off cargo intake by Erin.
In April 2018, Bumi Armada received a notice from Erin advising of a purported “Force Majeure Event” and requesting immediate shutdown of operations on the FPSO Armada Perdana. The company was also served a notice to seize the entire crude oil produced and stored in Armada Perdana in Nigeria.
However, the oil and gas industry players want clarity in the industry in order to best make investment decisions for both now and in the future. Lack of clarity has had Nigeria lose deals to African peers.
Anthony Okoroafor, chairman of Petroleum Technology Association of Nigeria (PETAN), captures sentiments in the oil and gas when he suggested conducting bid rounds for mainstream and marginal fields were long overdue because “there is no time as oil is going out of fashion and we have to monetise it fast”.
Okoroafor said delays in enacting the Petroleum Industry & Governance Bill (PIGB) and other reforms were major factors in deterring project sanctions
“We must have sanctity of contracts under the rule of law, licences should not be removed without due process and tax officials should not be sent out to harass companies as this sends out the wrong message to investors,” he said.
“Fiscally competitive terms are needed to unlock the deep offshore, while last year’s proposed production sharing contract (PSC) Amendment Bill to hike revenue royalties to 50 percent will drastically reduce net present value and further crush internal rate of return, driving investment to other countries,” he said.
