By Amy McLellan
KrisEnergy was established in 2009 by the former team behind Pearl Energy, the Asia-focused E&P that listed on the Singapore Stock Exchange with a market cap of US$240 million in 2005, was acquired by Aabar Petroleum for US$500 million one year later before being bought by Abu Dhabi’s Mubadala Petroleum for US$833 million in 2008.
KrisEnergy, which made its own debut on the Singapore Stock Exchange in 2013, is keen to emulate this success and has certainly stitched together a portfolio, both through organic drillbit success and acquisition, with the potential to deliver similar growth.
That portfolio, of 19 contract areas in Bangladesh, Cambodia, Indonesia, Thailand and Vietnam, is going to start delivering some of that growth this year. In Q3 2014 production was running at around 7,500 boepd from fields in the Gulf of Thailand and the high performing Bangora gas field in Bangladesh.
This year will see a step change in output: production is set to hit 15,000 boepd by the end of 2015 as its G11/48 and G10/48 projects in the Gulf of Thailand come onstream in the second half of the year, and 30,000 to 35,000 boepd by the end of 2017. The next 12 months will see 2P reserves jump from 32 million barrels to more than 100 million boe.
The big issue, as for all producing companies, is the oil price. Last year KrisEnergy issued two heavily oversubscribed bonds to institutions and private banks, a move that strengthened the balance sheet and more than halved its cost of borrowing to below 5 per cent but it does mean there will need to be a focus on cash flows.
There are some buffers against the oil price: last year gas accounted for about one third of revenues and company co-founder Richard Lorentz said in November that the company has a breakeven cost of around US$35 a barrel so there’s still breathing space at current prices. Average lifting costs in Q3 2014 were US$8.54/boe, down 40 per cent from the prior year period due to contribution of the Bangora field with its low lifting costs.
Even before the price slump, the company was aiming for parity between oil and gas production and the first weeks of 2015 have delivered some solid progress on this front with the news that the Indonesian authorities have approved the plan of development for the Lengo gas field in the Bulu PSC offshore East Java (Kris operates with 42.5 per cent). Chris Gibson-Robinson, director of exploration & production, said that once onstream the Lengo field will take the group’s production mix to 52 per cent gas versus 48 per cent oil.
The PoD approval paves the way for KrisEnergy to start formal gas sales negotiations for a field that is expected to deliver plateau production of 70 million cf/d. The shallow water gas field will be developed via four development wells and an unmanned wellhead platform, with a 65 km pipeline connecting to shore.
It’s a simple plan, and should take 24 months to execute once the JV gives the FID. There could be more to come: the PSC neighbour’s KrisEnergy’s East Muriah PSC, home to the East Lengo gas discovery. An appraisal well is planned and is a candidate for single well tie back to the Lengo facilities. And KrisEnergy also operates the Sakti PSC, where it has recently acquired 2D and 3D seismic.
The shares have been under pressure in recent months, reflecting the rout in the oil price and also the 20 per cent hit on EBITDAX in the Q3 results, which slipped to US$5.5 million for the three month period as a result of increases in operating costs and corporate G&A expenses. Revenues, however, jumped by a third to US$18.2 million, helping to offset lower oil prices. The company has steady and reliable cashflows from existing fields, plenty of headroom on its facilities, projects well underway to come onstream in H2 and, further ahead, an exciting mix of exploration and appraisal projects to keep the hopper full in future years.