KrisEnergy Ltd

Short Summary:

KrisEnergy Ltd. (the “Company”) is an independent upstream company focused on the exploration for, and development and production of oil and gas in Southeast Asia – with 14 contract areas in four countries spanning the entire exploration-to-production life cycle.

The Deal:

Offering Price: S$1.10

The Offering: 151,993,000 Shares (Include 19,900,000 Offering Shares to Singapore Public)

Cornerstone Investors: 94,161,000 Cornerstone Shares

Forecast Dividend Yield:

2012: No Forecast

2013: No Forecast

*Based on issue price of $1.10, 1,046,153,200 units after IPO, loss after tax of $22.266 million in 2012.

Dividend Policy:

Do not intend to declare dividend as the company is making a loss for the past 3 years
 

Strength

-Portfolio provides a balanced mix of assets by allowing the company to capitalize upon the cashflow generation from their producing assets in order to fund development and exploration activities and evaluate our exploration upside potential.

-Experienced Team (Founders have worked together since 1997, including the establishment, listing and divestment of Pearl Energy)

-Experienced And Recognized Controlling Shareholders (Keppel Corporation, bought a 20% stake for $115 million in Jul 2012 and announced in Jul 2013 to excersize a call option to buy another 16% from controlling shareholder; First Reserve, leading private equity energy specialists with >US$20 billion under management)

-Portfolio ideally positions the company to benefit from the increasing demand for oil and gas in Asia and Southeast Asia due to the economic development in these areas.

-Dedicated On-The-Ground Presence (Intending to further open offices with local technical and professional staff in countries in which the company have a significant presence. The company believe this gives them competitive advantage over their peers and allows them to respond quickly and efficiently to business opportunities.

-Exploration and appraisal success rate over the last three years in excess of 60%.

 

Weakness

-Making a loss for the past 3 years.

-The company conduct the majority of their operations through joint operations and have limited control over the activities in contract areas that the company do not operate.

-Reliance on the discovery and development of additional reserves to replace produced reserves.
-May only be profitable in 2015 after more area under development come into production.

In my opinion, this IPO is worth a try. They have the same founder as the Pearl Energy which went into privatization a few years ago on SGX, earning the shareholders a whopping 178% return in 3 years. The founders have a strong experience and track records in the region, which means they know what they are doing. Of their current assets, 3 of the fields are going to come online in production in the next 2 year, with another 4 of them in the next 3-4 years. They are backed by major players such as First Resources, and Keppel, our homegrown rig builder, is increasing its stake to 36%. This certainly shows the potential of this company. I particularly like the business model of the company, using the profits generated from their current production field and re-invest into exploration and development of other raw field. So far, they do have results to show, as their loss have been decreasing in the last 3 years.

 

Some useful information:

[12 Jul 2013], [9.00 p.m.] : Opening date and time for the Public Offer.

[17 Jul 2013], [12.00 noon] : Closing date and time for the Public Offer.

[18 Jul 2013]: Balloting of applications under the Public Offer, if necessary.

[19 Jul 2013], [9.00 a.m.]: Commence trading on a “ready” basis.

 

Rating for investment: 6/10

Disclaimer: You may use the above information as a guide, but please invest based on your own judgment.