Thursday, December 18, 2014

Ananda Krishnan looking to exit Bumi Armada?

Tycoon T. Ananda Krishnan, commonly known as AK, is looking to sell his entire 34.9% stake in Bumi Armada Bhd, Asia’s largest floating, production, storage and offloading (FPSO) company, said sources.

“Some oil and gas (O&G) service companies have been approached to take up AK’s stake in Bumi Armada,” the source told The Edge Financial Daily, adding that the deal could be settled by cash or a share swap in the purchaser’s company.

The negotiations are being conducted at shareholder level, said the source.

Nonetheless, it might not be easy for the tycoon to find a buyer given the current cautious sentiment on the O&G sector, particularly the offshore support vessel (OSV) segment where overcapacity is likely to weigh down on charter rates.

It is not known at what price the tycoon intends to part with his shares as Bumi Armada’s share price has plunged sharply in the past six months.

The company’s net assets per share was at RM1.57 as at September 30.

Based on yesterday’s closing price of RM1.16, AK’s shares are worth some RM2.4 billion, compared with a possible RM5.2 billion when Bumi Armada shares were trading at their peak early this year.

Year-to-date, the stock has fallen 53%, wiping out some RM8 billion from the company’s market capitalisation and leaving it with RM6.8 billion as at yesterday.

Bumi Armada’s share price has been on a downtrend since June when news broke that the company was facing problems with its African operations, particularly in Angola.

The company has been expanding its fleet in Africa. Currently, it has six vessels going into Angola, five in Congo and 11 in Nigeria.

It is currently the world’s fifth largest FPSO player with seven vessels in hand. The group also has a large OSV fleet consisting of about 51 vessels.

The share price plunged further when AK sold a 7.33% stake in Bumi Armada through his private entity Objektif Bersatu Sdn Bhd, giving him a current shareholding of 34.92%.

Some quarters see the tycoon’s share sale as a signal that something may not be right in the company. Nevertheless, Ananda is still the company’s largest shareholder through his private vehicle.

Other major shareholders include the Employees’ Provident Fund with 8.27%, Skim Amanah Saham Bumiputera (7.64%) and Ombak Damai Sdn Bhd (7.07%).

To make things worse, earlier this month, Bumi Armada’s long-serving chief executive officer Hassan Assad Basma tendered his resignation effective January 1, 2015.

Although he still acts as a consultant to the company until 2016, Hassan’s departure came as a surprise to many as he is still the ideal person to steer the company, having successfully pushed Bumi Armada through the 2007/2008 financial crisis.

Bumi Armada was relisted in 2011 at an initial public offer price of RM3.03, eight years after it was taken private in 2003 when the market turned tough.

Now that the O&G industry is once again sailing through rough waters, there have been talks of AK delisting Bumi Armada again.

Maybank IB Research, in a recent report, does not rule out a potential privatisation of the counter, as it was trading at around one time book value – considering dirt cheap for a leading offshore supportive vessel operator in the world.

“Operationally, we like Bumi Armada’s FPSO business model in the light of the current weak and volatile oil market environment,” the research firm added. – The Edge Financial Daily

Full article:

Saturday, November 15, 2014

What Is Oil Shale ?

Much have been said about oil shale in the media lately. It is said oil shale is one big component that is causing the oil prices to slide. So what exactly is oil shale ?

IER (Institute of Energy Research) : Oil shale is a fine-grained sedimentary rock which is very rich in organic sedimentary material called “kerogen.”

The shale is heated to separate the kerogen from the rock and the resultant liquid is converted to superior quality jet fuel, diesel fuel, kerosene, and other high value products.

So oil shale isn't like the natural oil found in the ground or in the ocean!

The process explained in a diagram -

Source: Wall Street Journal

Locations of Oil Shales 

Oil shale is found in many parts of the world, as the map above shows, but too bad, Malaysia isn't one place where oil shale could be found.

The figures from 1- 9 show where the oil shale are found in abundance, with the USA being the number 1 having the most recoverable reserves.

OPEC vs Oil Shale Producers

OPEC and the oil shale producers have one common goal : to extract out the oil and make lots of money. However, if both were to extract in large amounts, an oversupply situation will happen and lead to low international oil prices.

OPEC will probably do nothing now to arrest the sliding oil prices - as lower international oil prices will kill off the oil shale producers FIRST because the oil shale extraction costs are much higher than most of OPEC & other crude oil producers countries costs (diagram below shows).

Note: NAm Shale in the diagram above is North America oil shale, costs $65/barrel to extract out.

Impact on O&G stocks on Bursa Malaysia

Expect an adverse impact on these O&G stocks share prices to continue as long as oil prices continue sliding towards $65/oil shale producers cost. Nobody knows for sure where the bottom is, too early to tell, perhaps when everyone have SOLD and give up. All of these O&G stocks are trading way below their 200 day MA and 50 day MA. 


Disclaimer : This is my personal blog. Author will NOT be responsible for information errors, incompleteness or delays or for any actions taken in reliance on information contained herein. Examples in this blog are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The author assume no responsibility for your trading results. There is a high degree of risk in any form of trading and speculation. Trade at your own risk.




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