Singapore’s conglomerate and offshore rig builder Keppel Corporation is in talks to provide a lifeline to the upstream oil and gas company KrisEnergy, which could, in turn, lead to Keppel increasing its stake in KrisEnergy to almost 70 percent.
The announcement by Keppel on Thursday follows KrisEnergy’s proposed financial restructuring, announced on the same day, which KrisEnergy hopes will place it on a „stronger footing” while enhancing its capital structure to “weather the strong headwinds” in the upstream oil and gas industry.
The oil company, with assets offshore Cambodia and Thailand, has been impacted by the drop in global oil prices, and now faces significant financial covenant pressure and tight liquidity position.
Under the restructuring proposal, KrisEnergy has offered its noteholders the exchange of the existing notes maturing in 2017 and 2018, with new notes which would extend the maturity dates for five years.
Subject to the, inter alia, approval by noteholders, the company is planning to carry out a preferential offering of new senior secured zero coupon notes, hoping to raise some S$140 million. The offering would come with free detachable warrants to the shareholders, with each warrant carrying the right to subscribe for one new share in the capital of KrisEnergy.
KrisEnergy expects that, subject to a successful outcome of the plan above, it will be in a position to meet the funding requirements for the next 12 months.
Considerable value in KrisEnergy, Keppel says
Net proceeds from the offering would be used for capital expenditures on the groups existing assets, for repayment of short-term bridge facility with DBS Bank, and general working capital.
Keppel Corporation already owns a 39.9 percent share in the South-East Asia-focused upstream player via its Devan International subsidiary.
In a separate statement on Thursday, Keppel said it was in talks with Kris Energy to provide an irrevocable undertaking in favor of the preferential offering, and to take part in the offering after which Keppel could end up owing a 67.33 percent of the enlarged issued share capital of KrisEnergy.
Keppel has committed to undertake its pro-rata entitlement of KrisEnergy’s preferential offering of the Notes, and the remaining notes that are not taken up by the other shareholders.
In case that no other shareholder takes up the preferential offering of the notes and Keppel chooses to exercise all the warrants, it could end up a 67.33 percent of the enlarged issued share capital of KrisEnergy.
Keppel said it remained confident of KrisEnergy’s long term fundamentals, and believed that it would continue to extract quality returns on its investment.
“There is considerable value in KrisEnergy’s near-term production developments in Thailand, Indonesia, and Cambodia, which have limited exploration risks but require capital to generate future cash flows. The company is of the view that the preferential offering will enable KrisEnergy to ride out near-term funding challenges and create long-term value,” the company said.
Apart from the financial restructuring talks, the two firms are also in discussions to a “preferred partner” relationship where a wholly-owned subsidiary of the Company, Keppel Offshore & Marine Ltd, will provide KrisEnergy with offshore and marine solutions, subject to regulatory constraints and competitive pricing.
“As KrisEnergy will be ramping up its development activities, especially in Thailand and Cambodia, it will require production solutions and such engagement with KrisEnergy is in line with Keppel Offshore & Marine Ltd’s plans to work with oil and gas companies on developments in Asia,” Keppel said.
Offshore Energy Today Staff