Norwegian shipowner Ocean Yield is to book another $130m of impairments for two offshore vessels for which it has struggled to secure charters.
The Kjell Inge Rokke-controlled sale and leaseback specialist said it is still looking for work for the 214,266-cbm floating production, storage and offloading unit Dhirubhai-1 (built 1979) and the 156-loa offshore construction and cable-laying vessel Connector (built 2012).
The company added that it has been hampered by the Covid-19 pandemic and a lower oil price, which has led to an expected delay in the recovery within the oil services segment.
"There is a risk both with respect to the timeline of these projects and the sales price that can be achieved," Ocean Yield said.
The shipowner expects to log $95m of impairments in the third quarter for the FPSO, plus $35m for the offshore ship.
The impairments will reduce depreciation expenses in 2021 by about $12.7m, however.
Uncertainty has surrounded the Dhirubhai-1 since Reliance Industries released it in India in 2018.
Storage plan came to nothing
Last October, Ocean Yield took an impairment hit of $68.4m on the book value of the unit, which was written down to $150m.
In May, the company said it was hoping to take advantage of the floating storage trend to find work for the FPSO.
"Ocean Yield has a strong cash position, headroom to bank covenants and a large portfolio of modern vessels on long-term charters generating a stable cash flow," the shipowner added.
The current dividend level enables further investments without requiring new equity, Ocean Yield said.
"It is the board of directors' intention to pay stable and, over time, increasing dividends," the company added.
Fearnley Securities, which has a buy rating on the stock, said the FPSO now has a book value of about $50m, with the Connector assessed at $140m.
"These two assets are expected to have little cash flow contribution in the coming years," the investment bank said.
"More importantly, Ocean Yield's current distribution is robust in pretty much any oil service environment," it added.
In March, the Connector started a 175-day time charter with subsea contractor Ocean Installer for installation work in China.
The ship had racked up a loss of $5.1m in the first quarter.
Ocean Yield reported a $16.5m profit in the second quarter, better than the $5.3m in earnings posted for the same period of 2019.
