Yinson’s Ghana FPSO contract terminated amid Covid-19

KUALA LUMPUR (April 1): Yinson Holdings Bhd’s contract from Aker Energy Ghana Ltd to provide a floating production storage and offloading (FPSO) vessel for the latter’s Pecan development project at the deepwater Tano/Cape Three Points (DWT/CTP) in offshore Ghana has been terminated amid the Covid-19 pandemic.

“The termination is due to the decision made by Aker Energy to postpone the activities under the DWT/CTP Petroleum Agreement and the development of the project until further notice amidst the Covid-19 pandemic,” Yinson said in the filing with Bursa Malaysia today.

Yinson added that the group will preserve its right under the letter of intent (LoI) for compensation arising from the termination.

Yinson said it had on March 31 received a notice from Aker Energy to terminate the LoI issued on Feb 20 for the proposed award of the contract to charter FPSO for the Pecan development.

The termination is expected to have no material effect on Yinson group’s earnings and net assets per share for the financial year ending Jan 31, 2021. The group said it will make appropriate announcements to Bursa Malaysia Securities Bhd should there be any material development on the matter.

To recap, the LoI had been accepted by Yinson West Africa, an indirect 49%-owned joint venture entity of Yinson; Yinson Gazania Production Ltd, an indirect 94.9%-owned subsidiary of Yinson; and Yinson Gazania Operations Ltd, an indirect 49%-owned joint venture entity of Yinson.

The primary term of the contract is for a period of 10 years, and Aker Energy may extend it for an additional one year, up to five times, for a maximum of 15 years or as agreed by the parties.

The firm said the Pecan field is located in ultra-deep waters, ranging from 2,400 to 2,700 metres deep, 115 kilometres offshore Ghana. The field will produce through Yinson’s FPSO, which will be the centre for processing and exporting of crude oil from the field, with a plateau production of approximately 110,000 barrels of oil per day.

Aker Energy owns 50% of the rights to the Tano/Cape Three Points field with the remainder being held by Lukoil Overseas Ghana Tano Ltd (38%), Ghana National Petroleum Corp (10%) and Fueltrade Ltd (2%).

Today, trading in the shares of Yinson was halted for one hour from 9am to 10am, after which the counter rose six sen or 1.25% to RM4.83 before paring its gains at RM4.79 at the noon break, with some 1.14 million shares traded.

Almost one-third of its share price has diminished since March 3 from RM7.03 on weak sentiments on the back of the oil price crash prompted by the price war between Saudi Arabia and Russia amid demand plunging due to the coronavirus pandemic.

In the month of March alone, Brent crude oil price has fallen sharply by 55% to US$22.74 per barrel from US$50.52. While US West Texas Intermediate crude has sank some 52% at US$21.53 a barrel from US$41.76.

Source: TheEdgeMarkets