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PP16832/01/2013 (031128)

Malaysia
Initiating Coverage
6 March 2012

Buy (new)
Share price: Target price: RM4.13 RM4.88

Bumi Armada
The Armada strikes back
Initiating coverage with a Buy and RM4.88 target price. Bumi Armada (BA) offers a niche exposure to the Floating Production, Storage and Offloading (FPSO) market. As one of the fastest growing FPSO operators in the world, it has set its sights on being the Top 4 player in terms of FPSO fleet size by 2013. It is also poised to gain traction in Malaysias O&G sector, as it leverages on PETRONAS capex programme. BA, which is steadfastly building up franchise values, is a steady growth stock with a 3-year net profit CAGR of 25%. Bigger, bolder, better. BA is today a giant compared to its previous self. The restructured entity is now a powerhouse with a global presence, covering 4 core operations FPSO, Offshore Supply Vessel (OSV), Transportation & Installation (T&I) and Offshore Field Services (OFS). It commands an armada of 53 vessels: 5 FPSOs, 46 OSVs, 1 pipelay barge and SURF vessel operating across the the world. In an entrenched position to ride global E&P programmes. We see innumerable opportunities for BA to capitalize on the: (i) 125 potential FPSO projects worldwide, (ii) requirement for new, highly technical OSVs to support global deepwater programmes, (iii) services for the subsea umbilicals, risers and flowlines (SURF), inspection, repair and maintenance (IRM) markets, and (iv) increasing number of offshore development projects in Malaysia (marginal field and Enhanced Oil Recovery (EOR) development) and the Caspian region. Set to embark on an aggressive asset expansion plan. We see BA prospecting for new assets for growth. BA will likely double its FPSO assets, triple its SURF vessels and add 4 new OSV vessels to its fleet by 2015. This is possible as it has the balance sheet to support the heavy capex (estimated RM6.4b) for its expansion programme while keeping its net gearing below the 1.5x threshold. Strong earnings visibility 3 years out. We project a 3-year net profit CAGR of 25%. All divisions will contribute to growth, fueled by new vessels (FPSO, OSV, pipelay barges) progressively coming onstream and higher utilization (ex-dayrate revision) for the existing vessels.
Bumi Armada Summary Earnings Table
FYE Dec(RM m) Revenue EBITDA Recurring Net Profit Recurring Basic EPS (Sen) EPS growth (%) DPS (Sen) PER EV/EBITDA (x) Div Yield (%) P/BV(x) 1-yr na na YTD 0.7 (3.1) Net Gearing (%) ROE (%) ROA (%) Consensus Net Profit (RM m) FY10A 1,241.4 715.6 350.8 12.0 26.4 0.0 34.5 21.3 0.0 13.8 359.0 40.1 10.8 FY11A 1,543.9 845.1 387.3 13.2 10.4 2.5 31.2 16.4 0.6 3.4 49.9 10.9 9.3 FY12F 1,800.7 1,048.7 532.2 18.2 37.4 0.0 22.7 13.9 0.0 3.0 61.6 13.3 9.2 585.0 Source: Maybank IB FY13F FY14F 2,220.6 2,504.3 1,272.6 1,442.0 627.5 706.9 21.4 24.1 17.9 12.6 0.0 0.0 19.3 11.8 0.0 2.6 63.0 13.5 9.2 706.5 17.1 10.4 0.0 2.3 54.4 13.2 9.1 794.4

Wong Chew Hann, CA wchewh@maybank-ib.com (603) 2297 8688 Chong Ooi Ming ming.c@maybank-ib.com (603) 2297 8676

Stock Information
Description: Integrated Oilfield services provider with 4 core operations: FPSOs, OSVs, T&I vessels and offshore field services. Ticker: Shares Issued (m): Market Cap (RM m): 3-mth Avg Daily Volume (m): KLCI: Free float (%): Major Shareholders: Objektif Bersatu Sdn Bhd Ombak Damai Sdn Bhd Wijaya Sinar Sdn Bhd Karisma Mesra Sdn Bhd BAB MK 2,928.5 12,094.5 3.73 1,589.22 29.6 % 42.4 11.6 7.3 5.4

Key Indicators
Net cash (RM m): NTA/shr (RM): Net gearing (x): (1,760.6) 1.20 0.5

Historical Chart
4.5 4.2 3.9 3.6
3.3 BAB MK Equity

3.0
Jul-11 Sep-11 Nov-11 Jan-12

Performance: 52-week High/Low 1-mth 4.0 0.8

RM4.33/RM3.03 3-mth 11.3 3.8 6-mth na na

Absolute (%) Relative (%)

Kim Eng Hon g Kon g is a su bsi diar y o f Mal aya n Bank ing Ber had

6 March 2012

Page 1 of 60

Bumi Armada

Table of contents
Page Key investment merits Introduction: Bigger, bolder, better Snapshot of Bumi Armadas operations Floating Production, Storage & Offloading (FPSO) Offshore Supply Vessel (OSV) Transport & Installation (T&I) Offshore Field Services (OFS) Revenue and EBIT breakdown 7 12 16 16 17 3 4

Floating, Production, Storage & Offloading (FPSO) Fundamentals Opportunities

20 26

Offshore Supply Vessel (OSV) Fundamentals Opportunities 29 38

Transport & Installation (T&I) Fundamentals Opportunities 39 40

Offshore Field Services (OFS) Fundamentals Opportunities 42 45

FInancials Financial projections 48 51 52 52 53 55 57

Valuation Peers valuations FPSO operators Peers valuations OSV operators Risks Financial statements Appendix : Captains & Commanders of the Armada

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Bumi Armada

Key investment merits


Introduction. The Bumi Armada of today is a transformed entity. The Group has been restructured and now has four businesses: (i) FPSO, (ii) OSV, (iii) T&I and (iv) OFS, with a global presence in each segment. The company is driven by a dedicated, experienced and professional management team, comprising talent from multiple nationalities. Solid business model. We like the FPSO space. It provides steady visibility (contracts and earnings) with reasonable IRRs. Competition is limited given the high investment and technical hurdle requirements. Bumi Armadas OSV operation, relatively new, modern and modulated to the high-end vessel segment is a positive, for it provides respectable utilisation and day rates. Bumi Armadas stint in the T&I and OFS divisions has been brief so far but has delivered the desired results. Well-positioned to push for new contracts, locally and globally. Prospects are bright for Bumi Armada to ride on the global O&G capex upcycle, as it capitalises on the growing demand for new FPSO and OSV charters, as well as growing requirements for brownfield developments. In the domestic (i.e. Malaysia) space, the prospect of leveraging on PETRONAS deepwater, marginal field and enhanced oil recovery (EOR) field projects is high. It has both the operational foresight and financial structure to leverage and support its expansion programmes. Powering up - where growth and aspirations meet. We opine that Bumi Armada has the balance sheet to fund 3 new SURF vessels, 5 FPSOs and 8 OSVs over the next three years without straining its cashflow and gearing levels. This is a sensible aspiration, which would propel Bumi Armada to become the fourth largest FPSO operator globally with a competitive edge to boot. A towering growth stock with rewarding returns. With a 3-year net profit CAGR forecast of 25%, its relentless pursuit of excellence will secure Bumi Armada the status of fastest-growing operator among its global peers. However, given prospects for high growth, we believe that it is unlikely that Bumi Armada will reward shareholders with meaningful dividends in the foreseeable future. High conviction: valuations with compelling growth prospects. We value Bumi Armada at RM4.88, using the sum-of-part (SOP) valuation methodology. At our target, Bumi Armada would have a market capitalisation of RM14.3b, a valuation that would see it become the largest FPSO player worldwide by market value (ahead of SBMs RM10.3b), while outpacing its contemporaries in growth and profit margins.

Kim Eng Hon g Kon g is a su bsi diar y o f Mal aya n Bank ing Ber had

6 March 2012

Page 3 of 60

Bumi Armada

Bigger, bolder, better


Bumi Armada remembering the old days. The Bumi Armada of yesterday was just a shadow of its present incarnation. The previous entity, listed on 25 June 1997 and delisted six years later on 18 April 2003 (with a market capitalization of RM441m), was primarily engaged in just two main business activities: (i) offshore support vessel (OSV) operations, and (ii) offshore construction, installation & maintenance services. Operations then were predominantly domestic-centric, supported by 25 vessels, 2 tanker support vessels and a Floating Production, Storage and Offloading (FPSO) system. The present day rejuvenated and ready to ride the waves. The group has since been restructured and the Bumi Armada of today is a much larger and more diversified entity with a global reach. True to its name, it really has burgeoned into an armada, with a fleet of 5 FPSOs (including two undergoing conversion), 46 OSVs, one pipe-laying barge and another SURF vessel, making it the jointly fifth-largest FPSO operator in the world and the third-largest OSV operator in Southeast Asia. Meanwhile, its business has grown to encompass four segments: (i) FPSO, (ii) OSV, (iii) Transport & Installation (T&I) and (iv) Offshore Field Services (OFS) with two support units: Fleet Management Services (FMS), and Engineering, Procurement and Construction (EPC). Usaha Tegas Group (UT) is the largest shareholder. UT, a privatelyowned holding company, presently holds a 42.4% stake, held through Objektif Bersatu Sdn Bhd (OBSB). The other four substantial shareholders that hold a cumulative 27.5% stake are: (i) Ombak Damai Sdn Bhd (ODSB) (ii) Wijaya Sinar Sdn Bhd (WSSB) (iii) Karisma Mesra Sdn Bhd (KMSB) (iv) Wijaya Baiduri Sdn Bhd; (WBSB) - 11.6% - 7.3% - 5.4% - 3.2%

A well-managed set-up, driven by experienced management. Bumi Armada is led by an experienced, dedicated and culturally diverse senior management team that presides over an agile organisation. The group has proved it can attract worldwide talent (with over 20 nationalities) to operate across multiple countries while its flat organisational structure gives it the ability to react efficiently and quick ly to business threats and opportunities, both domestically and internationally. Hassan Asad Basma, the CEO of Bumi Armada, has an extensive 30 years of experience in the O&G industry with 18 years working knowledge in Asia.

6 March 2012

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Bumi Armada Business model Pre and post restructuring

BAN
OSVs and related logistics; 25 OSVs, 2 tankers and 1 FPSO

Haven Offshore installation, servicing and maintenance

Restructuring
Tripled FPSO f leet size Newer, younger and bigger OSVs

Disposal of Haven

Floating Production Storage and Offloading (FPSO) Owns and leases 5 FPSOs 2 in Nigeria 1 in Vietnam 2 to start operations in Balnaves field Australia & D1 field India

Offshore Support Vessel (OSV)

Transport and Installation Services (T&I)

Oilfield Services (OFS)

Engineering, Procurement and Construction

Fleet Management Services

Owns a fleet of 46 OSVs 26 AHT/ AHTS 8 accommodation barges/ boats 12 others

Pipelay, heavy lift, subsea installation, floater, mooring installation and marine spread support services 1 DLB in the Caspian Acquired a SURF vessel- Armada Hawk

Legend Business Units Support Units

Converted and sold an FSO to Petrofac for the Sepat field Services cover all aspects of the oil field life cycle, from exploration to development, production and abandonment

Solely in house EPC and project management Executed the Steel on Water new build fleet expansion programme Oversaw conversion of FPSOs and construction and re integration of Armada Installer (DLB)

In-house management and operations of fleet: has access to over 1,300 crew members Offices and shore bases in Malaysia, Singapore, India, Brazil, the Congo, Mexico, Nigeria and Turkmenistan

Sources: Company, Maybank-IB

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Bumi Armada

SECTION 1: EXISTING OPERATIONS

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Bumi Armada

A snapshot of Bumi Armadas operations


(i) The provision of FPSO services
A growing force in the FPSO world. Bumi Armada, ranked jointly 5 in the world by fleet size (lease units), is the first to own and operate a FPSO in Malaysia and is touted to be the only operator worldwide todate to have redeployed the same FPSO (Armada Perkasa) three times across two continents (i.e. Asia, Africa). Building its niche in the segment for small-sized, conversion FPSOs. Bumi Armada owns & operates three FPSOs (Armada Perkasa, Armada Perdana and Armada TGT1) on firm, long-term charters. It is currently outfitting another 2 units, the Armada D1 & Armada Claire (Balnaves), to be deployed in India (4Q 2012) and Australia (1Q 2014) respectively. Type-wise, all of its FPSOs consist of converted units and in terms of processing capacities, fit into the category of small-sized FPSOs (< 80,000 bpd of oil, 0.8m bbls storage).
Snapshot of global independent FPSO operators by fleet size
(Units)
18 15 1 Existing Fleet On Orderbook Idle
th

12
9

2
1

6
3

11

12 9 7

2
4

1 4 4 2 1 2 1 2 Saipem 2 2

0
SBM Modec BW Teekay Bluewater Bumi Armada

1
OSX Maersk

Petrofac Fred Olsen

Sevan Tanker Pacific Aker FP

Sources: Company, Maybank-IB

Existing FPSO contracts

Armada Perkasa

Nigeria: Afren 2008 - 2013 (2018)

Armada Perdana

Nigeria: NAE 2009 - 2019

Armada TGT 1

Vietnam: Hoang Long JOC 2011 - 2018 (2026)

Armada D1

India: ONGC 2012 - 2019 (2025)

Armada Claire

Australia: Apache 2014 - 2017 (2021)

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

Sources: Company, Maybank-IB 6 March 2012 Page 7 of 60

Bumi Armada

Arguably one of the fastest growing FPSO players in the field. Bumi Armadas FPSO fleet has expanded rapidly in recent years, with acquisitions averaging one new FPSO a year between 2007 and 2011. It refurbished the Armada Perkasa for a 3 rd contract in 2007 and secured contracts for Armada Perdana and Armada TGT1 in 2009. In 2011 Bumi Armada won two more contracts, chartering the Armada D1 to ONGC in India while the Armada Claire was contracted to Apache for its Balnaves field in Australia.
Bumi Armadas present FPSO fleet
FPSO Armada Perkasa & Armada Perdana Narrative Currently on operation in Nigeria. Armada Perdana is chartered to ENIs subsidiary; NAE for the Oyo field while Armada Perkasa is leased to Afren for the Okoro Setu field with firm 10 year contracts till 2019. Petroleum consultants Netherland, Sewell & Assoc, Inc. (NSAI), have recently certified gross 2P reserves in the Okoro Setu field at 19.5m barrels (bbls) of oil (as at Dec 2010) and 626m-2,200m bbls for Oyo (Apr 2011). To-date, only 15.2m and 3.6m bbl have been produced respectively. Armada TGT1 Chartered to PetroVietnam for the Te Giac Trang (TGT) field in Vietnam. Production began on 22 Aug 2011; the contract period is till 2018 with the potential for extension up to 2026. A 2nd well is expected to be added in 2012. On 10 Aug 2011, Bumi Armada signed a charter with ONGC to lease an FPSO for the D1 field in India. The USD620m contract is fixed for 7 years (2019) with annual extension options for another 6 years (2025). Bumi Armada has a 49.99% stake in the FPSO with the rest held by Forbes & Company Ltd Bumi Armada has recently signed a contract with Apache Energy Ltd in Sept 2011 to lease Armada Claire to the Balnaves development in Australia. With 14m-19m bbls of reserves, expectations are for 1st oil before 2014. Contract value of USD445m (RM1.46b). Rainbow River is an Aframax tanker on which Bumi Armada has the option to convert into an FPSO.

Armada D1

Armada Claire

Rainbow River

Source: Company, IMA, Maybank-IB

Proven and prospered, even during the credit crisis. Operationally, Bumi Armada has proven its technical excellence, track record and execution capabilities in the FPSO business. It has been able to deliver vessels on time, fully funded and within budget even during the global financial crisis in 2008. The Armada Perkasa, Armada Perdana and Armada TGT1 vessels have met all contractual uptime performance requirements to-date. Arguably among the most efficient FPSO operators in the world. From a financial perspective, Bumi Armada is among the better-run operators in the FPSO circle. Its EBIT margins of 27-32% are the highest vis--vis its peers 9-26%. Comparatively, it has the advantage of a lower cost base structure vis--vis its European counterparts. This is due to its effective cost management (i.e. firm cost controls, facility to source for funds and tankers at decent rates, close proximity to yards) and ability to execute projects with minimal cost overruns.

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Bumi Armada

Vessel 1: Snapshot of FPSO Armada Perkasa


Vessel details Terms Area of operation: Contract amount (USD m): Duration: History: Performance Statistics Production capacity (bpd 000): Storage capacity (bbl 000): Ave. daily production (bpd): Hull age, type and conversion yard: Sources: Company, Afren, Maybank-IB 30.0 298.4 16.1 Details On contract till 2018, in Okoro Setu field Nigeria 150 5-plus-5 year fixed-time charter. Deployed at Bunga Kekwa, (97-04) & Baram, (05-06) Ship Dimensions Length (m): Breath (m): Draft (m): Dwt (000 tonnes) 1975, Single hull, Keppel Singapore 221.2 32.2 17.5 58.6

Vessel 2: Snapshot of FPSO Armada Perdana


Vessel details Terms Area of operation: Contract amount (USD m): Duration: History: Performance Statistics Production capacity (bpd 000): Storage capacity (bbl 000): Ave. daily production (bpd): Hull age, type and conversion yard: Sources: Company, Maybank-IB 40 1,100 na Details On contract till 2019, in Oyo field Nigeria 400 10 year fixed-time charter. Petromins Histria Crown, sold for USD 22m Ship Dimensions Length (m): Breath (m): Draft (m): Dwt (000 tonnes) Keppel Singapore 308.7 46.0 22.6 156.5

1984, Single hull with side impact protection,

Vessel 3: Snapshot of FPSO Armada TGT1


Vessel details Terms Area of operation: Contract amount (USD m): Duration: History: Performance Statistics Production capacity (bpd 000): Storage capacity (bbl 000): Ave. daily production (bpd): Hull age, type and conversion yard: Sources: Company, Various, Maybank-IB 55 620 na Details On contract till 2026, in TGT field Vietnam 700 7-plus-8 year fixed-time charter. Great Easterns Jag Layak, sold for USD 44m Ship Dimensions Length (m): Breath (m): Draft (m): Dwt (000 tonnes) 1996, Double hull, Keppel Singapore 274.0 47.8 22.8 147.0

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Bumi Armada

Vessel 4: Snapshot of FPSO Armada D1 (undergoing conversion)


Vessel details Terms Area of operation: Contract amount (USD m): Duration: History: Performance Statistics Production capacity (bpd 000): Storage capacity (bbl 000): Ave. daily production (bpd): Hull age, type and conversion yard: Sources: Company, Maybank-IB 50 580 na Details On contract till 2025, in D1 field India 620 7-plus-6 year fixed-time charter. Ondimars Monte Umbe, selling price USD 21m Ship Dimensions Length (m): Breath (m): Draft (m): Dwt (000 tonnes) 1997, Double hull, Keppel Singapore 246.0 42.0 14.0 107.2

Vessel 5: Snapshot of FPSO Armada Claire (Griffin Venture- undergoing conversion)


Vessel details Terms Area of operation: Contract amount (USD m): Duration: History: Performance Statistics Production capacity (bpd 000): Storage capacity (bbl 000): Ave. daily production (bpd): Hull age, type and conversion yard: Sources: Company, Maybank-IB 80 750 na Details On contract till 2021, in Balnaves field Australia 445 Four-plus-four year fixed-time charter. BHPs Griffin Venture, deployed at Griffin field (1994-2009) Ship Dimensions Length (m): Breath (m): Draft (m): Dwt (000 tonnes) 1993, Double hull, Keppel Singapore 240.7 41.8 22.9 102.1

Vessel 6: Aframax Rainbow River: (Purchase option secured, conversion candidate for next FPSO project)
Vessel details Terms Area of operation: Contract amount (USD m): Duration: History: Performance Statistics Production capacity (bpd 000): Storage capacity (bbl 000): Ave. daily production (bpd): Hull age, type and conversion yard: Sources: Company, Maybank-IB na na na Details na na na GNMs Rainbow River, purchase price RM68m Ship Dimensions Length (m): Breath (m): Draft (m): Dwt (000 tonnes) 246.0 42.0 14.7 107.2

1999, Double hull, awaiting yard announcement

6 March 2012

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Bumi Armada Bumi Armada: Deployment of its FPSO

Canada
Northern Europe
Armada Perkasa, Okoro Setu, Nigeria (2008-2013/18) Armada TGT1, Te Giac Trang (TGT), Vietnam (2011-2018/26)

Gulf Of Mexico

Mideast/ SW Asia

Far East

South East Asia

Brazil
Armada Perdana, Oyo Nigeria (2009-2019)

Africa

Armada D1, D1 field India (2012-2019/21)

Australia/ NZ

Armada Claire, Balnaves, Australia (2014-2017/21)

Sources: Company, Maybank-IB

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Bumi Armada

(ii)

The provision of OSV services

A large and modern fleet. Bumi Armada has a large and modern OSV fleet with cross-border operational capabilities at both green and brownfields. It owns 25 Anchor Handling Towing Support (AHTS) vessels, 8 accommodation workboats workbarges, 3 mooring launch vessels, 3 Straight Supply Vessels (SSVs), 3 platform supply vessels (PSV), 2 utility vessels, a standby vessel and an oil recovery vessel. The biggest operator in Malaysia, 3 in SEA. With a fleet of 46 OSVs, Bumi Armada is the largest fleet operator in Malaysia and 3 rd in Southeast Asia, by size and competitiveness. According to Infield st Services Limited, Bumi Armada is recognised as a 1 tier OSV player (i.e. a sizeable fleet capable of servicing large operators and projects). Its other accolades include being the first domestic operator to own and operate dynamic positioning (DP) AHTS for deepwater projects (Kikeh). 70% waiver on Malaysia tax due to Section 54A. Bumi Armada is one of a select few OSV operators that enjoys Section 54A status under the Malaysias Income Tax Act. This grants the group a 70% waiver on income tax from its Malaysian-flagged vessels. Has a young fleet; 8 years average. Most of the vessels are deployed in Malaysia (28 units). In the overseas market, 16 of its vessels are deployed in Africa (i.e. Nigeria: 10, Congo: 1), South & Central America (i.e. Venezuela: 1, Mexico: 1, Brazil: 2) and Asia (i.e. Brunei: 1). The fleet is young, with an average age profile of 8 years. 54% of its vessels are 6 years old or less. 2 contracted newbuilds are under construction. Decent utilization rates. Bumi Armada has successfully chartered its vessels at decent rates and at decent utilization levels over the past three years. In terms of vessel-type, the accommodation workboats/ barges are the most employable, with high utilization rates of 80-91% in 2008-10. Meanwhile, the AHT and AHTS segment is the most volatile, with utilization ranging between 66% and 98%. In 4Q 2011, Bumi Armadas OSV fleet enjoyed a commendable 96% utilisation rate.
AHTS: Dayrates and utilization level (2008 2010)
Year 2010 2009 2008 1.15 DCR range (USD per bhp) 1.32 1.22 2.82 3.57 3.85 Utilization rate (% ) No. of OSVs (unit) 65.7 86.9 95.1 23 18 14
rd

Sources: Company, Maybank-IB

Accomodation workboat/ barge: Dayrates and utilization level (2008 2010)


Year 2010 2009 2008 58.4 DCR range (USD per bed) 63.9 63.9 174.6 257.5 257.5 Utilization rate (% ) No. of OSVs (unit) 80.0 91.2 91.1 8 8 6

Sources: Company, Maybank-IB

Other OSVs: Dayrates and utilization level (2008 2010)


Year 2010 2009 2008 534 569 DCR range (USD per bhp) 1,076 5,000 5,628 6,902 Utilization rate (% ) No. of OSVs (unit)* 73.4 61.9 85.2 9 19 16

Sources: Company, Maybank-IB; * excludes Armada 5, Armada 6 and Armada Tugas 1 that are under jointly-controlled entity; Armada Century Ltd 6 March 2012 Page 12 of 60

Bumi Armada OSV: Operators in South East Asia (fleet size)


Nor Offshore Otto ASL Strato Mermaid Chuan Hup Trinity Offshore Tgoff Anjong Vietsovpetro Pelican P. Radiance Petra Perdana BritOil Eastern Offshore Sealink CH Offshore Swiber Scomi Jaya Pacific Richfield Swissco RK Alam Maritim Ezra Bumi Armada Bumi Armada PACC Swire 0 10 20 30 40 Number of vessels 50 60 70

Sources: Company, Infield, Maybank-IB

OSV: Competiveness landscape


70
Swire

60 PACC
Size (Current+ New build fleet)

50

40 Ezra Great Offshore Pacific Richfield 20 Pelican Vietsovpetro Ajang Chuan Hup Strato 0 ODS market presence score NC Greatship Eastern Offshore Scomi Swissco CH Offshore Swiber Sealink Pacific Radiance Trinity Offshore ASL RK Jaya

30

10

Otto Marine

Brit Oil Petra Perdana Tanjung Offshore Mermaid Nor Offshore

Source: Infield

6 March 2012

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Bumi Armada Bumi Armada: Overview of OSV fleet


No. Vessel Type Built Age bhp beds DP Status charter DP1 DP1 DP1 DP1 DP1 DP1 DP1 DP1 DP1 DP1 DP2 DP2 DP2 DP2 DP2 Short Long Long Long Long Short Long Long Long Unemployed Long Long Long Long Short Short Long Unemployed Unemployed Short Long Short Long Short Short Short Short Long Long Long Short Long Long Long Long Long Long Unemployed Long Unemployed Short Long Unemployed Long nm nm Location Labuan Kemaman Kemaman Kemaman Nigeria Kemaman Labuan Nigeria Kemaman Kemaman Kemaman Kemaman Kemaman Labuan Labuan Labuan Nigeria Tj. Langsat Tj. Langsat Kemaman Labuan Nigeria Brazil Nigeria Venezuela Labuan Labuan Labuan Labuan Kemaman Nigeria Mexico Congo Labuan Miri Miri Kemaman Nigeria Nigeria Nigeria Kemaman Brunei Nigeria Brazil nm nm Charterer PTSC, Vietnam EMEPMI PTSC, Vietnam Afren Shell Afren EMEPMI 1 Armada Tuah 6 AHT 1997 15 4,000 2 Armada Tuah 8 AHT 2002 10 4,840 3 Armada Tuah 9 AHT 2002 10 5,040 4 Armada Tuah 10 AHT 2003 9 4,000 5 Armada Tugas 4 AHT 2005 7 5,040 6 Armada Tuah 20 AHTS 2004 8 5,040 7 Armada Tuah 21 AHTS 2005 7 5,040 8 Armada Tuah 22 AHTS 2005 7 5,040 9 Armada Tuah 23 AHTS 2006 6 5,040 10 Armada Tuah 24 AHTS 2006 6 5,040 11 Ventures Tuah Satu** AHTS 2007 5 6,000 12 Ventures Tuah Dua** AHTS 2007 5 5,000 13 Armada Tuah 25 AHTS 2007 5 5,040 14 Armada Tuah 26 AHTS 2007 5 5,040 15 Armada Tuah 80 AHTS 2008 4 8,000 16 Armada Tuah 82 AHTS 2009 3 8,000 17 Armada Tuah 81 AHTS 2010 2 8,000 18 Armada Tuah 83 AHTS 2010 2 8,000 19 Armada Tuah 84 AHTS 2010 2 8,000 20 Armada Tuah 85 AHTS 2010 2 8,000 21 Armada Tuah 100 AHTS 2006 6 9,000 22 Armada Tuah 101 AHTS 2007 5 9,000 23 Armada Tuah 102 AHTS 2008 4 12,000 24 Armada Tuah 104^ AHTS 2009 3 12,000 25 Armada Tuah 105 AHTS 2009 3 12,000 26 Armada Goodman Accom. workboat 1991 21 n.a n.a 27 Armada Topman Accom. workboat 1991 21 n.a 28 Armada Iman Accom. workboat 1998 14 n.a 29 Armada Salman Accom. workboat 2002 10 n.a 30 Armada Firman Accom. workboat 2004 8 n.a 31 Armada Firman 2 Accom. workboat 2008 4 n.a 32 Armada Firman 3 Accom. workboat 2008 4 n.a 33 Mahakam Accom. workbarge 2004 8 34 Armada Mutiara 2 Mooring launch 2008 4 750 35 Armada Mutiara 3 Mooring launch 2009 3 750 36 Armada Mutiara 4 Mooring launch 2009 3 800 37 Armada Aman Standby vessel 1996 16 3,600 38 Armada 5*** SSV 1984 28 2,600 39 Armada 6*** SSV 1984 28 2,600 40 Armada Tugas 1*** Utility vessel 2003 9 2,500 41 Armada Tugas 3 Utility vessel 2005 7 3,200 42 Armada Tugas 2 Oil recovery vessel 2003 9 3,000 43 Armada Hydro*** SSV 1988 24 1,060 n.a 44 PSV 1 PSV 2012 1 n.a 45 PSV 2# PSV 2012 1 n.a 46 MPSV 1# MPSV 2012 1 Note: ** Owned by Bumi Armadas JV, Offshore Marine Ventures Sdn. Bhd, *** Owned by Bumi Armadas JV,Armada Century Ltd. # Under construction Sources: Company, Maybank-IB

Petrofac Murphy Oil Murphy Oil Afren

Murphy Oil Petrobras Petromin/ PDVSA DESB Inoilco Nautika Talisman Superior Energy, USA Trese, Mexico Diamond Shell Shell Shell PETRONAS Maritime

95 95 140 132 200 200 DP2 200 DP2 300 -

Nautika Petrobras nm nm

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Bumi Armada Bumi Armada: Deployment of OSVs

Gulf Of Mexico
1
South East Asia

Venezuela 1 10
1

Mahakam, Congo

Africa

29

Brazil
2

Legend
Number of OSVs in the region

Sources: Company, Maybank-IB * 1 PSV and 1 MPSV under construction

Bumi Armada: AHTS capacity (by bhp)


160,200 120,200 76,200 23 vessels

Bumi Armada: Accommodation vessel capacity (by bed)


1,362 1,362

962
8 vessels 8 vessels

14 vessels

18 vessels

6 vessels

Average bhp / AHTS

2008 5,443 bhp

2009 6,678 bhp

2010 6,965 bhp

2008

2009

2010

Sources: Company, Maybank-IB Note: Excludes JVs (2 vessels)

Sources: Company, Maybank-IB

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Bumi Armada

(iii) Transportation & Installation (T&I) services


Bumi Armada ventured into this segment in 2009. This division primarily provides pipelay, heavy lift, subsea installation, floater and mooring installation and marine spread support services. Asset-wise, Bumi Armada owns and operates a derrick lay barge (DLB), namely Armada Installer, which is currently leased to Petronas Carigali Sdn Bhd (PCSB) in the Caspian Sea, off Turkmenistan on an 8-year contract since 2010. Armada Installer is one of only two DLB currently operating in the Caspian region. Track record with proven capabilities. Armada Installer, built in 2009, is capable of laying 4-48 diameter pipes with 800 tonnes of lifting capability. The vessel, which can operate in water depths of between 8300m was commissioned and has been in operation since 2Q 2010. It has concluded her maiden work, completing the laying of: (i) 2 lengths of 12 diameter pipe of 7 km each, (ii) 72 km of 12 diameter pipe and 4 diameter piggy back pipe, and (iii) 72 km of 26 diameter pipe. New asset acquisition. Bumi Armada has also acquired the Armada Hawk, a 2nd generation dynamic positioning (DP2) subsea installation vessel, which allows it to offer subsea umbilicals, risers and flowline (SURF) capabilities and services. Armada Hawk recently completed the Sepat field installation work and will be deployed to the D1 field in 201213. Expanding coverage. In addition to SURF installation, the vessel will also allow Bumi Armada to bid for inspection, repair and maintenance (IRM) projects. We expect Bumi Armada to acquire a pipelay vessel to expand its services in Brazil, West Africa and India.

(iv) Offshore Field Services (OFS)


This is Bumi Armadas most recent venture, and is a key part of its strategic focus for the Malaysia market. It leverages on PETRONAS domestic programmes to: (i) develop marginal fields through innovative solutions, and (ii) rejuvenate existing fields through Enhanced Oil Recovery (EOR) to optimize production and arrest the declining state of the existing fields. Recurring opportunities. OFS entails the provision of various specialized services required in the offshore mature/brownfield, EOR and the risk-based services contracts (RSC) markets. Bumi Armada currently offers services, either directly or through partnerships or alliances in the exploration (survey), development (facilities and installation), production (FPSO) and abandonment (T&I) phases of the marginal oil field, and brownfield projects. First project Sepat field. Bumi Armadas initiation in this segment came from the conversion and sale of an FSO to Petrofac for the Sepat field, off Terengganu in 2011. The project management work was completed on schedule in Oct 2011 in a record 8 months. Bumi Armada recognized about RM21m in EBIT from this project alone, based on a 10% margin.

6 March 2012

Page 16 of 60

Bumi Armada

Snapshot of revenue and EBIT breakdown


FPSO division is the largest contributor to group earnings, having overtaken the OSV division in 2010. It has generated 39-45% of group revenue and 32-38% of group EBIT over the past 3 years. The influence of OSV operations has been on a steady decline. Contribution to group revenue and EBIT fell from 55% and 52% in 2009 to 31% and 26% respectively in 2011. The reduction in contribution from the OSV division to group earnings has been more pronounced with the emergence of the more lucrative T&I division, which made its maiden contribution in 2010. T&I reported RM268m in revenue and RM149m in EBIT for the year, accounting for 22% and 36% of Group revenue and EBIT. For 2011, Bumi Armada has taken on an even more diversified earnings profile with maiden contribution from the new OFS segment which undertook the conversion of the FSO Sepat. OFS contributed RM211m in revenue and RM21m in EBIT accounting for 14% of total revenue and 5% of EBIT respectively.

Bumi Armada: Revenue breakdown (by division)


T&I 22%

OFS 14%
FPSO 44%

FPSO 45% OSV 55%


OSV 34%

T&I 16%

FPSO 39%

OSV 31% FY 2011 Revenue: RM1,543.9m

FY 2009 Revenue: RM732.1m


Sources: Company, Maybank-IB

FY 2010 Revenue: RM1,241.4m

Bumi Armada: EBIT breakdown (by division)


OFS 5%
T&I 36% FPSO 43%

OSV 52%

FPSO 48%
OSV 21%

T&I 26%

FPSO 43%

OSV 26%

FY 200 EBIT: RM294.4m


Sources: Company, Maybank-IB

FY 2010 EBIT: RM467.1m

FY 2011 EBIT: RM518.3m

6 March 2012

Page 17 of 60

Bumi Armada

Steady EBIT margins trend. On a blended basis, Bumi Armadas EBIT margin has been consistent, averaging around 34-40% over the past 3 years. Its 2011 EBIT was negatively impacted by a confluence of oneoff items: (i) the Armada Installer was dry docked in 3Q for upgrading, (ii) an estimated RM22m in listing expenses, (iii) RM6m in fair value changes of call options and (iv) higher depreciation (RM78m) due to additional vessels (i.e. FPSO and OSV). Operationally, the FPSO division had consistently delivered reasonable EBIT margins of 28-33% in 2009-11. The EBIT margin for OSV typically mirrors that of its FPSO operations, albeit with a lower 21-25% range. The T&I division commands the highest EBIT margin among the three core operations. Despite Armada Installer being dry docked, the segment still generated 48% EBIT margins in 2011.
Bumi Armada: EBIT by division
FPSO (LHS) T&I (LHS) Blended EBIT margin (RHS)
500

Bumi Armada: EBIT margin by division


OSVs (LHS) OFS (LHS)
( %) 50
FPSO OSVs T&I OFS 10.0%

21.0 148.5 117.2 116.8

400
300

40
55.3%

48.4%

30

200 99.6 100


0 89.4 53.6 92.8

88.9 179.2

20 200.2 10
0

27.7% 27.1%

24.6% 28.3%

21.2% 32.4%

24.2%
32.9%

2008

2009

2010

2011

2008

2009

2010

2011

Sources: Company, Maybank-IB

Sources: Company, Maybank-IB

Earnings breakdown by geography. Bumi Armada operates across 4 continents, from the rich offshore oil fields in the Gulf of Mexico, Brazil and Venezuela, to West Africa (Angola, Nigeria and the Congo), the land locked Caspian Sea, Vietnam and resource rich Australia. Asia and Africa anchor earnings. Geographically, Asia (ex-Malaysia) and Africa were the 2 major contributors to group revenue in 2010 at 43% and 35% respectively. Malaysian operations came in third with a 15% share, followed by Latin America (7%). No geographical breakdown was provided in 2011.

Bumi Armada: Revenue breakdown by region


M'sia 30% Asia 17% Africa 47%
Asia 17%

Africa 42%

M'sia 41%

Asia 43% M'sia 15%

FY 2008 Revenue: RM519.8m


Sources: Company, Maybank-IB

Americas 6%

Africa 35%

FY 2009 Revenue: RM732.1m

FY 2010 Revenue: RM1,241.1m

Americas America 7% s
7%

6 March 2012

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Bumi Armada

SECTION 2: OPPORTUNITIES

6 March 2012

Page 19 of 60

Bumi Armada

FPSO: Fundamentals and prospects


1. Industrys fundamentals
The fundamentals for the FPSO sector are favourable. Activities are returning to more normalised levels after a dismal 2009, underlying the positive macro (i.e. oil price rebound, higher E&P spending) and micro drivers (i.e. increased drilling activities). Fleet utilization has been robust. The number of idle FPSOs has fallen considerably and field developments have been pacing up. Africa, Asia and the Americas are the epicenter of FPSO activity. These three regions play host to 62% of the world wide FPSO fleet, and we believe they will remain the frontiers for FPSO operators. Key drivers. Growth in these regions will be driven by a combination of geological bounty, security concerns and domestic consumption factors which will render the development of offshore fields the inevitable trend.
FPSO: Fleet utilization rate and idle units
(Units)
12 Idle units (LHS) Ave. Utilisation - 94% Utilisation rates (RHS)

(%)
100

10
8 6 4

95

90

85 2 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 80

Source: ODS-Petrodata

FPSO contracts awarded since 2009


Company SBM Petrobras Bumi Armada EOC Saipem Bluewater SBM Bluewater Modec BW Offshore SBM Hyundai Sevan BLT Petrofac Daewoo Petrobras OSX-2 Petrofac BP SBM Offshore Teekay Bumi Armada Bumi Armada Field Aseng Papa-Terra TGT Chim Sao Aquila Nan Hai Baleia Azul Kitan Guara Athena Tupi NE Goliat Huntington Pagerungan Cendor Phase 2 CLOV Tupi x8 Waimea Berantai Quad 204 Block 15/06 Knarr Balnaves D1 Oil major Total Petrobras Hoang Long Joint Operating Co (HLJOC) Premier Oil ENI CNOOC Petrobras ENI Petrobras Ithaca Petrobras ENI E. ON Kangean Petrofac Total Petrobras OGX Petro/Petronas BP ENI/ Sonangol BG Apache ONGC Country Guinea Brazil Vietnam Vietnam Italy China Brazil Timor Leste Brazil UK Brazil Norway UK Indonesia Malaysia Angola Brazil Brazil Malaysia UK Angola Norway Australia India Type Leased Owned Leased Leased Leased Leased Leased Leased Leased Leased Leased Owned Leased Leased Owned Owned Owned Leased Owned Owned Leased Leased Leased Leased Award date 2009 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011 2011

Source: Pareto Research

6 March 2012

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Bumi Armada

The current global supply and demand outlook is promising, and offers new opportunities for growth in the industry. The chart below summarises the current supply and demand picture. The supply side consists of all producing and ordered units while the demand side is calculated on the basis of outstanding projects, i.e. firm tenders, planned and possible.
FPSO: Supply and demand based on existing projects only
(Units)
250

Producing FPSOs

Idle units re employed

High demand

Base

Low demand

250

200

200

150

150

100

100

50

50

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Source: ODS-Petrodata

Choice between leased and owned FPSOs among oil companies


Leased FPSOs
Afren Santos Murphy Kangean Addax Talisman CNR PTTEP Premier ConocoPhillips BHP Petronas Maersk O&G Hess Statoil ENI PetroVietnam Woodside Shell Chevron BP ExxonMobil Total Other CNOOC Petrobras

Owned FPSOs 1 2 2 2 2 3 4
1 1 1 1 1 2 2 2 2 0 1 1 1 1

4 1 2 6
1 1

3 3

4 5 6 7 9 13 14
24

3 3 1 3 0 19 1
19

Sources: International Maritime Associates Inc, Maybank-IB

6 March 2012

Page 21 of 60

Bumi Armada

2. Snapshot of FPSOs currently deployed


There are 160 FPSOs in the world now. Of the total inventory, 149 units are currently in service or available worldwide while 11 units are currently off field, and available for reuse. Utilization rate is high, at 93%. The Asia Pacific region (Asia and Oceania) has the largest count, with 47 FPSOs in operation. This is followed by America: North, Central & Latin (39), Africa (37), Europe (22) and the Mediterranean & Middle East (4). 12 new FPSOs ordered since a year ago, March 2011. According to International Maritime Associates, Inc (IMA), 12 units of new FPSOs have been ordered since March 2011 and these vessels are scheduled to hit the market from 2013-2015.

Current deployment of global FPSO fleet: 149 units in the field

2
Canada

22
Northern Europe

14 3 5 Gulf Of Mexico
Mediterranean
Far East

32 Brazil

37 Africa

1
Mideast/ SW Asia

20
South East Asia

13 Australia/ NZ

Legend
Number of FPSOs deployed in the region

Sources: International Maritime Associates Inc, Maybank-IB

6 March 2012

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Bumi Armada

3. Outlook
Current order backlog for FPSOs worldwide stands at 40 units, comprising 16 newbuilds and 24 conversions. Of the 40 units, 3 units are on speculative orders without field contracts. Brazil currently dominates orders for 21 FPSOs, which include 8 serial pre-salt units. The underlying growth in Brazil is largely due to: i) ii) Petrobras plans to develop a new pre-salt province entailing at least 40 large scale FPSOs and compliance with local content clauses for FPSOs (up to 65%)

FPSOs in the pipeline 40 units on order

5
Northern Europe

1
1
Mediterranean

Gulf Of Mexico

21 Brazil

4 Africa

1
Mideast/ SW Asia

2
South East Asia

2 Australia/ NZ

3
Legend
Number of FPSOs to be deployed per region

Speculative units without contracts in hand

Sources: International Maritime Associates Inc, Maybank-IB

6 March 2012

Page 23 of 60

Bumi Armada

The medium-term outlook. Projection-wise, 200-250 new orders for FPSOs are expected to enter the market over the next 5 years. The orders are categorized into 2 core groups for: (i) visible and (ii) future emerging projects. (i) Visible projects: In the planning pipeline are 125 firm projects that potentially require FPSOs should the projects go to development. FPSO is the only likely production solution for 100 of these projects. The remaining 25 projects could require either FPSOs or other types of production solutions (i.e. tension-legged platform (TLP), semi-submersibles, SPAR). With a few exceptions, all the projects are declared discoveries, some of which will require multiple FPSOs for development. Future emerging projects: A reasonable estimate is that 75 to 125 FPSO projects will emerge over the next 5 years that are not now visible. This estimate is based on an assessment of the number of projects in the current planning list and was not visible a few years ago.

(i)

4. Sensitivities of projects
Insensitive Based on the analysis of the 125 potential FPSO projects, it is estimated that about 30% are relatively insensitive to short-term market conditions. The decision to proceed will be based on long-term oil price assumptions and potential of the project to build reserves. The need to replace reserves and the opportunity to exploit large hydrocarbon complexes provide continuous momentum for project development. This grouping comprises big projects involving large reservoirs offshore Brazil and West Africa. Sensitive 40% of the 125 projects are considered opportunistic projects, which require a robust oil price environment to proceed. They generally involve projects with relatively small reserves and non-major oil operators. These groupings are projects located in South East Asia. Somewhat sensitive: 50/50 30% of the visible 125 FPSO projects are considered somewhat sensitive to short term market conditions, where to some degree, underlying short to mid-term crude oil prices are taken into account in making an investment decision. These projects are spread over a wide spectrum of geographical areas and generally involve fields with mid-size recoverable reserves, heavy oil or difficult access.
6 March 2012 Page 24 of 60

Bumi Armada

Most likely scenario: 100-140 units by 2015. In our view, we see orders for 100 to 140 FPSOs over the next 5 years, averaging 20-28 new units p.a. from 2012-2015. This includes new units and redeployments, which will generate capital expenditure (capex) of USD65b-85b over this period. The bulk of the variation between the 3 scenarios is in the small- to mid-size FPSO orders. An 80:20 ratio for newbuild and conversion vs. redeployments. We opine that 80% will be satisfied via newly built or converted units while the remaining 20% of the FPSO projects will be on redeployment basis. All redeployment will be of small- to mid-sized FPSOs.
Forecasted FPSO new orders over the next 5 years 3 scenarios
Low case Oil price: USD70-90/ bbl Unit Capex (USDb) 26 8 31.2 6.4 Reasonable case Oil price: USD90-110/ bbl Unit Capex (USDb) 28 8 33.6 6.4 High case Oil price: > USD110/ bbl Unit Capex (USDb) 30 8 36.0 6.4

Types of FPSO Large FPSOs New converted units with 150-250,000 bpd Topsides pre-salt hulls Midsize FPSOs New converted units with 80-150,000 bpd Topside spec hulls Modified redeployed FPSOs Small FPSOs New converted units below 80,000 bpd Modified redeployed FPSOs Total

Capex (USDb) 1.20 0.80

0.60 0.25 0.30

24 3 3

14.4 0.8 0.9

29 3 4

17.4 0.8 1.2

34 3 5

20.4 0.8 1.5

0.40 0.15

25 11 100

10.0 1.7 65.4

34 14 120

13.6 2.1 75.1

42 18 140

16.8 2.7 84.6

Sources: International Maritime Associates, Inc, Maybank-IB

28-80% growth on the horizon. The next 5 years forecast (2011-15) of 100-140 units new FPSO order is a 28-80% increase when compared against actual orders over the past 5 years (2006-10). The strong growth rate may partly be attributed to the: (i) depressed global financial and commodity markets in 2008-09 and (ii) FPSO market at the pre-inflection stage, with growth accelerating YoY. Our expectation is that FPSO orders will grow at an increasing rate as the need for new oil supply sources grows and major deepwater finds continue.
Forecasts of FPSO orders over the next 5 years by size
(Units)
160 120

Large FPSOs

Midsize FPSOs

Small FPSOs

Series4
140

120 78
80

100

60 48

36 30 34 36

42

40

36 Base scenario: USD 90-110 oil

38 High: scenario: USD 110-150 oil

0 Past five years Low scenario: USD 70-90 oil

Sources: International Maritime Associates, Inc, Maybank-IB

6 March 2012

Page 25 of 60

Bumi Armada

5. Opportunities for Bumi Armada


A promising roadmap aiming for Top 4. Bumi Armada targets to be the fourth-largest FPSO operator by end-2013. In order to achieve this feat, it needs to have a minimum of 8-9 FPSOs in its armada, which implies the addition of 3-4 units to its existing fleet over the next 24 months. A major force by 2013. This is a reasonable target, in our view considering the myriad prospects in the FPSO market. Growing its FPSO fleet by 3-4 units would only: meet 2-4% of the needs of 100-140 new projects expected to come onstream over the next 5 years, account for 5-11% of the global forecasted small-sized FPSO orders by 2015 (based on 36 to 60 projects), account for 27-36% of global FPSO orders, on a base case scenario (low scenario, 30% sensitivity on small FPSOs; 11 units).

Target, focus and criteria. Based on the set criteria, we opine that Bumi Armada will most likely focus on: (i) small-sized FPSO projects, (ii) converted FPSOs, (iii) Asia Pacific (i.e. Asia and Oceania) and Africa markets, and (iv) Oil companies that typically lease FPSOs. 25 potential projects identified. Based on our screening criteria listed above, we have identified 25 potential projects, located in 12 countries: Angola (1), Australia (1), Cameroon (1), Gabon (1), India (3), Indonesia (4), Malaysia (5), Nigeria (2), Thailand (1), The Philippines (1), Tunisia (1) and Vietnam (4). In terms of time-line: 25 potential projects oncoming projects that fit Bumi Armada
Year 2012 (8 projects) Country India Indonesia Malaysia Malaysia Malaysia Malaysia 2013 (5 projects) Vietnam Angola Indonesia Thailand Vietnam 2014 (12 projects) Australia Cameroon India Indonesia Gabon Nigeria Vietnam Malaysia The Philippines Tunisia Source: IMA 6 March 2012 Page 26 of 60 Field Cluster 7 oil field (C 7) Madura BD, Bukit Tua (2 units) Gumusut-Kakap (temporary) PM301/PM325 (Kamelia) PM302 (Bunga Dahlia and Teratai) SB 302 (Belud) Dong Do/ Thang Long Block 15/06 Badik B6/27 Blk 102/106, Lac Da Vang (2units) Lady Nora Etinde IE/IF Dhirubhai, KG-DWN-98/2 (2 units) Ande Ande Lumut Dussafu Ruches Aje, Bilabri/Orobiri (2 units) Dai Nga N3/Spaoh West Linapucau Cosmos

Bumi Armada

Snapshot of projects that pass Maybank-IBs selection screening criteria


Status Bidding/ final design Bidding/ final design Bidding/ final design Planned or being studied Planned or being studied Bidding/ final design Bidding/ final design Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Planned or being studied Country India Indonesia Indonesia Malaysia Malaysia Malaysia Vietnam Indonesia Thailand Vietnam Vietnam Australia India India Indonesia Gabon Nigeria Nigeria Vietnam Malaysia Tunisia Field C7 Madura BD Bukit Tua Kamelia Bunga Dahlia and Teratai Belud Dong Do/ Thang Long Badik B6/27 Blk 102/106 Lac Da Vang Lady Nora Dhirubhai KG-DWN-98 Ande Ande Lumut Dussafu Ruches Aje Bilabri/ Orobiri Dai Nga N3/ Spaoh Cosmos Operator ONGC Husky/CNOOC Petronas Petronas/ Hess Petronas Hess PetroVietnam/Petronas Anadarko PTTEP/Nippon Oil Petronas PetroVietnam Woodside Reliance ONGC Genting O&G Harvest Natural Resources Chevron/ Yinka Peak Idemitsu Petronas Chinook Energy Water depth (m) 85-90 55 100 <200 65-70 155 65 70 35 25-30 48 80 1194 225 100 115 90 40-300 120 80 120 First oil possible 2013 2014 2014 2014 2014 2014 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2013

Sources: International Maritime Associates, Inc, Maybank-IB

The FPSO tenders that we gauge Bumi Armada has entered into to date are in India, Indonesia, Vietnam, Malaysia, Angola and Nigeria.

FPSO tenders that Bumi Armada could have a high prospect of winning
Country India Operator Oil & Natural Gas Corporation (ONGC) Description We do not rule out Bumi Armada expanding further into the Indian FPSO market. ONGCs Cluster7 FPSO tender is a likely project, which is at the bidding/ final design stage stage. ONGC requires an FPSO that can handle 30,000 bpd of oil and 63mmscfd of gas with storage capacity of 0.5m bbl and operate up to 100m water depth. It is no secret that 8-10 prospective contractors took part in a pre-bid meeting by ONGC. The notable names apart from Bumi are: (i) Malaysia-based M3Nergy, (ii) Singapore-based Tanker Pacific, (iii) Indias ABG Shipyard, (iv) Pipavav Shipyard and (v) Mercator. ONGC has another project in India, KG-DWN-98/ 2, a marginal field offshore Andhra Pradesh on Indias East Coast, that requires an FPSO. Production is slated for 2014/16. However, the project had several false starts in the past. This project is at the planned or being studied stage. We rate Bumi Armadas chances for the Cluster 7 FPSO project as high. Bumi Armada could penetrate Indonesias FPSO market this year via Husky Energys tender for an FPSO to develop its Madura BD field off East Java. Husky requires an FPSO that can handle 8,000 bpd of condensates and 110 mmscfd gas with storage capacity of 370,000 barrels. The FPSO is required to handle sour gas while operators face strict bidding requirements in terms of both local cabotage laws and financial performance bonds. The charter period offered is a firm 10-year term with up to 5 annual extensions. It has been reported that Bumi Armadas competitors are BW Offshore, M3nergy, Tanker Pacific and EMAS. We gauge Bumi Armadas chances to be fair for this project.

Indonesia Husky/CNOOC

Sources: International Maritime Associates, Inc, Maybank-IB

6 March 2012

Page 27 of 60

Bumi Armada FPSO tenders that Bumi Armada could have potentially participated in to-date (continued)
Country Vietnam Operator PetroVietnam/ PETRONAS Description We expect the Lam Son Joint Operating Company FPSO contract to be awarded in 2012. The FPSO will develop 2 oilfields in the Cuu Long basin field. This project is in the bidding/ final design stage. The field, co-owned by PetroVietnam and PETRONAS, requires a FPSO with up to 18,000 bpd of oil processing capacity and storage space for 350,000 barrels. The FPSO will initially process oil from the Thang Long fields, followed by the Dong Do field. This is a 7-year fixed-term contract with the option to extend for 3 years. We understand that Fred Olsen Production is the favoured bidder. It has received a Letter of Intent due to its competitively-priced bid. However the contract has not yet been finalised. There are 3 other projects in Vietnam; (i) Dai Nga, (ii) Blk 102/106 and (iii) Lac Da Vang, which require FPSO, MOPU/ FSO or fixed platform as production solutions. These projects are scheduled to hit first oil in 2013-2015. These projects are at the planned or being studied stage. There are 5 projects in Angola, which are at the bidding or final design stage. They are: (i) Block 14 Negage, Lucapa, (ii) Block 18 Platina, Chumbo, Cesio, (iii) Block 31 Ceres, Heve, Urano, Titania, Terra, Miranda, Cordelia, Portia, Dione, Leda, Oberon, Tebe, (iv) Block 15/ 06 hubs Ngoma/ Sangos/ Cabaca Norte/ Nzanza/ Cinguvu/ Mpungi/ Cabaca Southeast and (v) Block 16 Chisonga. These projects are at the bidding/ final design stage stage. Based on Bumi Armadas technical track record limits, we opine that the Block 15/ 06 hubs appear to be the most likely target for Bumi Armada due to the shallow water depth (470-1,420m); the other fields are in ultra-deep waters (1,300-2,220m). For this particular field, the chances of a win are higher, in our opinion, as 2-3 FPSOs are likely to be utilised. We are optimistic of Bumi Armadas chances in clinching this contract. We have identified 4 other projects in Angola, which are at the planning stage and which are currently being studied. They are the: (i) Block 32. (ii) Block 17/ 06, (iii) Block 18/ 06 and (iv) Block 33. Still, Block 15/ 06 remains the most likely target due to the favourable environment (easy to moor), water depth (470-1,420m) and existing relationship with ENI. The project is expected to kick in by 2013 (earliest). Bumi Armadas prospects in Nigeria are likely to be most favourable for the Aje field, owned by Chevron/ Yinka. This field however is still at the planning stage. The water depth is favourable at 90m with the field targeted to achieve first oil by 2014. Apart from Aje, there are 10 other fields in Nigeria, which are currently being studied. Up to 4 FPSO projects could be awarded this year in Malaysia. They are: (i) SB 302 (Belud), (ii) PM301/PM325 (Kamelia), (iii) PM302 (Bunga Dahlia and Teratai) and (iv) Gumusut-Kakap (a temporary FPSO with short-midterm charter) The first 3 are fast-tracked projects brought forward to boost Malaysian gas supply needs; first gas/oil is targeted for 2014 while the last would be a short-term contract. Belud FPSO - It has been reported that the M3nergy and EMAS consortium submitted the lowest bid in a recent tender for the Belud FPSO, offering the FPSO Lewek Arunothai whose charter was prematurely terminated in Thailands Arthit field in 4Q2011. However, considering the FPSO Arunothais chequered operating history, Hess is reported to have offered Bumi and MISC a second chance to match the consortiums bid. Kamelia and Bunga Dahlia & Teratai FPSOs - Both the Kamelia and Bunga Dahlia/Teratai projects will require floating solutions for field development. With both fields targeted to achieve first gas by 2014, we expect contract awards by this year. Should M3Nergy win the Belud job, we reckon either Bumi or MISC could win one of these. Spaoh FPSO. The Spaoh field aka NC3 will likely use an FPSO or fixed platform. Further appraisal is being planned. This field will hit first oil by 2014/16.

Angola

ENI

Nigeria

Chevron/ Yinka, Peak

Malaysia

PETRONAS/ Shell

Hess/

Sources: International Maritime Associates, Inc, Maybank-IB 6 March 2012 Page 28 of 60

Bumi Armada

OSV: Fundamentals and prospects


1. Industrys fundamentals
OSV market currently going through an overbuilt period. Vessel supply for now outstrips demand by 1.6x and the overhang situation was at its crest in 2010, owing largely to the influx of orders for AHTS and platform supply vessels (PSV) during the 2005-2007 period. Fueled by the arrival of new vessels entering the market. 1,193 newbuilds comprising AHTS and PSVs entered the market in 2006-10, exacerbated largely by the AHTS segment (707 units), which outstripped the PSV (486 units) market by 1.45x. The 5,000bhp AHTS market was the hardest hit. The oversupply state in the AHTS market is more prevalent in the small vessel segment (5,000bhp) and less on the higher specs (8,000-12,000bhp). The PSV segment is slightly better off than the AHTS market, owing to the higher investment requirement and lower volume. Increasing number of vessels lying idle; utilisation rate at its lowest in 2010. The number of idle vessels reached its zenith in 2010, doubling its immobilized fleet YoY. The prevalent situation has brought down utilization rates for AHTS and PSVs from a peak of 86-88% in 2006 to 70-72% in 2010. Old vessels (>15 years) experienced lower utilization (40-55%) compared to newer builds (<10 years; >60%).
OSV: Global AHTS demand, supply & utilization
(Units) 1600 1200 (%) 100 90 80

OSV: Global PSV demand, supply & utilization


(Units) 1200 (%) 100 90 80

1000
800 600

800
70 400

400
200 0 2005 2006 2007 Demand (LHS) Utilisation (RHS) 2008 2009 2010 Supply (LHS) Malaysia Flag (RHS)

70 60
50

60 50 2005 2006 2007 Demand (LHS) Utilisation (RHS) 2008 2009 2010 Supply (LHS) Malaysia Flag (RHS)

Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

OSV: Supply overhang in the AHTS segment


(Units) 1,800

OSV: Supply overhang in the PSV segment


(Units) 1,300 1,200 1,100 1,000 900 800 700 600 500 400

1,600 1,400
1,200

1,000
800 600

400 2001 2003 2005 Demand Effective supply 2007 2009 2011 2013 2015 2017 Total supply Effective supply ex 30 ex y.o.s

2001 2003 2005 Demand Effective supply

2007

2009

2011 2013 2015 2017 Total supply Effective supply ex 30 ex y.o.s

Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

6 March 2012

Page 29 of 60

Bumi Armada OSV: Increasing numbers of vessels idle


(Units) 150
120 90 AHTS PSV

OSV: Utilisation rates (old vs new)


(Utilisation) 100

Built in/ before 1991

Built on/ after 2005

90 80
70

60 30 0 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11

60
50 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11
Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

2. Outlook
Positive trends over the next 18-24 months. The vessel market for the 5,000bhp AHTS segment remains weak and oversupplied but the 8,000-12,000 bhp AHTS segment is seeing moderate progress in rates as several recent contracts have secured decent charter rates. Newbuilds tailing off. 338 orders committed in the past few years will enter the market in 2011-14. Overall, newbuild deliveries are tailing off as the pace of orders has significantly slowed down. PSVs are in demand. Newbuilding activities so far are nominal, largely confined to the larger specification vessels (i.e. 8,000-12,000bhp AHTS) and PSVs with higher DWT (>3,000t dwt).

OSV: Snapshot of newbuild for AHTS

OSV: Snapshot of newbuild for PSV

(Units) 250

Under 9,999 18,000+

10,000-14,999 bhp' 000/unit

15,000-17,999 (bhp) 25

(Units) 120 100

<3,000 4,000+

3,000-3,999 dwt' 000/unit

(bhp) 6 5

200
150

20
15

80 60
40 20 0 2001 2003 2005 2007 2009 2011 2013

4 3
2 1 0

100
50 0 2001 2003 2005 2007 2009 2011 2013

10
5 -

Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

6 March 2012

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Bumi Armada OSV: Global OSV newbuild by order to-date


(Units) 300 250

OSV: Newbuilds (2006 2014)


Newbuild vessels 350 300 250

AHTS M'sia AHTS

PSV M'sia PSV

AHTS (Delivered) PSV (On coming) 327 312

PSV (Delivered) AHTS (On coming)


291

200
150 100

200 150
100 50 0

224 166
164 104 36 2006 2007 2008 2009 2010 2011 2012 2013 4 2014

50
0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

Dayrates have stabilized. Dayrates after going through the floor have stabilized, as the market gradually absorbs the overbuilt situation. The low orderbook/fleet ratio of less than 20% supports our view that the current momentum will continue into 2012. We expect day rates to trade sideways and only improve over the next 18 months. A cyclical recovery in motion. We expect a cyclical recovery in demand for offshore vessels. The strength in oil prices is a key secular driver for OSV demand for it encourages further offshore exploration and drilling activities. OSVs will be required to support growth. Our house economist forecasts oil price to average USD100/bbl in 2011 (WTI) and USD110/bbl in 2012. WTI crude ended last Friday at USD106/bbl after touching a year high of USD109/bbl the week before. All good things come to those who wait. Putting things into perspective, the demand and supply disconnect for offshore vessels should normalize in the later part of 2012. Utilisation rates are on the rise, with the steepness of the increase depending on the type of vessels.

OSV: Global AHTS term fixtures


(USD 000/day)

OSV: Global PSV term fixtures


4,000-9,999 bhp
(USD 000/day) 50 45 40 35 30 25 4,000+ dwt 3,000- 3,999 dwt

15,000 bhp

10,000-14,999 bhp

70
60 50 40

30
20 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

20 15 10 5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

6 March 2012

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Bumi Armada OSV: AHTS 4,000 6,000bhp dayrates vs. utilisation


(USD 000/day) 25 Day rate Utilisation (%) 100 90 20

OSV: PSV 3,000 3,999 t dwt dayrates vs. utilisation


(USD 000/day) 70 60 50 40 30 Day rate Utilisation (%)

100
90 80 70 60 50 40 30 20

80
70

15

60
50

10

40
30

20
10

20
10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

OSV: AHTS average age profile (13.9 years)

OSV: AHTS average age of idle vessels (21.7 years)

15% 21%

0-19 yrs
20-29 yrs

31%

34%

0-19 yrs
20-29 yrs

64% 30 yrs+

35%

30 yrs+

Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

OSV: PSV average age profile (12.6 years)

OSV: PSV average age of idle vessels (25.0 years)

13% 14%

0-19 yrs
40%

29%

0-19 yrs
20-29 yrs

20-29 yrs

73% 30 yrs+

31%

30 yrs+

Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

6 March 2012

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Bumi Armada OSV: Global market share by vessel demand


AHT 6%
PSV 39%

OSV: Global market share by vessel supply


AHT 7% PSV 39%

AHTS 55%

AHTS 54%

Sources: ODS-Petrodata, Maybank-IB

Sources: ODS-Petrodata, Maybank-IB

OSV: Global supply & construction OSV fleet


Constru ction Vessels 17% Supply Vessels 83%

AHT 7%

ROV Support 28%

Accomo dation 17%

PSV 39%

Derrick 8% Diving Support 15% Others 7%

AHTS 54%

Pipelay/ Derrick Pipelay 25%

Sources: ODS-Petrodata,, Maybank-IB

OSV: Global demand construction vessels by type


Constru ction Vessels 12% Supply Vessels 88%

AHT 3% PSV 13%

ROV Support 13%

Accomo dation 31%

AHTS 84%
Pipelay/ Derrick Pipelay 37% Diving Support 19%

Sources: ODS-Petrodata,, Maybank-IB

OSV: Global demand for AHTS, PSV and construction vessels by region
12%
Asia Pac Europe
11%
11% 22% 21% 22%

13%

Asia Pac

15% 29% 11%

Asia Pac Europe

Europe
N. America C&S America

41% 25%

N. America Caspian & CIS C&S America Med & Mid East

N. America Caspian & CIS C&S America Med & Mid East

Med & Mid East West Africa

10%

11%
3%

4%

4%

West Africa

1%

13%

21%

West Africa

1,003 AHTS

716 PSVs

Sources: ODS-Petrodata,, Maybank-IB

6 March 2012

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Bumi Armada

a) South East Asias OSV outlook


Malaysia, Indonesia and Vietnam are most likely to provide the most opportunity for PSVs in the region as the number of operational platform installations in the region is expected to increase incrementally over the next five years. Although the majority of installations are currently in shallow water locations offshore these countries, the region is reflective of the global offshore industry in that it is moving increasingly towards deep and ultra-deepwater fields particularly offshore Malaysia.
South East Asia platform capex by region (2011 15)
Myammar 5% Brunei 3%

Malaysia 27% Cambodia 1%

Vietnam 21% Indonesia 26% Phillipines 5% Thailand 12%

Sources: Infield Systems Limited, Maybank-IB

b) Malaysias OSV outlook


Malaysia is well-positioned as a regional deepwater centre. Malaysias deepwater activities, actively promoted by PETRONAS, are expected to feature prominently in the industrys exploration and production (E&P) development as it is one of the most effective ways to increase reserves and production. Deepwater to contribute 1/3 of Malaysias production. PETRONAS expects the deepwater sector to contribute 30-40% of Malaysias O&G production over the next 10 years, in line with the growing trend in the region. A total of 17 deepwater production sharing contracts (PSC) have been awarded to-date, covering 119,000sq km. At present, only one is at the production stage. Deepwater blueprint offers visible roadmap. We gather that 8 deepwater projects will be implemented. The Kikeh field is Malaysias first deepwater production field, which was successfully commissioned on 17 Aug 2007 with an oil production rate of 120,000 bpd presently. The Gumusut-Kakap field is up next, by 2013. PSVs to support deepwater projects. With the Gumusut-Kakap and Malikai deepwater projects projected to come onstream soon, there will be a need for PSVs to support the field production activities.

6 March 2012

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Bumi Armada

As well as upcoming shallow water projects. Deepwater projects aside, 65-70 new platform structures are required for shallow waters in 5 years. 22 new open shallow water blocks, covering over 240,000 sq km are open and available for data review. Based on PETRONAS announcement, there is a need to construct 65-70 (small and large) fixed structures and platforms for its domestic operations over the next 10 years.
Malaysias deepwater reserves potential
Metres below sea level 0 200 400 Gumusut-Kakap 650 m bbl Malikai 108 m bbl Jangas 81 m bbl Kamunsu 401 m bbl

600
800 1,000 1,200 1,400 1,600 1,800 Pisangan 56 m bbl

Ubah Crest 215 m bbl

2,000
Sources: PETRONAS, Maybank-IB

Malaysias implementation of deepwater projects


2007 Kikeh

Future development field projects

Gumusut/Kakap

Malikai

Indicative First Oil Exploration Strategy Exploration Appraisal & Reservoir Evaluation Field Development Studies Preliminary Engineering
Project Implementation

Kebabangan

Jangas
Ubah Crest

Pisangan Kamunsu

Source: PETRONAS

6 March 2012

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Bumi Armada Malaysias planned oil production: Shallow and deepwater fields
100%

Deepwater fields

Shallow water fields

80% 60% 40% 20% 0%


2010A

2011F

2012F

2013F

2014F

2015F

2016F

2017F

2018F

2019F

2020F

Source: PETRONAS

PETRONAS deepwater blocks worldwide

OBO (Greenland)
2 blocks

North Sea
OBO (Vietnam) 1 block COB (Malaysia) OBO (Mauritania) 1 block CBO (Mauritania) 2 blocks
OBO (Egypt)

7 blocks

2 blocks

CBO (Cuba)

4 blocks

Gulf of Mexico

West Africa

COB (Myanmar) 3 blocks

JOB (Malaysia) 1 cluster

Offshore Brazil
Deepwater hotspot Emerging hotspot

OBO (Cameroon) 2 blocks

OBO (Indonesia)
OBO (Malaysia) 11 blocks

3 blocks

Carigali operated block (COB)

COB(Mozambique) 3 blocks

Operated by others (OBO) Joint operated block (JOB)


Source: PETRONAS

OBO (Mozambique)
1 block

6 March 2012

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Bumi Armada

c) West Africas OSV sector outlook


Positive. The West African market will hold a great deal of positive news for OSV players, in particular companies with high class AHTS. New platform-driven growth. This is attributable to the rise in platform projects over the next 5 years through new platform installations, primarily in offshore major countries such as Angola, Nigeria as well as emerging countries like Gabon and Ghana.
West Africa platform capex by region (2011 15)
Eq. Guinea 6% Gabon 3% Angola 35%

Congo 6%
Cameroon 6%

Ghana 4% Ivory Coast 1%


Nigeria 36%

Sierre Leone 3%

Sources: Infield Systems Limited, Maybank-IB

d) Latin Americas OSV sector outlook


Brazil to anchor growth. There is expected growth in O&G investment for platforms and subsea assets in Latin America over the next 5 years. Majority of the capex will be concentrated in Brazil, taking up 68% of the capex in the region. As well as Mexico and Venezuela. Mexico and Venezuela will also see increasing demand for PSVs with new platform installations as well as increase in the cumulative base of existing operational platforms as PDVSA and PEMEX increase shallow water platform investments.
Latin America platform capex by region (2011 15)
Argentina Venezuela 13% 1% Brazil 68% Trinidad 5%

Peru 1%
Chile 1%

Mexico 11%

Sources: Infield Systems Limited, Maybank-IB

6 March 2012

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Bumi Armada

e) Offshore accommodation market outlook


Growing demand to support brownfield projects. The bulk of accommodation services will be required in the shallow waters and demand here is benign due to intermediate environmental conditions, driven by aging infrastructure. However, high-end vessels capable of working in intermediate and harsh conditions should see some growth in demand in later years. Vessels with DP hardware will be preferred. It is anticipated that more and more DP2 and DP3 high-end vessels will enter the market looking to capture the niche market. Region-wise, Brazil will require high-end accommodation vessels for its ultra-deepwater works. In North Asia, development at the South China Sea and Bohai Bay by Chinese NOCs and the international partners will likely underpin accommodation activities. In South East Asia (Malaysia, Indonesia, Thailand), majority of the forecasted demand is targeted for IRM services. Notwithstanding that, platform installations are also expected to drive demand for this type of vessel.

3. Opportunities for Bumi Armada


We view the PSV and accommodation workbarge/boat markets as a compelling opportunity for Bumi Armada. Africa and Latin America (notably Brazil) will likely be its key markets for its future fleet expansion programme. 8-10 new vessels planned. We expect Bumi Armada to add 8-10 new vessels, a balanced combination of PSVs, MPSVs and accommodation units over the next 2 years to capitalize on the strong demand for higher spec OSVs. Prospects for securing good charters are high. One of the PSV (to be built by Nam Cheong for USD30m with an end-2012 delivery date) will be contracted for the Gumusut-Kakap deepwater project on a long term basis, which is expected to come onstream in 2013. This initial win establishes Bumi Armada as a deep water PSV vessel operator and bodes well for its prospects for further deepwater jobs. Expecting high utilization for newbuilds. We opine that utilization rates for the newbuilds (PSV and accommodation workbarges) will be high and contracted on long-term charters. Utilisation set to improve for the existing vessels too. Utilisation rates for its existing fleet of vessels are also expected to improve in 2012, in our view, as demand picks up. Utilisation rates, in our view are expected to increase by 0.5-1.0% per month throughout 2012 with a target utilization rate of around 80% from 70% presently.

6 March 2012

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Bumi Armada

T&I: Fundamentals and prospects


1. Industrys fundamentals
The Caspian region offers robust potential. The region, accounting for 20% and 45% of the worlds oil and gas reserves respectively, is one of the most important drivers of O&G production growth. O&G developments in Russia (notably the Vladimir Filanovsky development) and Kazakhstan (Kashagan field) are expected to drive these regions to become big buyers of topsides in the near future. Turkmenistan, bordering Kazakhstan in the north and Iran in the south, also offers potential. Majority of the demand is expected to be for pipelay vessels (derrick lay barges (DLB), in particular for the interlinking cluster developments in Kazakhstan and Azerbaijan (Kashagan and Azeri projects) as well as Turkmenistan and Russia.
Key Caspian Sea development projects
Project Country Reserves (mmboe) Start-up date Est. Peak Production ('000 bpd) 1,500 1,030 510 370 250 410 90 125 160 100 Est. Peak Date Operator Production facilities

10,285 2013 4,367 1997 2,930 2006 2,608 2010 1,664 2006 1,190 1949 898 2016 833 1972 720 2018 463 2018 Sources: Wood Mackenzie, Maybank IB; * State Oil Company of Azerbaijan

Kashagan ACG Shah Deniz (gas) Severnyi Livanov SOCAR Assets* Khvalynskoye (gas) Cheleken Kalamkas More Pearls

Kazakhstan Azerbaijan Azerbaijan Russia Turkmenistan Azerbaijan Kazakhstan-Russia Turkmenistan Kazakhstan Kazakhstan

2023 2011 2018 2024 2021 1981 2018 2015 2021 2023

NCOC BP BP LuKoil PETRONAS SOCAR LuKoil Dragon oil NCOC CMOC

Artificial Island Fixed platform Fixed platform Fixed platform FPSO/ fixed platform Fixed platform Fixed platform Fixed platform Fixed platform Fixed platform

DLB vessel demand in the Caspian region

Turkemenistan 13%

Russia 22% Azerbaijan 54%

Kazakhstan 11%

Sources: Infield Systems Limited, Maybank-IB

6 March 2012

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Bumi Armada

A duopoly market; with good day rates and long-term charters. With the Caspian Sea almost a closed off market, as harsh winters, render the region landlocked for much of the year, having a vessel within the market is a key competitive advantage for operators. Only two pipelay vessels are currently available in the region, one operated by Momentum Group (Israfil Huseynov) and another by Bumi Armada (Armada Installer). Given the limited number of players, dayrates and utilization rates are expected to remain healthy over the next five years.
Caspian Sea heavy lift demand & supply
(Vessel Days) 16 14 12 10
400 300

Caspian Sea pipelay demand & supply


(Vessel Days) 600 Heavy Lift Demand Heavy Lift Suppy

Lay demand

Lay supply

500

8 6
4 2

200 100
0

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Infield Systems Limited

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Infield Systems Limited

2. Opportunities for Bumi Armada


Armada Installer is on a firm 8-year charter to PCSB on attractive terms. Petronas Carigali Sdn Bhd (PCSB) has guaranteed a minimum number of hire days for the vessel. We estimate 60-70% utilization of the vessel for the duration of the contract. This makes vessel cost payback likely. We note that the guaranteed minimum hire days clause kicks-in only in the fourth quarter of each final year (Oct-Dec). Armada Installer can also bid for other jobs simultaneously. More importantly, Bumi Armada is free to bid the vessel for works from the other operators, i.e., Dragon Oil, BP, Lukoil etc., during the remaining days ex- maintenance time. 7 projects are in various stages of completion and another 3 major projects have been lined up in the immediate future, providing Armada Installer great earnings visibility. Enter the Dragon. Of particular interest to investors would be the Cheleken field where Dragon Oil plans to spend USD1b from 2012 to 2015. Its upcoming projects encompass multiple jack-up platforms, at Zhdanov A & B and Lam D, E, F and G, and this greatly solidifies the visibility of the Armada Installers order flow. Anticipating higher utilization rates for the Armada Installer. There could be much opportunity for Bumi Armada in the Dragon Oil T&I projects as the Armada Installer (which is 2 years old) is arguably a better candidate, being a younger and more modern vessel compared to its rival; Israfil Huseynov a 20-year old pipelay barge. With elevated earnings. We estimate that clinching such jobs would lift Armada Installers utilization up beyond the 90% threshold (from 70% currently), effectively raising revenue by RM9m p.a., based on an average rate of USD70,000/day for 62 operating days.

6 March 2012

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Bumi Armada

New assets to drive T&I earnings. Bumi Armada acquired the Acergy Hawk (now named Armada Hawk) in June 2011. Thus far the vessel has worked on riser installations for the FSO Sepat and will spearhead bids for SURF installation and IRM projects in Asia. We expect Bumi Armada to add a third vessel, similar to the Armada Hawk in 2012, which would contribute about RM60m-90m in revenue p.a., assuming USD70,000 dayrates. Moreover, Bumi Armada can fit an existing AHTS Tuah 104 with an A-frame to undertake T&I works.
Major projects worldwide SURF contracts
2010 Contract 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Total Sources: Instok, Maybank-IB 2,300 5,114 Block 17-CLOV Roncador 3 Laggan Tormore Mars B Value (USD m) 1,300 520 250 230 2011 Contract Greater Gorgon Lula Nordeste Liwan Block 15-06 Tamar Guara-Phase 1 Barzan Phase 1 Jack/St. Malo Big Foot Lucius Prelude Papa Terra Clair Ridge Waimea OSX 1 Value (USD m) 945 650 585 460 420 416 400 300 230 220 180 150 90 68 2012 Contract Egina Caricoa Tweneboa Cernambi Guara-Phase 2 Gehem Ichthys Franco-FPSO 1 Gendalo Shtokman Nsiko Baleia Azul Freedom Myammar M-9 West Nile Delta Pipeline Mad dog Waimea Value (USD m) 1,300 960 850 656 544 450 450 448 360 300 300 288 160 131 125 100 100 68 7,197 6,812 2013 Contract Wahoo Block 31 South East Browse LNG Leviathan Wheatstone LNG Franco-FPSO 2 Iara-FPSO 1 Moho Bilondo 2 Florim Rosebank Shenandoah Jubilee FPSO 1 Pluto LNG 2 Vito Abadi LNG Value (USD m) 928 920 783 750 657 592 496 320 288 240 230 220 198 190 126

Major subsea markets world wide


(USD' m) 12,000 Angola Australia Brazil

Malaysias subsea market by definition


(USD' m) 1,200 1,000 800 600
400 200 0 559

SURF

Subsea Equipment 1,093

10,000
8,000 6,000 4,000 2,000

Nigeria

UK

GOM

404
276

111
2004

157

254

243

166

2010
Source: Instok

2011

2012

2013

2014

2005

2006

2007

2008

2009 2010F 2011F 2012F

Source: Instok

6 March 2012

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Bumi Armada

OFS: Fundamentals and prospects


1. Industrys fundamentals
PETRONAS capex blueprint denotes growth. PETRONAS is projected to spend about RM250b in capex over the next 5 years (2011-15). This equates to an average investment of RM50b p.a., which is 25% higher than its 2010s spending. The bulk of its capex spending will be redirected to domestic field development as it intensifies exploration and development activities in the deepwater, shallow, brown and marginal fields to lift production. PETRONAS domestic strategy. On its E&P efforts, PETRONAS will focus on: (i) (ii) (iii) unlocking stranded resources by fast-tracking the development of marginal fields projects, improving enhanced oil recovery (EOR) efforts to optimise existing fields resources, and intensifying exploration efforts to further grow its hydrocarbon resources.

PETRONAS 3-prong strategy

Source: PETRONAS

PETRONAS targeted fields

Source: PETRONAS

6 March 2012

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Bumi Armada

2. Outlook: Marginal field developments


Positive outlook. The countries in Asia Pacific, such as Malaysia, Indonesia, Thailand, Vietnam and India offer the most promising prospects, in terms of marginal field development. The growth is driven by Government incentives.
Marginal field development plans in Asia Pacific
Country Malaysia Indonesia Thailand Vietnam Marginal fields 90 hotspots identified, 25 to be developed 160 O&G fields identified 40 O&G fields identified 20 O&G fields identified Outlook Positive outlook. Several projects have been announced (Sepat, Berantai). More to follow. Positive outlook. Government has identified 100 oil fields and 60 gas fields for development. Positive outlook. Marginal fields are attracting more investors.

Positive outlook. The government is developing marginal fields in Cuu Long basin in an effort to boost production. Australia 10 O&G fields identified Positive outlook. New innovative concepts have been developed to explore marginal fields, which are economically viable. New Zealand 165 new marginal fields Positive outlook. Government is keen on rapid development of smaller, economically marginal fields identified to meet countrys energy deficit. India 165 new marginal fields Positive outlook. 44 fields have been monetized. 90 fields are in the process of being put to identified production. China 30 O&G fields identified Moderate outlook. Progress on marginal fields has been restricted due to unfavourable PSC conditions and tight government controls. Sources: Origin Business Engineering B.V., Maybank-IB

Marginal field development to see rapid progress in Malaysia. PETRONAS will adopt the fast track approach to execute its marginal field projects, as it aims to secure 1st oil and/or gas as fast as possible (within a 12-month period) with minimal capex and infrastructure requirement. Development will be through innovative solutions. PETRONAS will develop 25 domestic marginal fields as it seeks to reverse declining output of Malaysias existing reserves. The marginal oil fields have 30m barrels of oil reserves and unlocking these fields is expected to raise Malaysias crude oil production by 55,000 bpd (+10%). The capex required to develop a marginal field is around USD800m and the breakeven cost is estimated at USD70/ bbl. Marginal fields to be developed via the RSC model. The marginal field programmes will be developed via Risk Sharing Contracts (RSC) and not the conventional Production Sharing Contracts (PSC) accorded to oil majors participating in Malaysias major O&G fields. The RSC is aimed at making the project viable and attractive for smaller independent oil companies (IOCs). PETRONAS has kicked off marginal field development, more to emerge. The first two pilot projects, Berantai and Sepat, have been rolled out and we anticipate 2 more (Balai and Bentara) to be awarded soon. It is understood that at least 5 more hydrocarbon discoveries are being looked at. The fields under consideration are said to include the Cenang and Tembikai gas discoveries near Talisman Energy operated Block PM 314. The other finds Diwangsa, Rabung, Korbu, Desaru and Jambu could also be on the table.

6 March 2012

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Bumi Armada

3. Outlook: Enhanced Oil Recovery (EOR) projects


Enormous potential. Existing brownfields also offer an abundance of opportunities. EOR potential in Malaysia is massive and is estimated to be approximately 1b stock tank barrels. Existing fields will be rejuvenated through enhanced oil recovery (EOR). 166,000 bpd, 1,000 idle wells, 955m bbls, 37 fields... Malaysia aims to boost brownfield production by 166,000 bpd (+30% increase to current total production) come 2020 using new EOR technologies. There is an est. 955mboe trapped in 37 brownfields with 1,000 idle wells. 60% of total EOR potentials in Malaysia reside in 6 reservoirs. They are the Tapis, Guntong Upper, Guntong Lower, St Joseph, Tiong, and Dulang fields. The crucial factor would be boosting the average recovery factor to 45-55% from the current average of 36%.
Snapshot of Enhanced Oil Recovery (EOR)
200

Tapis Lower J

Total potential: 955 MMstb Number of reservoirs: 37 Average size: 26 MMstb

Group 1: 570 MMSTB (60.4%)

150

Guntong Upper I CO2 miscible


100

St. Joseph B/G

Water Flood HC miscible Other potential reservoirs: 374 MMSTB (39.6%)

Tiong J - 20/21 Guntong Lower I


50

Others

Dulang E-12/3 (pilot stage) Dulang E - 14 (pilot stage)

Source: PETRONAS

...3x times larger than marginal field plans...The ultimate goal, according to PEMANDU, is to add 220,000 bpd of oil from EOR initiatives and marginal fields accounting for 1/3 of domestic production. The greater emphasis on brownfields stems from the relatively easier, faster and lower incremental cost per barrel of increased production. The ultimate winner we feel will be the company able to deliver executable, cost effective and quick to deploy solutions. ...with RM45.9b capex committed. Petronas & Shells EOR projects for St. Joseph, South Furious (SF30), Barton and the Baram Delta Operations (BDO) call for USD12b (RM36b) in investments to develop the 9 fields of Sarawak and 4 fields in Northern Sabah. Meanwhile, Exxon will be rehabilitating the Tapis (RM3.2b), Guntong, Tabu, Palas, Seligi, Irong Barat and Semangkok fields (RM3.6b) and 2 mature gas fields, Jerneh & Lawit Bintang (RM3.1b) off the peninsular.

6 March 2012

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Bumi Armada

4. Opportunities for Bumi Armada


(i) Angsi EOR project. This is a fast-track project. PETRONAS has set a target to commence operations by Sept 2013. It requires a vessel-based sea-water reverse osmosis (SWRO) plant (CEOR floater) with the capacity to desalinate 150,000bpd of seawater to increase oil recovery rates by another 20%. Water Standard to team up with local operator(s). US-based Water Standard won the oilfield desalination project and will likely partner an FPSO operator for this job. Conversion work is expected to take 16 months to complete. Potential winners. Bumi Armada, SapCrest Kencana Petroleum, Uzma and Deleum are the names mentioned. We think Water Standard could team up with one to two local partners due to the massive capex and job scope. Angsi: An immediate target for PETRONASs CEOR vessel

Sources: PETRONAS, Maybank-IB

(ii)

St Joseph EOR. This is a similar project to Angsi but requires a smaller SWRO unit. The project requires the vessel to handle an initial 10,000bpd water and chemical injection during the pilot phase (12 months). If this is successful, the vessel will undergo modification to triple its injection capacity to 30,000bpd. Requires a 30,000bpd SWRO now with an Angsi size unit to follow. Unlike the Angsi field, the main asset (i.e. vessel) will be owned by Shell with the winner earning project management fees. However Shell intends to source a larger vessel when the economic viability of the project has been ascertained, to support the full field injection of 15,000bpd. Relocation from Angsi to Sabah? We understand from discussions with O&G service providers that chemical alkaline surfactant polymer treatments are normally carried over a 3-4 year period. Based on the 150,000bpd processing capacity required for the Angsi SWRO unit, we estimate the vessel hull size could at least be an aframax tanker (market price RM60m70m per unit). Considering the modifications and quantity of topside equipment required we think it likely the same floater

6 March 2012

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Bumi Armada

will be utilised at both fields, consecutively, allowing the capex to be depreciated gradually. Bidders and potential winners. Bumi Armada and six other operators (BW Offshore, MISC, M3nergy, SapuraCrest, Deleum and Tanjung Offshore) have been invited by Shell to bid for an EPCIC contract to supply a CEOR vessel for the St Joseph pilot project off Sabah. However, only two bidders remain Bumi Armada and Deleum.
Snapshot of 13 BDO & North Sabah oilfields to be developed
South Furious 30

Baronia BaroniaBarat Betty Bokor Tukau Sikau Siwa Bakau West Lutong

St. Joseph

Barton South Furious

EOR Project

Sabah

1. USD12b investment over 30 years 2. To develop 9 fields in the Baram Delta, Sarawak and 4 fields in North Sabah 3. To recover 756m bbl of oil or 90-100k bopd 4. To improve average recovery factor to 50% 5. To extend fields productive life to beyond 2040

Sarawak

Source: Maybank IB

(iii)

Tanjung Baram. Meanwhile, the Tanjung Baram EPS project, awarded to a foreign party, is running into complications and will likely miss the first oil production target (1,000-3,000bpd) set for Jul 2012. A re-tender could recur should the issue remain unresolved.

6 March 2012

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Bumi Armada

SECTION 3: FINANCIALS, VALUATION, RISKS

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Financials
Registered robust profits in the past. Bumi Armada delivered a RM277m net profit in 2009 (+85% YoY), RM351m in 2010 (+25% YoY) and RM387m in 2011 (+10% YoY). These translate to a robust 3-year historical net profit CAGR of 37% (2009-11). Poised to break new ground. Looking ahead, we expect the earnings trajectory to continue its climb, at least over the next 3 years, on the back of stronger profits from all core divisions, namely FPSO, OSV and T&I operations. Set to enjoy strong and sustained growth. We project a strong 3year net profit CAGR of 25%, forecasting that Bumi Armada will deliver a net profit of RM532m in 2012 (+37% YoY), RM628m in 2013 (+18% YoY) and RM707m in 2014 (+13% YoY). Growth will be driven by: (i) 3 new FPSOs progressively coming onstream. We expect Bumi Armada to secure 3 FPSO contracts in 2012-13 (i.e. Malaysia, India and Angola). We expect the group to own a fleet of 8 FPSOs by end-2013, elevating it to becoming the fourth-largest FPSO operator worldwide by then. (ii) OSV expansion and higher utilisation rates. We project Bumi Armada will take delivery of 2 PSVs in 2012 and another 4 newbuilds in 2013-14. Expectation is for these new vessels to generate revenue of RM29m-RM213m p.a. in total, lifting OSVs topline by 6-28% respectively in 2012-13. In terms of utilisation rates, we expect a progressive step-up, from 79% in 2012 (+7-ppt YoY) to 83% in 2013 (+4-ppt YoY). Growth will largely be driven by higher charter days for its 8,000-12,000 bhp AHTS and PSVs. (iii) T&Is Dragon Oil contract and contributions from new vessels. In the T&I segment, we have assumed Bumi Armada will secure the Dragon Oil T&I contract in the Caspian Sea. Bagging this project will elevate utilisation of Armada Installer from 70% to above 90%. With Bumi Armada taking delivery of Armada Hawk in 2H 2011 and another SURF vessel by 2012 to participate in the IRM projects in Asia, we project growth of the T&I EBIT at RM184m-RM190m p.a. in 2012-14 respectively, and at RM117m in 2011 to (iv) OFS division is the wild card. With the delivery of the one-off Sepat FSO project, Bumi Armada aims to move to a recurring income business model via the Angsi SWRO vessel projects. We expect this project, to be awarded by 1H12, to generate EBIT of RM56m p.a.. Optimised earnings impact from 2015. Putting things into perspective, we expect Bumi Armada to enjoy the full effect of its underlying strong earnings-generating assets in 2015. This will notably come from the 3 new FPSOs, as the O&M charter rates kick in.

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Bumi Armada Snapshot of assets growth


FYE Dec (RM m) Assets (unit) - FPSO (contract signed) - OSV - T& I Total Utilisation rate (% ) OSV - AHT - 5,000 bhp AHTS - 8,000 10,000bhp AHTS - 12,000 bhp AHTS - Workbarge/ boat - PSV - Others T&I - Armada Installer - Newbuild (2) Sources: Company, Maybank-IB 2010A 3 37 1 41 2011A 5 46 2 53 2012F 7 48 3 56 2013F 8 50 3 61 2014F 8 50 3 61

87 70 50 100 80 73 70 -

87 83 45 100 74 90 83 75 95

73 85 73 100 88 90 80 92 95

77 85 83 100 95 90 80 92 95

77 85 83 100 95 90 80 92 95

Not ruling out further upside potential. We do not discount the possibility of Bumi Armada adding another new small-to medium-sized FPSO beyond the projected 3 units, which would effectively lift its FPSO fleet size to above 8 units. In our modeling, we have also not imputed the expectation of any other production floaters (i.e. FSO). Overall, we opine Bumi Armada has the balance sheet, skill sets and appetite to undertake this. Has the ability for growth. Our forecasts suggest that Bumi Armadas net gearing level will range between 0.5x and 0.6x in 2012-14. This is below the internal threshold of 1.5x set by management. Hypothetically gearing up to 1.5x in 2012 could effectively lift borrowings by RM3.5b (i.e. 3-4 FPSOs). Has the balance sheet to take up another FPSO. We estimate that taking on the extra debt will still be sufficient for Bumi Armada to fund the expansion for a small-sized FPSO. As a benchmark, the capex to construct/convert a small-sized FPSO from a tanker (<80,000 bpd capacity) would range between USD300m-USD500m. The cost to modify an existing smaller unit is estimated at USD100m-USD250m.
Segmental breakdown
FYE Dec (RM m) Revenue - FPSO - OSV - T& I - OFS EBIT - FPSO - OSV - T& I - OFS Sources: Company, Maybank-IB 2010A 1,241.4 553.4 419.7 268.3 0.0 467.1 179.2 88.9 148.5 22.7 2011A 1,543.9 609.2 481.9 242.3 210.5 518.3 200.2 116.8 117.2 21.0 2012F 1,800.7 743.9 622.6 334.2 100.0 621.8 227.5 175.0 183.8 13.0 2013F 2,220.6 965.4 686.1 334.0 235.0 745.7 260.6 207.2 183.7 40.8 2014F 2,504.3 1,097.4 688.4 344.8 373.8 835.2 330.2 221.0 189.6 69.3

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Significant capex going forward. Bumi Armada will spend heavily on capex (RM6.7b in total, in 2011-15) to fund its expansion programmes. As such, we do not expect significant dividend payout in the near term.
Bumi Armada: Capex profile
(RM b) 1.5

FPSO

OSVs

T&I

Others

RM6.7b

1.3
1.1 0.2

0.4
0.3

0.9
0.7 0.5

0.2 0.1

0.5

0.3
0.1

0.5

0.7

0.8

-0.1

2008 1.2

2009 1.4

2010 1.1

2011-14

Sources: Company, Maybank-IB

Progressive dividend policy. Management intends to adopt a progressive dividend policy in determining the level of dividend payment, with the level of cash, gearing, debt profile, retained earnings, capex and investment plans to be taken into consideration.
Projected capex for FPSO orders: Capex to build/convert FPSOs varies widely, depending on unit size, complexity and application. Large FPSOs: A large 150,000+ bpd FPSO intended for use offshore Africa or Brazil can cost USD1b to USD2.2b. As benchmarks, capex for the Clov FPSO is USD1.8b, Usan USD1.6b, Pazflor USD2.1b and the P62 and P63 FPSOs are around USD1b. Given the expected mix of future orders of large FPSOs, the notional capex of USD1.2b is a reasonable average cost to build such a unit. Mid-size FPSOs: An 80,000-150,000 bpd unit can range from USD0.4b to USD1.4b. As benchmarks, capex for the P.C. de Itajai conversion is estimated around USD400m. Goliat, designed for harsh environment is USD1.1b, Quad 204 is USD1.3b. The notional capex of USD0.6b to build or convert or convert a unit and USD0.3b to modify/upgrade an existing vessel is representative of the average capex for midsize FPSOs. Small-size FPSOs: A >8,000 bpd unit can range from USD300m to USD500m. As benchmarks, the Chim Sao capex was USD400m. Cost to modify a smaller unit is around USD100m - USD200m. The cost to modify/ upgrade East Fortune for Berantai is about USD345m. Modifying/ upgrading Glas Dowr for Kitan is around USD120m-USD150m, the OSX1: USD200m. The notional capex of USD0.4b to build or convert a small FPSO and USD0.2b to modify/ upgrade an existing vessel.
Source: International Maritim Associates, Inc

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Valuations
Target price: RM4.88. Our target price is based on a sum-of-parts (SOP) valuation. The FPSO, OSV, T&I and OFS (i.e. SWRO unit) operations are valued based on discounted cash flows (DCF), using a WACC of 4.5%. DCF is a reasonable method, in our view, considering that FPSO contracts are typically chartered out on a long-term basis (7 years + option period) while the OSVs, T&I and OFS vessels tend to see 1-8 year contracts. We value the OFS EPCC operations on price-earnings multiples. We ascribe a scrap value to their assets (i.e. FPSO, OSV, T&I and OFS) based on an estimated scrap steel tonnage. At our RM4.88 target price, Bumi Armada would be trading at 26.8x 2012 PER which is not excessive in our view, considering we are expecting a strong 3-year net profit CAGR of 25%.
SOP valuations
Terminal growth rate Division FPSO OSV T& I OFS Scrap value Net debt Total Source: Maybank-IB Value (RMm) 6,585 4,871 3,528 385 638 (1,760) 14,291 Value (RM/share) 2.25 1.66 1.20 0.13 0.22 (0.60) 4.88 Methodology DCF DCF DCF DCF on SWRO unit and 10x PER on EPCC FPSOs, OSVs, T&Is 2011

Key assumptions to our WACC estimate are laid out in the table below, where we have applied a 4.0% risk-free rate, 6.5% market risk premium and 1.0 beta. We have assumed a long-term: (i) 80:20 debtto-equity structure and (ii) cost of debt of 3.0%
Assumptions and basis used for WACC discount rate
Risk free rate Long-term cost of debt Market risk Beta Target capital ratio Debt / (debt + equity) Equity / (debt + equity) Wd We Ke Wc 80% 20% 10.5% 4.5% Target gearing 1 target gearing = Rf + (Rm Rf) = Kd (1-tax) (Wd) + Ke (We) Rf Kd Rm 4.0% 3.0% 10.5% 1.0 10-year government bond yield Average 3.0% effective interest rate (Maybank IBs forecast) Maybank IBs in-house assumption

Cost of equity WACC Source: Maybank IB

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Peers valuations: FPSOs


FPSO operator peer comparison (Calenderised)
Company Market Cap (USD m) 3,446.6 985.0 868.4 143.8 127.5 117.5 3-yr EPS CAGR (% ) 25.0 76.0 28.6 nm nm 8.7 3-yr EBITDA CAGR (% ) 2011 SBM Offshore BW Offshore Modec Inc Fred Olsen Sevan EOC Simple Average Selected peers average (weighted) Sources: Bloomberg, Maybank-IB 11.8 37.9 nm nm nm 4.2 6.7 8.7 18.7 5.5 22.3 7.3 11.5 EV/ EBITDA (x) 2012 6.3 6.2 16.5 4.8 12.8 6.3 8.9 2013 5.7 5.2 11.4 4.3 nm 6.5 6.6 2011 68.4 21.0 nm 17.2 nm 12.6 29.8 EV/ EBIT (x) 2012 9.9 14.3 29.3 18.6 12.6 10.1 15.8 2013 9.1 11.3 24.4 16.7 nm 11.0 14.5 2011 8.1 nm 22.7 nm nm 4.9 11.9 8.1 PER (x) 2012 7.6 9.1 16.0 nm nm 3.2 9.0 8.3 2013 6.7 7.1 11.9 nm nm 3.4 7.3 6.9 6.2 8.7 1.8 7.4 0.9 1.1 0.4 0.0 1.5 1.9 21.1 8.5 8.5 0.5 0.9 11.0 1.9 1.2 1.0 0.8 0.7 0.2 Div yield (% ) Gearing (x) ROE (% ) P/ BV (x)

7.7 6.3 5.4 44.7 12.1 10.2 Note: *Acquired Prosafe Productions in Dec 2010, 2011-13 net profit CAGR: 20%

Peers valuations: T&I and OSV operators


FPSO operator peer comparison (Calenderised)
Company Market Cap (USD m) 22,212.53 11,908.49 8,176.78 1,149.6 889.6 723.8 3-yr EPS CAGR (% ) 13.2 19.3 148.6 19.2 20.9 110.9 3-yr EBITDA CAGR (% ) 2011 Saipem (T&I) Technip (T&I) Subsea 7 (T&I)* Farstad (OSV) Ezra (OSV) Solstad (OSV) T&I average OSV average Sources: Bloomberg, Maybank-IB 12.5 17.4 160.4 9.4 41.1 20.6 8.9 8.7 8.9 7.6 18.3 10.9 8.8 12.3 Note: *Acquired Acergy EV/ EBITDA (x) 2012 8.4 8.2 7.1 7.4 13.5 7.7 7.9 9.6 2013 7.1 6.3 5.0 6.9 11.3 6.8 6.2 8.3 2011 12.7 10.8 13.6 11.9 25.5 27.0 12.4 21.5 EV/ EBIT (x) 2012 12.1 10.4 10.0 11.4 17.6 15.1 10.8 14.7 2013 10.2 7.9 6.9 10.7 14.6 12.9 8.4 12.8 18.1 14.1 2011 18.2 17.2 18.7 11.5 16.7 PER (x) 2012 16.3 17.2 16.3 10.3 10.8 11.6 16.6 10.9 2013 13.9 13.6 11.8 8.7 8.0 9.0 13.1 8.6 2.2 1.0 0.8 3.0 0.4 3.1 1.0 1.0 0.1 0.8 1.1 1.9 21.06 21.06 8.47 8.57 8.50 7.41 3.6 2.5 1.4 1.0 1.0 0.9 Div yield (% ) Gearing (x) ROE (% ) P/ BV (x)

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Risk factors
Bumi Armadas wide ranging business profile opens the group to a broad spectrum of operational, geographical and environmental risk. Operating in multiple countries and compliance with additional local regulations may hamper operations and increase operating costs. Below is a non exhaustive list of the major risk factors confronting Bumi Armada. Oil price levels affect long-term investment plans. Oil majors investment plans are dependent on long-term oil price expectations, which can be affected by low and/or volatile oil price levels. We have seen oil field exploration/developments shelved when the oil price fell below USD50/bbl (average) in 2008, and there is no certainty this will not recur. Our economics team projects an average USD100/bbl crude oil price (WTI) in 2012 (2011: USD95/bbl). Currency fluctuations. Revenue from customer contracts, capex and operating cost is largely denominated in USD which do provide for some form of a hedge (but not in full). In addition, Bumi Armada reports results in RM, which leaves the group open to foreign currency movements especially fluctuations of the USD against the RM. We estimate that a 1 sen strengthening or weakening of the RM against the USD to impact bottomline by RM2m (with 0.4% of its earnings in RM). Financial leverage. Bumi Armada has and will maintain a significant level of leverage in line with the industry norm. Refurbishments are made before each redeployment of FPSOs and the vessels will require extensive repairs at regular intervals to meet the operating certification needed. High debt service and other contractual obligations will render Bumi Armada highly sensitive to any interruption in cashflows. Contractual requirements. FPSO contracts can encompass turnkey contracts for the vessels construction, conversion and refurbishment. Turnkey: FPSO conversions and refurbishment projects involve significant procurement of equipment, supplies and equipment. Risk include lack of supply of, or higher than expected cost of materials, equipment and manpower. Delivery: FPSO contracts have strict delivery schedules and failure to adhere to set dates could result in lower daily charter fees or even late penalties. Dependence on external parties: FPSO operators can be heavily dependent on vendors throughout the process, from equipment and manpower to even yard space. Cost overruns: Historical FPSO projects cost overruns were often tied to increases in price or requirements of manpower, fabrication materials (e.g. steel) or additional requirements or changes in orders from clients (VO). Unless protected by a price escalation clause, Bumi Armada may face reduced earnings or even losses.

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Performance: Post deployment, the FPSO would be required to maintain a pre-agreed commercial uptime, technically possible operating days less allowance for maintenance and emergencies. Failure to meet the set targets could result in reduced charter fees, suspension of charter fees or even penalties being imposed. Early termination: Lease contracts are structured to provide the lessor with flexibility. Firm contracts are only offered for the estimated time required to exploit reserves but vessels have to be configured with the potential full period in mind. Should the termination of the contract occur and Bumi fail to redeploy the vessels on time, Bumi could suffer both reduced income and even impairment charges on its FPSOs External factors/events: This comprises weather and natural hazards (typhoons, tsunamis, etc), pirate attacks (more likely kidnap of crew and shutdowns versus hijacks) and policy changes of governments. Regulatory risks. As Bumi Armada operates worldwide, it must adhere to the offshore O&G industry regulations across multiple areas: Local content: Several emerging countries are attempting to boost local industries i.e. fabrication, process equipment, etc. by introducing local content clauses. This includes Nigeria, Angola, Brazil and Malaysia, which require portions of the system to be fabricated at the local facilities. Environment: Bumi Armadas single hull FPSOs cannot operate in a number of regions (North America and Europe) and the number of areas are set to increase. Aside from hull requirements, rules relating to waste storage and discharge, carbon emissions, etc. will have an impact on Bumi Armadas operating expenses. Cabotage: Bumi Armadas vessels (FPSOs and OSV) must comply with each countrys licences, permits and certifications. Failure to comply could result in fines or vessel seizure. For example, Nigeria requires annual renewal of all license and imposes fines of up RM300,000 per OSV.

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Financial statements
INCOME STATEMENT (RM m) FY Dec Turnover Cost of goods sold Gross profit Other operating (exp)/inc. EBIT Net int (exp)/ Inc Associates & JV Exceptional gain/ (loss) Pretax profit Tax Minority interest Net profit Net profit ex EI EBITDA Sales Growth (%) EBITDA Growth (%) EBIT Growth (%) Effective Tax Rate (%) BALANCE SHEET (RM m) FY Dec Net Fixed Assets Invts in Assocs & JVs Other LT Assets Cash & ST Invts Other Current Assets Total Assets ST Debt Other Current Liab LT Debt Other LT Liab Shareholders Equity Minority Interest Total Cap. & Liab Share capital Net Debt Working capital Gross gearing

2011A 1,543.9 (883.1) 660.8 (142.5) 518.3 (109.2) 26.8 (27.7) 435.9 (70.6) (5.7) 359.7 387.3 845.1 24.4 18.1 10.9 16.2

2012F 1,800.7 (984.8) 815.9 (194.1) 621.8 (113.0) 56.3 0.0 565.2 (27.0) (6.0) 532.2 532.2 1,048.7 16.6 24.1 20.0 4.8

2013F 2,220.6 (1,226.2) 994.4 (248.7) 745.7 (138.2) 56.7 0.0 664.3 (30.8) (6.0) 627.5 627.5 1,272.6 23.3 21.4 19.9 4.6

2014F 2,504.3 (1,383.6) 1,120.7 (285.6) 835.2 (155.7) 67.7 0.0 747.2 (34.3) (6.0) 706.9 706.9 1,442.0 12.8 13.3 12.0 4.6

2011A 4,201.2 151.3 423.3 1,248.5 912.0 6,936.2 447.4 353.1 2,559.8 33.2 3,528.0 14.7 6,936.2 2,928.5 1,758.7 1,360.0 85.2

2012F 5,274.3 207.6 423.3 990.5 965.5 7,861.3 447.4 373.1 3,000.0 33.2 3,987.0 20.7 7,861.3 2,928.5 2,456.9 1,135.6 86.5

2013F 6,247.5 264.3 423.3 1,539.2 1,053.2 9,527.5 447.4 405.7 4,000.0 33.2 4,614.5 26.7 9,527.5 2,928.5 2,908.2 1,739.3 96.4

2014F 6,840.7 332.0 423.3 1,554.1 1,112.4 10,262.5 447.4 427.8 4,000.0 33.2 5,321.4 32.7 10,262.5 2,928.5 2,893.3 1,791.2 83.6

CASH FLOW (RM m) FY Dec Net profit Dep. & amortization Chg. In working capital Other operating CF Operating CF Net capex Chg in LT investment Chg in other assets Investment CF Net chg in debt Chg in other LT liab. Other financing CF Financing cash flow Net cash flow 2011A 387.3 326.8 (596.6) 212.6 330.2 (1,058.7) 0.0 (1,058.7) (1,167.6) (410.4) 2,218.5 0.0 1,808.1 970.7 2012F 532.2 426.8 (33.6) (50.3) 875.1 (1,500.0) 0.0 (1,500.0) (1,500.0) 440.2 (73.2) 0.0 367.0 (258.0) 2013F 627.5 526.8 (55.0) (50.7) 1,048.7 (1,500.0) 0.0 (1,500.0) (1,500.0) 1,000.0 0.0 0.0 1,000.0 548.7 2014F 706.9 607.8 (37.1) (61.7) 1,215.8 (1,200.0) 0.0 (1,200.0) (1,200.0) 0.0 0.0 0.0 0.0 15.8

RATES & RATIOS FY Dec Gross Margin (%) EBITDA Margin (%) EBIT Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Interest Cover (x) Debtors Turn (days) Creditors Turn (days) Inventory Turn (days) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (x) Capex to Debt (%) N.Cash/(Debt)PS (sen) Opg CFPS (sen) Free CFPS (sen) 2011A 42.8 54.7 33.6 25.1 17.6 9.3 9.7 17.9 4.7 60.3 90.7 0.6 2.7 2.7 0.5 0.4 (60.1) 31.6 (24.9) 2012F 45.3 58.2 34.5 29.6 14.2 9.2 10.2 0.0 5.5 70.4 63.1 0.6 2.4 2.4 0.6 0.4 (83.9) 31.0 (21.3) 2013F 44.8 57.3 33.6 28.3 14.6 9.2 10.2 0.0 5.4 68.6 60.2 0.6 3.0 3.0 0.6 0.3 (99.3) 37.7 (15.4) 2014F 44.8 57.6 33.3 28.2 14.2 9.1 10.2 0.0 5.4 71.5 63.1 0.6 3.0 3.0 0.5 0.3 (98.8) 42.8 0.5

Sources: Company, Maybank-IB

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SECTION 4: APPENDICES

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Appendix : Directors & Management


Board of Directors
Name Dato Sri Mahamad Fathil bin Dato Mahmood Designation Non-Independent Non Executive Chairman Remarks Entrepreneurial experience across multiple sectors Directorships in numerous companies Diploma, Institute of Management Specialist, fellow, British Institute of Management, UK Over 20 years experience in finance, accounting auditing & consultancy Involved in the O&G industry since 2000 ACCA, Member of MICPA, Public Accountant in MIA Over 10 years experience in general management, corporate finance & privatization CEO of Sharikat Permodalan Kebangsaan Berhad MBA, Chicago University, BBA, Western Michigan University, USA 16 years in Corporate Banking and Investment Banking at ABNAMRO Bank Head of Europe for RBS during 2008 Degree, Politics, Philosophy & Economics , Oxford University, UK and Masters in Development Economics ,Erasmus University, Netherlands 40 years of technical and managerial experience in the petroleum exploration and production industry worldwide focusing on South East Asia/Australia Member of the American Association of Petroleum Geologists, the Society of Professional Well Log Analysts and the Petroleum Exploration Society of Australia Bachelor of Science, First Class Honours in Geology, University of Adelaide, Australia 30 years experience in investment banking, financial management and accounting Joined Usaha Tegas in 1992, serves as executive director and sits on the Board of Directors of Usaha Tegas related companies Degree, Economics & Accounting, Newcastle, ICAEW, UK Legal experience in both the government service and private sector Managing partner of own law firm since 2003 BA in Law, Kent University, Barrister at Law Middle Temple, UK Over 20 years experience in treasury and credit management Group Treasurer of Usaha Tegas Degree, Business Administration, Hawaii University, USA Over 30 years of experience in the O&G sector, 17 years in Asia Previously at Kvaerner E&C Singapore & Far East Single Buoy Mooring B. Sc, Engineering, Manchester Institute of Science & Technology University, UK Over 15 years of corporate finance/ fund raising and financial management experience Joined Bumi Armada in 2005, was previously with Usaha Tegas B. Sc, Economics, Bristol University, UK

Dato Ahmad Fuad bin Md Ali

Non-Independent Non Executive Deputy Chairman Independent Non Executive Director

Saiful Aznir bin Shahabudin

Alexandra Elisabeth Johanna Maria Schaapveld

Independent Non Executive Director

Andrew Philip Whittle

Independent Non Executive Director

Chan Chee Beng

Non-Independent Non Executive Director

Farah Suhanah Ahmad Sarji

Non-Independent Non Executive Director Non-Independent Non Executive Director Chief Executive Officer

Lim Ghee Keong

Hassan Assad Basma

Shahrul Rezza Hassan

Chief Financial Officer

Source: Company

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Bumi Armada Senior Management


Name Hassan Assad Basma Shahrul Rezza Hassan Designation Chief Executive Officer Chief Financial Officer Remarks Over 30 years of experience in the O&G sector, 17 years in Asia Previously at Kvaerner E&C Singapore & Far East Single Buoy Mooring Over 15 years of corporate finance/ fund raising and financial management experience Joined Bumi Armada in 2005, was previously with Usaha Tegas Over 25 years of experience in the O&G sector MBA, Monash Univesity, Bachelor of Engineering, Ballarat College, Australia Co-founder of Bumi Armada Navigation, 33 year veteran of Bumi Armada One the most experienced Malaysians regarding OSVs Over 14 years of experience in O&G management, engineering & construction M.Sc Aircraft Design, Delft Univesity, Degree in Aircraft Engineering, Pisa University Veteran of Bluewater Offshore Productions Systerms B.V. M.Sc Management, Brussels Univesity, Bs. Sc Mechanics, Rijswijk, Netherlands Over 18 years experience in research, planning & strategy BA, Business Admin, The American College, London Over 22 years of HR experience in O&G and other industries M. Arts Public Administration, numerous other degrees from India Over 20 years experience in engineering B. Sc, Mechanical Engineering, Colorado State University Over 16 years experience in HSEQ in Brazil MBA, Finance, Ibmec, Master in Production Engineering, Rio Federal University Over 18 years experience in procurement and project management Advanced Diploma, Business Admin, UK, Certified Purchasing Manager, USA

Andrew Day Lamshed Wee Yam Khoon Massimiliano Bellotti,

Sr. VP, Floating production systems Sr. VP, OSV Sr. VP, T&I

Adriaan Petrus Van De Korput Jonathan Edward Duckett Madhusudanan Madasery Balan Noor Azmi bin Abdul Malek Noval Davila Paredes Choong Guan Huat Source: Company

Sr. VP, Projects Sr. VP, Corporate planning Chief Talent Officer VP, BAE VP, Corporate HSEQ VP, Strategic Procurement

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APPENDIX 1
Definition of Ratings
Maybank Investment Bank Research uses the following rating system: BUY HOLD SELL Total return is expected to be above 15% in the next 12 months Total return is expected to be between -15% to 15% in the next 12 months Total return is expected to be below -15% in the next 12 months

Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the covera ge do not carry investment ratings as we do not actively follow developments in these companies.

Some common terms abbreviated in this report (where they appear):


Adex = Advertising Expenditure BV = Book Value CAGR = Compounded Annual Growth Rate Capex = Capital Expenditure CY = Calendar Year DCF = Discounted Cashflow DPS = Dividend Per Share EBIT = Earnings Before Interest And Tax EBITDA = EBIT, Depreciation And Amortisation EPS = Earnings Per Share EV = Enterprise Value FCF = Free Cashflow FV = Fair Value FY = Financial Year FYE = Financial Year End MoM = Month-On-Month NAV = Net Asset Value NTA = Net Tangible Asset P = Price P.A. = Per Annum PAT = Profit After Tax PBT = Profit Before Tax PE = Price Earnings PEG = PE Ratio To Growth PER = PE Ratio QoQ = Quarter-On-Quarter ROA = Return On Asset ROE = Return On Equity ROSF = Return On Shareholders Funds WACC = Weighted Average Cost Of Capital YoY = Year-On-Year YTD = Year-To-Date

Disclaimer
This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely ba sed on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other a dvice regarding the appropriateness of investing i n any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been indepe ndently verified by Maybank Investment Bank Berhad and consequently no representation is made as to the accuracy or completeness of this report by Maybank Investment Bank Berhad and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Berhad, its affiliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward looking statements. Maybank Investment Bank Berhad expressly disclaims any obligation to update or revise any such forward lo oking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticip ated events. This report is prepared for the use of Maybank Investment Bank Berhad's clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written cons ent of Maybank Investment Bank Berhad and Maybank Investment Bank Berhad accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distrib ution, publication, availability or use would be contrary to law or regulation.

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Bumi Armada

APPENDIX 1
Additional Disclaimer (for purpose of distribution in Singapore)
This report has been produced as of the date hereof and the information herein maybe subject to change. Kim Eng Research Pte Ltd ("KERPL") in Singapore has no obligation to update such information for any recipient. Recipients of this report are to conta ct KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. As of 6 March 2012, KERPL does not have an interest in the said company/companies.

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This research report prepared by Maybank Investment Bank Berhad is distributed in the United States (US) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Kim Eng Securities USA, a brokerdealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Kim Eng Securities USA in the US shall be borne by Kim Eng. All re sulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. This report is not directed at you if Kim Eng Securities is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should sa tisfy yourself before reading it that Kim Eng Securities is permitted to provide research material concerning investments to you under relevant legislation and regulations. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply if the reader is receiving or accessing this report in or from other than Malaysia. As of 6 March 2012, Maybank Investment Bank Berhad and the covering analyst do not have any interest in any companies recommended in this Market themes report. Analyst Certification: The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Additional Disclaimer (for purpose of distribution in the United Kingdom)


This document is being distributed by Kim Eng Securities Limited, which is authorised and regulated by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

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Maybank Investment Bank Berhad (15938-H) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136 http://www.maybank-ib.com

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