Singapore-listed KrisEnergy Ltd has upped its stake in the Block A offshore oil field to 95 percent, acquiring the shares of two minority stakeholders who had opposed the Cambodian government’s attempts to renegotiate a revenue-sharing model, the company revealed in its third-quarter filings.
The document, released yesterday, shows that Japanese-backed MOECO Cambodia Co Ltd and South Korea’s GS Energy Corporation transferred their shares in Block A to KrisEnergy in early October for an undisclosed sum. MOECO previously held a 28.5 percent stake in the block, while GS Energy held 14.25 percent.
The share transfer gives KrisEnergy full ownership of Block A, which covers 4,709 square kilometres in the Gulf of Thailand and contains the Apsara field, Cambodia’s only confirmed oil discovery. However, the Cambodian government reserves the right to exercise its 5 percent option.
Meng Saktheara, secretary of state at the Ministry of Mines and Energy (MME), said he expects the revised ownership structure to end the stalemate that has hindered progress in developing the block’s oil resources.
“The big news is that KrisEnergy now has the whole block and the other companies that got in the way are no longer there,” he said. “This allows them to move forward with the project, but all the responsibility now rests on their shoulders.”
The “finger pointing” excuse was no longer valid, he added.
KrisEnergy farmed into Block A in 2010, and increased its participation in 2014 by purchasing the departing stake of energy giant Chevron, to become the majority shareholder. The company has already submitted development plans to the government and reached an agreement on its fiscal and technical terms.
However, according to Saktheara, the development plans were held up by the two minority stakeholders in the block, who refused to accept a revised revenue-sharing agreement, claiming the government had to abide by the original deal it signed with Chevron and MOECO in 2002.
With KrisEnergy now fully in control, Saktheara said that progress could resume and the company was still on course to begin oil production by 2018 at the earliest. However, KrisEnergy would still have to prove that it had adequate financial resources before it would be allowed to begin operations.
“We need to make sure they can secure enough financing to continue to pursue this project, as well as finalising with us our revenue-sharing deal,” he said.
While KrisEnergy still holds $37 million in unused liquidity, the company struggled during the third quarter as oil prices remained low, according to its financial statements.
KrisEnergy reported a loss of $31.6 million for the three-month period compared to $9.3 million in profit for the same time last year, despite revenue tripling to $44 million on the back of a 68 percent production increase from the existing oil fields it holds.
“Although we saw a slight improvement in market conditions in the third quarter from the first half of 2016, the oil and gas environment remains challenging. Oil prices in the fourth quarter to date have been on a slightly firmer footing but sentiment is uncertain,” interim CEO Jeffrey MacDonald said in the filing.
The company noted that while it had taken necessary steps to reduce costs and capital expenditure this year to the “bare minimum”, it would stay true to an overall growth plan.
“We are implementing major changes to our existing operational strategy and our financial structure to ensure the viability of the company,” said MacDonald. “The primary operational change will be an increased focus on development and production in the Gulf of Thailand in both Thailand and Cambodia.”
In a separate filing yesterday to the Singapore Stock Exchange (SGX) yesterday, KrisEnergy announced that it would issue new bonds in hopes of raising an additional $100 million to help keep the company afloat. Keppel Corporation Ltd, a Singaporean oil rig manufacturer that already holds a 40 percent share in KrisEnergy, has announced that it intends to buy the bonds.