Harland & Wolff (HARL) , the marine engineering specialist, announced a majhor contract with Cenovus Energy for the mid-life upgrade of the SeaRose floating production storage and offloading (FSPO) vessel. The contract follows a letter of intent previously announced on July 31 2023.
The base contract value is approximately £61m and the vessel is expected to arrive in Q1 2024 and spend more than 3 months in Harland's building dock in Belfast. The shipbuilder said a number of pre-arrival works have already commenced, including inspections, procurement of steel, assembly of customised blocks, and other dry dock operations.
A number of fabrication works will also commence in FY23 so that Harland is fully ready to begin the refurbishment and upgrade works as soon as the vessel arrives in 2024. Upon completion of these pre-arrival workstreams, Harland expects to generate revenues from the contract of approx. £10m in FY23, with the outstanding balance expected to be received in FY24. At peak, it's estimated around 1,000 personnel will be working on the vessel, including Harland staff and subcontractors.
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A major contract win for Harland, which was anticipated following July's letter of intent. Still, the confirmation elicited a strong reaction from markets, driving HARL shares 13% higher on Friday. The shares are up 96% over the past 12 months.
The customer is Cenovus Energy, an international integrated oil and natural gas company based in Calgary, Canada, with a market cap of c. CA$54bn. Revenues from the large £61m mid-life upgrade contract are already included within management's expectations for FY23 and FY24 revenues, being c. £100m and £200m respectively.
The vessel was last in Harland's Belfast yard in 2012, so the shipbuilder has existing knowledge of the FSPO, which should help preparation and efficiency, to be further boosted by Harland's modernised equipment in Belfast.
Overall, this is a major addition to Harland's non-defence portfolio that further underscores the shipbuilder's growing reputation in the maritime industry as the go-to yard for large and complex programmes. The project will leverage the 1,000 personnel and supply chains set up to support the upcoming FSS programme:
In its FY22 results, Harland detailed significant progress with revenue growth of 51% to £27.96m and a contracted backlog of £900m, compared to £100m in FY21. Late last year, a Harland-led consortium was awarded the massive £1.6bn contract for the Royal Navy's Fleet Solid Support (FSS) Programme, prompting a large jump in share price, which has since consolidated. Later in FY23, Harland was awarded its subcontract for the project, yielding several years of significant revenue visibility.
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