MODEC reports increased orders and revenue, but operational issues in Brazil eat up 2021 profits

Asset management of aging vessels still a challenge in the company's main market

Japanese offshore production systems provider MODEC reported its 3Q results on November 2, 2021.

Revenues reached 323.3 billion yen (2.84B usd) for the nine months ended September 30, 2021, up 40.6% from the same period last year. New orders improved 52% to 270.6 billion yen (2.37B usd). Profits also improved, but remained in negative territory. Operating profit was -8 billion yen (-70m usd), slightly better than the -10.6 billion yen reported in 2020.

The profit outlook for the full year, however, deteriorated markedly since first made public in February. Ordinary profit guidance was revised from 10 billion yen (88m usd) to -4.5 billion yen (-39m usd). Revenue guidance was unchanged, at 400 billion yen (3.51B usd).

According to the company, ordinary profit has been revised downward primarily due to prolonged shutdown periods of several FPSO operated in Brazil, impairment loss for the FPSO Cidade de Santos MV20, and decrease in profitability of several ongoing FPSOs under construction due to COVID-19 delays.

A number of COVID-19 cases were found on the flotel which was used for a special maintenance campaign for FPSO Cidade de Santos MV20. As a consequence, personnel on board was limited and the shutdown period for special maintenance was considerably extended due to manpower shortage. FPSO Cidade de Niterói MV18 is also shutting down its operation in order to repair broken equipment. No income is recognized during shutdown, thus loss of charter and O&M service is expected to increase.

The operational issues remain a concern particularly after MODEC was suspended by Petrobras from participating in new competitive bidding for 13 months from March 31, 2021. At the time, the main basis for the administrative sanction was alleged losses to Petrobras caused by the performance of three MODEC FPSOs: the FPSO Cidade do Rio de Janeiro MV14, whose charter contract expired in 2019, and two FPSOs which are currently chartered to Petrobras, namely, the FPSO Cidade de Niterói MV18 and the FPSO Cidade de Santos MV20.

MODEC has a large orderbook in Brazil, including three FPSOs for Petrobras (FPSO Guanabara MV31, FPSO Almirante Barroso MV32 and FPSO Anita Garibaldi MV33) under construction and the yet to be named Equinor Bacalhau FPSO. This last order, whose FID was announced in June, will be the 17th FPSO/FSO vessel delivered by MODEC in Brazil, the 9th FPSO in the pre-salt region, as well as MODEC’s first with Equinor.

Bacalhau FPSO. Image credits: MODEC


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