Dommo Energy of Brazil May Opt for Two Payments for the Leasing of FPSO OSX-3 in Brazil
In November 2018, Dommo Energy signed an amendment to the leasing contract for OSX-3 with the ship owner, OSX 3 Leasing B.V., to extend the existing lease for a period of up to 20 years. The freight payment under the agreement last year was US$ 47.2 million per year, equivalent to a rate of US$ 129,315 per day.
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The oil company stated on Tuesday that it was finalizing the revitalization of the Tubarão Martelo Field, in the Campos Basin, a project that would require significant investments in the next 60 days to complete.
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Dommo Energy stated that it may need to use a larger portion of its oil sales revenue to complete the revitalization plan “, which [Dommo] believes is ultimately in the interest of all parties involved.”
“If this situation arises, [Dommo Energy] will likely stop paying the freight for the next offloading (currently scheduled for the end of December) and potentially the following offloading in Q1 2020.”
Dommo Energy explained that defaulting on payments for OSX-3 may be necessary to avoid any risk of liquidity constraints as Dommo Energy completes the revitalization.
“Dommo Energy and OSX3 intend to discuss possible changes to the terms of the leasing contract to align the payments due under the BBCA with the company’s projected cash flows and operational and capital expenditures. The Company will keep the market updated regarding the outcome of these discussions,” said Dommo.
After the updated leasing agreement last year, Dommo Energy stated that it provided the necessary visibility and long-term commitment to continue investing in the Tubarão Martelo field to further increase its production. The main goal is to increase TBMT production to an estimated value of 10.0 kbbls per day in early 2020.
Dommo expects the project to cost US$ 77.9 million, which will be disbursed over the next 12 to 18 months and will be financed with existing cash balances and future cash generation.
In a recent quarterly report, Dommo stated that the Revitalization consists of two campaigns and includes, in the first ongoing phase, the completion of the 7-TBMT-4HP, which was drilled but not connected to the FPSO OSX-3. The second phase concerns the remaining three production wells and will consist of workover activities as they become necessary.

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