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KrisEnergy approaches end of the line

Thong Sotha​​   On April 22, 2021 - 11:46 am​   In Investment  
KrisEnergy approaches end of the line KrisEnergy approaches end of the line

KrisEnergy’s oil production dreams in the Khmer Basin appear to be dead in the water after the oil and gas company revealed it was not able to form a viable debt restructuring plan and will lose its revolving line of credit from Singapore-based DBS Bank.

The company said there continued to be “material concerns” that it would not be able to operate as a going concern, indicating the company will likely need to cease operations because of its lack of production in its Cambodian project.

Oil extraction in the Apsara oilfield’s Block A, located in Cambodian waters in the Gulf of Thailand, has not improved since Kris Energy’s last announcement in March and therefore there appears to be no path forward to guarantee revenue from the project dubbed Mini Phase 1A.

The company said Netherland, Sewell & Associates’ independent assessment is still ongoing.

“However, given the disappointing production results from Apsara Mini Phase 1A so far, there remains material uncertainty over the Group’s ability to continue operating as a going concern,” it said.

“In the circumstances, the company’s restructuring plan as described in its previous announcements… is no longer viable.”

Hopes were high when the first drops of oil were extracted in December last year. The project was viewed as a catalyst for Cambodia’s fledgling oil and gas industry that could help fund educational and health initiatives.

However, it soon became apparent the company’s projected 7,500 barrels of oil per day (bopd) would not be achievable.

By the end of March, the company was producing just 2,493 bopd.

An independent oil analyst told Khmer Times offshore oil fields need to produce a minimum of 9,500 bopd to be financially viable.

KrisEnergy was already in dire financial straits before the Cambodian project went online and was banking on producing sufficient oil from Mini Phase 1A to climb out of debt.

The company said on Tuesday: “The development of CBA [Block A concession offshore Cambodia] formed the basis of the company’s restructuring as the company expected the bulk of the KEL Group’s future revenue to come from CBA once its Apsara Mini Phase 1A commenced production.”

It underwent its first debt restructuring plan in 2016 and was suspended from the Singapore stock exchange in August 2019.

Now that one of its last lifelines – revolving credit amounting to $200 million from DBS – has been revoked, the company is running out of room to manoeuvre.

The Keppel Corporation, KrisEnergy’s largest shareholder, said the amount outstanding in the revolving credit facility, to which the company has provided a guarantee, is $188.7 million.

It continued that the $188.7 million and the carrying values of its loan receivable and contract assets “would be significantly and negatively impacted by the current situation of KrisEnergy, especially if it cannot continue to be a going concern.”

On April 12, Cheap Sour, the general director at the Ministry of Mines and Energy’s General Department of Petroleum, said it was awaiting an announcement from KrisEnergy before determining whether it would terminate its contract with and potentially penalise the company.

Yesterday, he said the government would need more time to study the matter before jumping to any conclusions or taking action.

Kris Energy owns 95 percent of the working interest for Block A while the government retains the remaining 5 percent.

In 2014, the company bought Chevron’s 28.5 percent share of Block A for $65 million and later bought out Moeco and GS Energy to reach 95 percent ownership.

Tanya Pang, the vice-president of investor relations and corporate communications at KrisEnergy, said: “As stated in yesterday’s announcement, the company, together with its advisers, is undertaking an assessment of the impact in respect of the group’s activities and the appropriate steps moving forward. The company will announce further information at the appropriate time.

When asked about the vast discrepancy between the company’s projected bopd and its actual bopd production, Pang said: “The company will announce the conclusions of the third-party independent review shortly.” Khmer Times