Kjell Inge Rokke’s Ocean Yield could be forced to cut back its dividend if it is unable to find employment or a buyer for its only FPSO.
Uncertainty has surrounded the unit since Reliance released the 214,266-cbm Dhirubhai-1 (built 1979) last year and fresh firm work from within Rokke’s empire or outside has yet to materialize.
The FPSO is one of four offshore assets in the Ocean Yield cataloge of more than 60 vessels which are without long-term contracts, a situation which dented results for the second quarter.
The company has now completed upgrades to the Dhirubhai-1 in Sri Lanka and is working with Rokke’s Aker Energy and others on a contract.
Aker Energy has an option on the unit for a long-term bareboat charter in Ghana running until the start of September. The deadline has been extended multiple times since the pact was first agreed.
Ocean Yield today repeated a warning first sounded in May that its dividend - a consistent feature since its 2013 IPO - may be sliced if a new deal for the Dhirubhai-1 is not found by early next year.
Lars Solbakken, chief executive of Ocean Yield, said during a conference call today: “We have a very strong focus on securing employment for the FPSO. Currently a lot of resources are being put into that."
He added: "If we do not have a long-term contract for the Dhirubhai-1 by the reporting of Q1 results, the board will consider adjusting the dividend from 19.1 cents to 15 cents.
"We hope all of the efforts with respect to securing new employment will result in a contract before that.”
Fresh Indian impairment
Ocean Yield shouldered an impairment of $4.5m related to the FPSO in the second quarter stemming from decommissioning work at its former site in India to be undertaken later this year.
Pressed by analysts on if the FPSO could be sold, Solbakken said this was “always an alternative".
He said the challenge with an FPSO was the value of the asset was much higher if it could be deployed at a particular field and substantially lower as a speculative investment.
“Therefore, we are spending a lot of time to identify a field where it can be used,” he said. “A lot of technical studies are then necessary to see if it can be used.
“We need to have an approach that can result in a sale or a long-term charter.”
Offshore obstacles
While Ocean Yield has a contract backlog of $3.3bn across its fleet, it has three other offshore assets against which question marks exist.
It has a standstill agreement in place with Solstad Offshore - which is seeking to restructure - meaning there is no income presently from the anchor handlers Far Senator and Far Statesman.
Ocean Yield is also waiting on a long-term contract for the construction vessel Connector, which is working short-term deals until the market takes a turn for the better.
The struggles in its offshore related business are a far cry from Ocean Yield’s shipping fleet, which has been growing with both new dry cargo acquisitions and the delivery of VLCC newbuildings of late.
Results disappointing
Ocean Yield booked a profit of $5.3m in the second quarter, down from $35.1m at the same stage in 2018.
Analysts at Arctic Securities said the results, released yesterday, were slightly below expectations.
They placed adjusted net profit at $0.07 per share, below the $0.10 per share consensus.
As TradeWinds has reported previously, Ocean Yield is not ruling out further investments despite the uncertainty around its FPSO.
“We also see a number of attractive investment opportunities across several sectors," Solbakken said today.
“We have recently had a very strong focus on tankers and bulkers and continue to see interesting opportunities in these two segments. We are also closely following other segments.”
