KrisEnergy Ltd, the operator of the Apsara oil field development offshore Cambodia, has confirmed that all operations of its subsidiary in Cambodia, KrisEnergy (Cambodia) Ltd, will continue as normal, despite its parent company filing for liquidation on June 4, according to a senior official of the Singapore-based oil and gas exploration company.
This offers some hope to the government, which has harboured the ambition to be able to produce significant volumes of crude for over a decade.
Cambodia extracted its first drop of crude oil on December 28 from the A-01D well – part of the five-well mini-platform featured in KrisEnergy’s “Mini-Phase 1A” development.
The Singapore-listed company on June 4 announced to its shareholders that it filed a winding-up petition to the Grand Court of the Cayman Islands and a hearing date will be fixed, saying it “is unable to pay its debts based on actual and/or contingent liabilities and will proceed to liquidation”.
It said its liabilities exceed the value of its assets, it lacked “acceptable” alternative restructuring options, and was unable to secure a near-term infusion of fresh funds.
At the same time, the “significantly lower ultimate recovery and cashflow from the Apsara Mini Phase 1A development resulting in the company’s restructuring exercise” was “no longer viable”, it said.
KrisEnergy investor relations and corporate communications vice-president Tanya Pang told The Post: “The winding-up petition as announced on June 4 relates only to KrisEnergy Ltd, the parent company listed on the Singapore Exchange and not the subsidiary companies holding the group’s assets. Operations of KrisEnergy’s assets are continuing.”
Ministry of Mines and Energy director-general for Petroleum Cheap Sour told The Post on June 8 that he would keep a look out for further details of the court proceedings or other pertinent information concerning the company.
“On our side, we are going to check the conditions in the petroleum agreement. What obligations does the company have to fulfil? We’ll clue them in on what is mentioned in the agreement,” he said.
On April 28, a KrisEnergy statement cautioned that lower-than-forecast production at the Kingdom’s only active oil field would have a “substantial adverse impact” on revenue generated from the Mini Phase 1A development, despite a recovery in benchmark oil prices since last year’s lows, when the Covid-19 pandemic began to emerge.
Sour warned that filing for liquidation does not absolve the company from its obligations under its petroleum agreement with the Kingdom.
“For the crude oil which the company already pumped, they are going to fulfil their obligations. Once they fulfil their obligation, we can evaluate their work.
“Now, we also want to see the company’s progress after the liquidation – how the court proceedings go. We need to gather clear information from the company,” he said.
In August 2019, KrisEnergy filed for a six-month debt moratorium to seek court protection from creditors’ legal action while it sought to restructure its debt totalling some $476.8 million then.
The government has roughly calculated an annual revenue of $30 million if oil prices hover above $55 per barrel.
Though this could be more on the pretext that crude oil prices increase, a 2015 independent report by Canada-based Resources for Development Consulting on the prospects of oil revenue for Cambodia showed.
The report stated that if full development of the second phase takes off, total government revenue over the project’s lifespan could range between $630 million, at a barrel cost of $70, and $1 billion ($90 per barrel).
In 2002, US oil giant Chevron was granted an exploration licence in 2002 to explore a 278sq km area in Block A. In 2005, it announced that it had discovered up to 400 million barrels of oil reserves in the offshore block, and initially predicted oil would begin flowing by 2011. It left Block A after a decade of hurdles.
KrisEnergy first farmed into Block A in 2010, and increased its participation in 2014 by buying out Chevron’s stake for $65 million.
In 2016, KrisEnergy took over the minority stakes of Japanese-backed MOECO Cambodia Co Ltd and South Korea’s GS Energy Corporation, which were seen as blocking any further progress in negotiations toward a revised production agreement.
Cambodia Block A covers 4,709sq km of the Khmer Basin in the Gulf of Thailand and is approximately 150km off the Kingdom’s shores, with water depths ranging from 50-80m.