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KrisEnergy appoints advisers over debt burden, widens Q4 net loss

KRISENERGY, an upstream oil-and-gas firm, said on Tuesday it has appointed advisers to formally evaluate and implement all viable options available to the group, as the loss-making group remains over-geared and underequitised.

It said this as part of its results announcement, where it widened its net loss for the fourth quarter from a year ago, amid lower revenue, continued - though lower - impairment of assets, and higher depreciation-related costs.

"While balance sheet management is critical for all operational, financial and strategic decisions, the group has been unable to materially improve liquidity via inorganic means due to covenants imposed by the group's secured and unsecured lenders," it said in its financial statement.

"Organic improvements in liquidity were evident in 2018, however, a material part of the group's liquidity was allocated to debt service, which as a result diverted capital from income-generating activities such as the development of net present value positive developments within the group's portfolio."

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KrisEnergy disclosed that on April 9, 2018, DBS had provided an additional commitment of US$20 million - or an upsize of a bridge loan - under the revolving credit facility for an initial maximum period of three months. KrisEnergy has since then extended its maturity date on its upsized bridge loan to March 8, 2019 with the bank.

"Although the group benefited from the general improvement in oil prices in 2018, the consequences of volatile oil prices from August 2014, coupled with the group's high exposure to interest-bearing debt, have materially and adversely impacted the group's results of operations and financial condition."

It reported that as at Dec 31, 2018, the group's total equity declined to US$10.1 million, compared with its year-ago total equity of US$159.7 million. This was a result of significant non-cash expenditures relating to finance costs, asset impairments, writedowns and depreciation, depletion and amortisation charges.

Total debt recognised on the group balance sheet as at year-end of 2018 stood at US$459.1 million. The group's gearing as at Dec 31, 2018 was 99.9 per cent.

Net loss for the three months ended Dec 31, 2018 stood at US$97.33 million, widening from a net loss of US$87.57 million reported a year ago. Revenue was down 47.7 per cent to US$17.41 million on depressed sales volume. 

Its depreciation, depletion and amortisation charges jumped to US$18.3 million in the fourth quarter, compared to US$2.38 million the same period a year ago. This was due mainly to higher charges for G10/48 - an oil-and-gas field in the Gulf of Thailand - as a result of the 53.2 per cent decrease in 2P reserve estimates year-on-year. 

2P reserves denote best estimate scenario of reserves.

This comes even as its other operating expenses - which capture impairment charges - decreased to US$71 million in the fourth quarter from a year ago's US$87 million.

The decrease was primarily attributable to lower impairment charges in the fourth quarter that nonetheless still comprise a write-off of US$33.4 million for Block 120 in offshore Vietnam as the company intends to relinquish the non-operated asset, a non-cash provision of US$15 million related to the Bala-Balakang PSC in Indonesia in accordance with accounting standards, and finally, an impairment of G10/48 of US$18.9 million as a result of lower 2P reserves.