KrisEnergy's Q1 profit lifted by cut in costs and a net fair value gain

KRISENERGY reported on Friday a swing back into the black for the first quarter of 2017 on the back of lower operating costs and charges as well as a net fair value gain which the group said would be reversed in subsequent quarters.

The independent upstream oil and gas company generated a net profit of US$55.72 million in Q1 2017, compared to a net loss of US$18.29 million a year ago. Revenue was US$31.80 million, down from US$33.11 million a year ago.

In line with lower production in the Wassana oil field in the Gulf of Thailand, operating costs fell almost 36 per cent to US$12.4 million in 1Q. Depreciation, depletion and amortisation charges were also cut.

However, KrisEnergy got a huge US$77.52 million boost in other operating income, which was all non-cash. During the quarter, it recognised a net fair value gain of US$73.90 million on financial instruments relating to the exchange of its 2017 and 2018 notes to the longer dated 2022 and 2023 notes following a debt restructure.

"This net fair value gain of US$73.9 million will be reversed in subsequent quarters, recognised as accretion of bond discount expense under finance costs, as we progress towards the maturity date of the 2022 notes and 2023 notes,'' KrisEnergy said.

Given the uncertainty over when crude oil prices will recover, KrisEnergy said it has "taken all measures to reduce its cost base and curtail discretionary operational expenditure for the foreseeable future".