Yinson Production’s Ebitda to reach US$900mil

SHANGHAI: Yinson Production, an independent owner and operator of floating production, storage and offloading (FPSO) vessels, expects to generate nearly US$900mil in annual cash earnings before interest, taxes, depreciation and amortisation (Ebitda) from all nine of its vessels once its latest and largest project, FPSO Agogo, achieves first oil.

A subsidiary of Yinson Holdings Bhd, Yinson Production converted the Agogo FPSO from a tanker in just 24 months – three months ahead of schedule – and it is set to sail for Angola next week.

Chief executive officer Flemming Gronnegaard said first oil for FPSO Agogo could be achieved even sooner, potentially up to six months ahead of the original schedule.

“If the rest of the project goes as expected, we will see first oil around late August or early September,” Gronnegaard said at the sidelines of the Agogo FPSO naming and sail-away ceremony held at Cosco Shipping Heavy Industry (Shanghai) Shipyard on Feb 20.

“When all units are in operation, we will see a cash Ebitda which is close to US$900mil,” he added.

Gronnegaard noted that the early delivery of FPSO Agogo, which was completed well within the projected budget, boosted the project’s internal rate of return (IRR).

“While you could say it is a market rate IRR, what is enhancing the IRR is the early delivery. Early delivery is enhancing the returns dramatically.

“And this has been built on budget. It is again greatly enhancing the IRR,” he added.

FPSO Agogo will operate in the Agogo Integrated West Hub Development Project in Block 15/06 offshore Angola for Azule Energy under a 15-year firm charter, with an option to extend for another five years.

The total contract value is worth up to US$5.3bil.

Yinson Production chief operating officer Jahn Atle Hogberg said the company has seen strong cash Ebitda growth over the past year, driven by the successful delivery of FPSO Maria Quitéria project in October and FPSO Atlanta in December.

“We delivered Maria Quitéria in October, then Atlanta in December, and now Agogo is coming soon. We have pretty much doubled Ebitda over the last year,” he said.

Hogberg added that a similar contract to FPSO Agogo could potentially generate an additional US$200mil to US$300mil in cash Ebitda once first oil is achieved.

FPSO Agogo is Yinson Production’s largest vessel by capacity, capable of producing 120,000 barrels of oil per day, processing 180,000 barrels of liquids daily, compressing 230 million standard cubic feet of gas per day, injecting 180,000 barrels of water per day, and storing up to 1.6 million barrels of oil.

Awarded to Yinson Production by Azule Energy – a 50:50 joint venture between BP and Eni – in February 2023, FPSO Agogo features cutting-edge carbon reduction technologies. These include a closed flare system, hydrocarbon blanketing, combined cycle technology, automated process controls, all-electric drive systems, as well as the first pilot of a post-combustion carbon capture system on an FPSO.

These technologies are expected to reduce carbon emissions by up to 27%.

With the addition of Agogo, Yinson Production now has eight FPSOs and one FSO in its fleet. Another FSO, Lac Da Vang, is currently under construction and is on schedule for completion in 2026.

Hogberg highlighted the critical role of both early delivery and operational uptime in enhancing project value.

“The two biggest value creations we deliver for our clients are early delivery, which leads to early cash flow and high operational uptime,” Hogberg said.

“For a project like this, a 2% difference in uptime – say 99% instead of 97% – equals about US$500mil in net present value (NPV) for our company.

“And, of course, in many of our contracts, we are incentivised to do well,” he added.

Hogberg noted that Yinson Production’s fleet has maintained an average technical uptime of 99.6% over the past five years, with typical uptime ranging between 99% and 100%. On growth strategy, Gronnegaard said Yinson Production is “now in the market to secure new FPSO (projects)”.

“We also have an ambition of signing at least one FPSO per year. And that means we will, at any point in time, have between three and four FPSOs in construction.”

To support this expansion plan, Yinson Production has secured a US$1bil redeemable convertible preference shares (RCPS) deal, signed in January.

Of the proceeds, US$800mil will be utilised by Yinson Production to fund upcoming FPSO projects, while US$200mil will be distributed to its controlling shareholder, Yinson Holdings.

For Yinson Production’s portion, Gronnegaard said the RCPS issuance is structured in a staggered manner over 18 months to align with its project pipeline.

“We have no interest in getting the cash before we need it,” he explained.

The enlarged equity position will enable Yinson Production to undertake three to four mid-range FPSO projects valued between US$1bil and US$1.8bil each.

He said the group is positioning itself by showcasing its capabilities and track record to potential clients, with the current project pipeline looking “very strong”.

Gronnegaard said Yinson Production will continue to focus on South America, West Africa and Asia for future FPSO projects, as these regions represent about 75% to 80% of the company’s business.

However, he said the group remains open to opportunities outside these areas.

“Our main focus is on lease-and-operate projects with long-term contracts of 15 years or more.”