Keppel entered an agreement to invest up to US$101 million (S$140 million) in fellow Singaporean company KrisEnergy, in addition to raising its stake in the company.
Image from KrisEnergy.
During the Q3 2016 period, KrisEnergy reported a $31.6 million loss, quite a dramatic fall when compared to Q3 2015’s $9.3 million net profit. In addition, its operating costs have increased some 80% in one year, going from $6.6 million in Q3 2015, to $33.6 million in Q3 2016.
After an extensive period of evaluation and consideration of all available options, KrisEnergy Interim CEO Jeff MacDonald said that the company intends to undertake comprehensive measures to place KrisEnergy on a stronger footing.
“We believe that, with the support of our stakeholders, these measures will enable us to deliver value to all of our stakeholders in the medium term,” he said.
Keppel Oil & Gas, which through its wholly-owned subsidiary Devan International, currently holds 39.99% stake in KrisEnergy, is stepping in and has agreed to invest up to $101 million in KrisEnergy, and increase its stake to 67.33%.
“The company remains confident of KrisEnergy’s long term fundamentals, and believes that the company will continue to extract quality returns on its investment,” Keppel said. “There is considerable value in KrisEnergy’s near-term production developments in Thailand, Indonesia and Cambodia, which have limited exploration risks but require capital to generate future cash flows.”
Keppel and KrisEnergy have also entered into discussion to establish a “preferred partner” relationship, where Keppel Offshore & Marine will provide KrisEnergy with offshore and marine solutions, subject to regulatory constraints and competitive pricing.
“As KrisEnergy will be ramping up its development activities, especially in Thailand and Cambodia, it will require production solutions and such engagement with KrisEnergy is in line with Keppel Offshore & Marine plans to work with oil and gas companies on developments in Asia,” Keppel said.
KrisEnrgy said it is implementing major changes to its existing operational strategy in order to ensure the long-term stability and sustainability, which includes possible farmouts at its two of its major concessions in the Gulf of Thailand: G10/48, where the producing Wassana field is located, and Cambodia Block A.
As part of the company’s revised operational strategy, KrisEnergy said it is rationalizing its existing asset portfolio, and believes that following appropriate risk management and prudent oilfield practice, a farmout or sale process aimed at reducing the group's working interest in the two blocks will be optimal, subject to obtaining a fair price for such farm-out or sale process.
KrisEnergy currently holds 85% stake in both G10/48 and Cambodia Block A.
“We are implementing major changes to our existing operational strategy and our financial structure to ensure the viability of the group,” MacDonald said. “The primary operational change will be an increased focus on development and production in the Gulf of Thailand in both Thailand and Cambodia. That said, we will retain some high-impact exploration assets for future upside potential when oil prices have stabilized and recovered somewhat from today’s levels.”
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