The Malaysian services firm that leases the FPSO to the Woodside-operated joint venture, Bumi Armada, told the Bursa Malaysia that the Aussie oiler was "purporting to terminate the contract", but called that move invalid
Bumi Armada described it as "a repudiation of the contract by Woodside", and says the oiler is cancelling for convenience - and its wants compensation.
"The company intends to fully enforce its rights under the contract, including initiating legal proceedings against Woodside for its unlawful purported termination of the contract," it said.
The FPSO has been operating in the Balnaves field, off north-western Australia since delivering first oil in August 2014 and was the Malay firm's first foray into Australia.
Bumi Armada signed the $359 million contract with Apache Corporation to provide the Armada Claire for the Balnaves field in September 2011 for a four-year fixed term time charter with an option of a further four-year annual extension period.
Production started in August 2014.
Woodside bought Apache's 65% interest in Balnaves for an estimated $54 million (net cash) in April 2015, and has since expressed disappointed with the performance of the field.
Partner Kuwait Foreign Petroleum Exploration holds the remaining 35%.
Woodside boss Peter Coleman told analysts recently that Balnaves appears to have less than two years reserves remaining, assuming its 2P reserves of 9.8 million barrels is accurate, but production is likely to taper out before then as the reserves look closer to the 1P level of 6.7MMbbl.
The field has produced around 3MMboe (gross) with 2MMboe attributable to Woodside.
In announcing a 99% lower profit last month of just $US26 million ($A36.5 million) down from $2.414 billion in 2014, Woodside confirmed that of $1.1 billion in writedowns some $128 million was recognised in 2015 reflecting the shortfall in value between the value of the Balnaves asset and the lease obligations.
The provision arose due to both lower performance from the reservoir and lower oil prices.
Some $US10 million of that writedown was due to the decline forecast oil prices and oil field decline for the Balnaves oil asset, the rest was for an onerous lease provision, with the FPSO leased until 2018.
Balnaves, located some 180km northwest of Karratha in WA-49-L, consists of four subsea wells: two horizontal production wells, one horizontal water injector, and one gas injector.
Woodside's termination is expected in impact Bumi Armada's full year 2016 financial results, but those results will depend on the legal action taken against the Australian explorer.
The Malaysian facilities company posted a $55.5 million loss for the 2015 fiscal year off the back of power revenue.
The 240m-long FPSO Armada Claire, was built in 1993 as the Armada Prima, and was and refurbished in 2014 to meet Australian standard and to install a disconnectable riser turret mooring system for cyclonic weather.
It has a production capacity of 80,000bpod and a storage capacity of 805,035bbl.
Woodside has been contacted for comment.
