Financially crippled Asia-focused upstream player KrisEnergy has finally admitted defeat and filed a winding-up petition to the Grand Court of the Cayman Islands. In response, state-backed Keppel Corporation, the largest shareholder in the Singapore-listed company, appears intent on seizing KrisEnergy’s remaining assets in Asia.
KrisEnergy said on 4 June that it is unable to pay its debts and will proceed to liquidation. As a result, on 7 June some of the company’s biggest creditors, including DBS Bank and Madison Pacific, said they intend to take enforcement action against KrisEnergy. Madison Pacific acts as an agent for Keppel subsidiary Kepinvest, which has loaned KrisEnergy money.
Keppel said today that it “benefits from a comprehensive first ranking security package over the assets of the KrisEnergy group. In view of KrisEnergy’s filing of a winding-up petition, Keppel is now implementing detailed recovery plans developed in consultation with its financial advisor and legal adviser to preserve KrisEnergy’s assets and to maximise recoveries for Keppel.”
Keppel said it will appoint Borrelli Walsh as receivers over KrisEnergy’s assets. “Once appointed, the receivers will pursue all necessary action to maximise recoveries for the benefit of Keppel,” added the Singaporean conglomerate.
“I believe Keppel’s security position is strong enough that they will end up with the assets sooner rather than later,” a senior industry executive close to KrisEnergy told Energy Voice.
“DBS has to be seen as fighting for their rights. However, I suspect it will be resolved in a behind the scenes Singapore way. The key risk of a prolonged fight over security is the value erosion of the portfolio. The portfolio needs to be rejuvenated and invested in to preserve value and this will not happen with the parents arguing in the divorce courts,” added the executive.
Keppel said that the carrying values of its investment, contract asset and loan receivable, as well as other outstanding credit, amounted to about S$423.4 million (US$320 million) on 31 March 2021. Keppel added that it will recognise a loss of S$318 million in respect of its exposure to KrisEnergy for its first half 2021 financial results.
“This suggests Keppel may hope to recover about S$105 million, although I expect the expectations on recovery value are too high,” said an industry veteran that tracks KrisEnergy.
Prateek Pandey, vice president analysis at Rystad said told Energy Voice that “Keppel has exposure to around 66% of KrisEnergy’s debt, and might look to recover majority portion of this amount through asset sales.”
The Southeast Asian-focused upstream player holds working interests in three producing fields, one offshore Cambodia, one in the Gulf of Thailand and one onshore Bangladesh. It also participates in five blocks in various stages of the exploration and production lifecycle in Indonesia and Thailand. KrisEnergy operates six of the contract areas.
KrisEnergy operates Block 9 (30%) onshore Bangladesh and Block A offshore Cambodia (95%). In Indonesia, it operates the Bulu PSC (42.5%) and Sakti PSC (95%). In Thailand, it is a minority partner in Chevron’s B8/32 and B9A, while KrisEnergy operates G6/48 Reservation Area (30%) and Rossukon Production Area (100%). It also operates G10/48 (89%) in Thailand.
It looks like Keppel will attempt to take over the assets and find a partner to help operate them. However, if the assets are eventually put up for sale, “it should be possible to find buyers for the producing assets in Thailand and Bangladesh, even if it’s just the existing JV partners absorbing the interests,” Andrew Harwood, Asia Pacific research director at Wood Mackenzie, told Energy Voice.
However, it will be tougher to find buyers for pre-development assets and the troubled operations in Cambodia, as well as the Wassana field in Thailand, he added.
Readul Islam, an Asia upstream specialist at Rystad Energy, told Energy Voice, that Keppel will want to preserve the value of the assets, but “even if anyone wants a shot at the assets, no one will be willing to pay above fire sale prices now — I’m not sure whether Keppel will be able to do anything to overcome that expectation.”
Islam said it remains to be seen whether anyone would want the assets.
“In Bangladesh, Bangora receives a low gas price. In Thailand’s Block 8/32, it’s a less than 5% stake in a block that produced less than 30 thousand barrels of oil equivalent per day in 2020. Oil production at the 100% owned Wassana field in Block G10/48 has been stopped — whether restarting production is worth the costs is the puzzle any potential buyer must first solve,” added Islam.
“In Thailand, Block G6/48 holds the Rossukhon field with around 10 million barrels of oil equivalent resources which has gone through FEED. In Indonesia, there are a few offshore gas opportunities which could interest players heeding the energy transition call, but that will need to be balanced against the desirability of doing business in Indonesia,” said Islam.
Block 9 in Bangladesh is seen by many as one KrisEnergy’s best assets as it has been profitable. “It was also Richard Lorenz’s favorite KrisEnergy asset,” said the industry veteran that has tracked KrisEnergy. Lorenz was one of the original founders of KrisEnergy but left the company in 2017. He was also a co-founder of Pearl Energy, which was a successful Southeast Asia-focused upstream player listed in Singapore.
“Within KrisEnergy’s producing assets, Block 8/32 in Thailand has partners who could easily choose to pre-empt any possible sale. However, the other IOC in Block 9 in Bangladesh is Niko Resources. But I’m not sure Niko is in a position financially to pre-empt if required. More importantly, with it being in various legal disputes with Petrobangla and the Bangladeshi government, I doubt Niko has any intention of increasing its Bangladesh exposure,” said Islam.
Ultimately, it is no surprise that KrisEnergy is folding. Energy Voice predicted earlier this year that the company would finally have to be wound up in 2021. Although this is, in itself not surprising, rather what is surprising is the fact that KrisEnergy was kept on life-support for so long.
KrisEnergy, which went through its first restructuring in late 2016, has only survived because of support from Singapore government-backed Keppel and DBS bank. The company has also been under court protection from creditors
Trading in KrisEnergy shares was suspended in August 2019.
KrisEnergy had been betting on oil production from its Cambodia development, which started up in late December 2020, to provide cashflow to keep the company operating.
But using the development of the Apsara field in Block A offshore Cambodia to keep the company going was a desperate one. KrisEnergy initially joined Block A as a partner in 2010. Neither the then operator Chevron, nor the partners Moeco and GS Energy could see a commercial way forward to make a development worthwhile.
Incredibly, in 2014 KrisEnergy paid $65 million for Chevron’s 28.5% and operatorship.
After acquiring the remaining interests in 2016, KrisEnergy tried to farm-out a share of Block A and the Apsara field to a range of companies, but all viewers rejected it as non-commercial.
Earlier this year KrisEnergy admitted that performance at the Apsara oil field offshore Cambodia was disappointing. The field was the financially crippled Singapore-listed company’s last hope to prevent it from going bust.
Significantly, it may come as no surprise that the frontier basin in Cambodia disappointed.
Some industry watchers believe KrisEnergy already knew that the Apsara oil development about 160km off Cambodia’s coast in the Gulf of Thailand would disappoint.
“Many inside KrisEnergy knew that Cambodia was going to underperform, including external experts, such as reserve auditors. I have seen documents that suggest their Cambodian numbers were wildly optimistic,” a senior industry executive told Energy Voice previously.
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