Papa Terra FPSO Starts Voyage to Brazil

The EPC conversion project FPSO P-63 (Papa Terra) has today left the COSCO Dalian yard in China for its voyage to Brazil with a planned short stop-over in Singapore for refueling. Estimated arrival in Brazil is in February 2013, where the final integration of the remaining six modules will take place in QUIP’s Rio Grande yard. The FPSO is then expected to be installed on the field and commence operation.

The management of BW Offshore has carried out an updated analysis of the project, and the Board of Directors of BW Offshore has today concluded to increase the forecasted cost for completing the project from USD 375 million to USD 450 million. The third quarter 2012 results will consequently be negatively impacted by USD 75 million. BW Offshore will as previously announced release the third quarter results on 26th November 2012.

The additional project costs are mainly linked to increased engineering, construction, procurement and commissioning cost and increased yard costs associated with the delayed schedule. All possible efforts are being made by BW Offshore and its Brazilian partner, QUIP, to meet the overall project schedule requirements from Petrobras for a July 2013 start-up.

BW Offshore has agreed with its lending banks for the USD 2,400 million loan facility and the Umuroa loan on a waiver to carve out the Q2 2012 loss on Papa Terra of USD 50.0 million, as well as additional Papa Terra-losses of up to USD 75.0 million in the second half of 2012. The waiver applies for the equity ratio covenant, the leverage covenant and the interest cover ratio. The waiver has not changed any other terms and conditions in the facilities.

The Papa Terra project is accounted for as a fixed-price construction contract where revenue is recognised in accordance with the “Percentage of Completion” (POC) accounting method. BW Offshore has received milestone payments from the client Petrobras throughout the project period.