Armada Kraken was the problematic FPSO that nearly brought Armada down back in 2018. A litany of problems from project delays, cost overblowns, penalties and nearly endless production issues had literally caused investors pulling out their hair. So, Armada Kraken + Shutdown naturally trigger those nightmarish memories. Hence, the reactions today..
An one-off ~RM100m hit from current shutdown would be painful but not fatal. It would be a grave concern however if the shutdown is the beginning of a series of problems that is not unlike what plagued Armada Kraken during the commercement of the FPSO. Yet, before the latest problem, Armada Kraken was running optimally for the last 3 consecutive years. Whatever technical issues during the initial stage should have been throughly fixed.
It should be noted the current problem is related to transformers. Just requote from Robert Waters
------------------ Nowhere I saw transformer failure as a MAE (Main Accident Event). Most pumps are in sets with1 online and 1 on standby. Surely if critical, not just 2, there may be 3 to be safe side by side. So are the transformers. And you can always get a new transformer from warehouse, fly it with helicopter and have it installed by electricians that just wire it in. No need to break containment. ------------------
On balance, the shutdown is more likely an one-off freak incident than a precursor to something more sinister down the road. Our fear is our natural defence for self-preservation or in this case, capital preservation. With the risks capped by the return to production later this week, is the market far too fearful than it deserved?
Reply Mabel " Great MM78 and Bon888! " Trying to get some bargains when market is fearful but only at those counters I am familiar with their fundamentals. 😊 Good Luck to all who try.
Bumi Armada's share-price weakness may be a good opportunity to accumulate, Affin Hwang IB analyst Tan Jianyuan says in a note. He doesn't think the Armada Kraken floating production storage and offloading vessel operations suspension is a major setback and expects a quick fix. "The already low 5X price-to-earnings ratio valuation for 2023-2024 should cushion the share price from declining too sharply," he adds. Tan cuts Bumi Armada's 2023, 2024 and 2025 earnings forecasts by 8.0%, 9.2% and 16%, respectively, assuming a 90-day interruption. Affin Hwang lowers Bumi Armada's target price to MYR0.80 from MYR0.85 but maintains a buy rating on the stock. Shares are 20% lower at MYR0.51. (yingxian.wong@wsj.com)
Bumi Armada may resolve its Armada Kraken floating production storage and offloading vessel's suspension of operations in the short term, RHB IB analyst Sean Lim says in a note. He doesn't expect a "lumpy vessel impairment." Based on Lim's estimate, the Armada Kraken FPSO will generate about 30% to 35% of 2023 earnings. He therefore cuts his 2023 earnings forecast for the company by 14%, assuming a three-month interruption and additional maintenance expenses. RHB lowers Bumi Armada's target price to MYR0.73 from MYR0.80 but maintains a buy rating due to its attractive valuation and strengthening balance sheet. Shares are 21% lower at MYR0.50.
There is so much not taken into consideration in the Kraken story. HSP are downhole pumps, meaning inside wells, located at the depth of 3.5 km under the sea in the oilfield. Normally, and I do not know contract, but normally, they belong to client who owns the field, EnQuest. Normally, they are electric and named ESP. Hence they need transformers. But here they are hydraulic. They were likely installed in field before FPSO arrived by SPX Flow. Bumi Armada hooked up the FPSO to those wells with pumps inside down below, and now provides hydraulic power (hot water under pressure) to spin those pumps by means of water turbines connected to the pumps. This water heats crude oil and enables it to flow to FPSO through risers, providing a lift. Otherwise, wax could plug tubing in the well . I bet from my work offshore that EnQuest Well Department operates those pumps from the Kraken FPSO. There is always Well Dept, with specialized people that make more money and have better work conditions. They are sitting separately and protect their job. If pump seized and blowed the transformer, it may be operator's responsibility. Maybe there was wax build up already, and power liquid pumped by FPSO by means of HPU, or Hydraulic Power Unit, likely connected to transformer that broke could not handle it.
I doubt that Enquest would allow Armada to operate their wells. Well intervention is way more costly and complicated than fixing things on FPSO. I am sure they will be keen to get things resolve and avoid dispute. They may know more that Armada about what happened. And we are lucky it is the transformer onboard and NOT the pump downhole that is broken.
From there they even mentioned BA didn't seemed to care less about the transformer outage and took the leeway to go ahead with the Q3 periodic maintenance instead. How ironic. And then best of all the chat room community question all the IB analysts where on earth did they derive the 6 months outage. Interesting to see how the Mr market responds to this news
Old man finally you said something positive. I fully agreed with you.
Why not you try your luck in Sapura Energy also? RO extended for another 9 months. Think about it.
Posted by i3lurker > 9 minutes ago | Report Abuse
sometimes in life, you need to take a considered bet. if it turns against you then ... so be it, but its a considered thing, better than buying lottery ticket.
Right from the start it was merely HV transformers failures or blown out and hence the production outage. Nothing tangible damage to assets class and compromised in asset safety and well being. Dream Big Tomorrow
A tranformer is used to step down electricity from 11 KV or higher KV to 415V.
Thro' motor control center a 3 phase 415V electricity current is feed into stator of the motor and the induced current will cause the rotor to rotate at 3000 or 1500 rpm.
The motor rotor is couple to the drive shaft of a pump and rotate the pump impeller inside the pump casing. The rotating impeller will sucked in the liquid from pump suction and exit the impeller at high velocity then upon exiting the pump casing discharge the velocity head is converted to pressure head. The pressure head will then force the liquid flow along the discharge piping to the intend destination.
Motor and pump are very common items use to transfer liquid from one place to another place along the piping. And normally important pump will have a hot stanby complete pump with motor and many pump spare parts and motor on cold stanby.
At the MCC trip amp will be set that will auto cut off the electricity supply if the amp is too high (above safe operating limit).
Running at perlong high amp will cause the motor stator wiring insulation melt and short circuit and burn the stator wiring.
High amp normally cause by pump impeller overload (too heavy due to sudden change in liquid viscosity or density or addition load (bolt and net) jammed at impeller
Recovering a transformer is not that difficult. If it is just short, replacing primary and secondary coil would settle. Identifying the root cause if there is an over current, might be more tricky. If over current is due to something mechanical, then the situation might be even more complicated. This might be why Armada do not want to specify the amount of downtime. 20% drop in market cap due to an incident is just too much.
Just to give you an idea, when I worked as a supervisor of a utility plant, an operator destroyed the transformer that was tied to transfer switch between normal power supply and emergency power. He did it by flipping switch on transfer station on and off a few times rapidly. Like a kid playing with a lightbulb. (The guy thought the power was not transferring quickly enough, so he re-engaged.) 'On and off' till it burned out. That is another way to destroy an equipment quickly. How things happen in reality.
The new transformer and switch set was 50 thousand dollars. That was 20 years ago. But still, estimate by the IB that cost of repair transformer on AK is 50 million is 1000 times to high.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
apple4ver
23 posts
Posted by apple4ver > 2023-06-06 16:29 | Report Abuse
Armada Kraken was the problematic FPSO that nearly brought Armada down back in 2018. A litany of problems from project delays, cost overblowns, penalties and nearly endless production issues had literally caused investors pulling out their hair. So, Armada Kraken + Shutdown naturally trigger those nightmarish memories. Hence, the reactions today..
An one-off ~RM100m hit from current shutdown would be painful but not fatal. It would be a grave concern however if the shutdown is the beginning of a series of problems that is not unlike what plagued Armada Kraken during the commercement of the FPSO. Yet, before the latest problem, Armada Kraken was running optimally for the last 3 consecutive years. Whatever technical issues during the initial stage should have been throughly fixed.
It should be noted the current problem is related to transformers. Just requote from Robert Waters
------------------
Nowhere I saw transformer failure as a MAE (Main Accident Event). Most pumps are in sets with1 online and 1 on standby. Surely if critical, not just 2, there may be 3 to be safe side by side. So are the transformers. And you can always get a new transformer from warehouse, fly it with helicopter and have it installed by electricians that just wire it in. No need to break containment.
------------------
On balance, the shutdown is more likely an one-off freak incident than a precursor to something more sinister down the road. Our fear is our natural defence for self-preservation or in this case, capital preservation. With the risks capped by the return to production later this week, is the market far too fearful than it deserved?