From Company's Website
1. Business
Description
Independent oil &
gas upstream player. Established
in 2009, Kris Energy is an independent upstream company focused on the
exploration, development and production of oil and gas in Southeast
Asia.
Portfolio of oil & gas assets
that encompasses 14 contract areas. KrisEnergy holds a portfolio of oil & gas assets that
encompasses 14 contract areas, of which they operate 6, in 4 different
countries - 1 in Cambodia, 7
in Indonesia, 4 in Thailand and 2 in Vietnam as of FY12. They have since
added 2 more one in Bangladesh and one in Thailand.
From Company's Prospectus
Below is
the 2 new contract area that KrisEnergy will operate in.
From Company's Prospectus
Well spread out
portfolio with interest at different stage. As shown below, KrisEnergy has a well spread out
portfolio with interest at different stage. This ensure future potential of its
development and production profile.
As of now, excluding the 2 new contract areas that they are
acquiring, only their 2 Thailand
area B9A and B8/32 are producing. The Glagah-Kambuna Indonesia has since ceased
production on July 11, 2013 and the company will seek to liquidate it after its
IPO.
From Company's Prospectus
Reserve life of 11.94
years based on 2P reserves & 1Q13 production level. Taking its 2P reserves of 31.7
mmboe and 1Q13 production level of 7,725 boepd level (works out to 7,725 X 365
days = 2.66 mmboe a year), it provides a reserve life of 11.94 years.
From Company's Prospectus
Strong industry
dynamics. Oil
& gas sector is always a cyclical industry. Nevertheless, the dynamic for Asia looks exciting (see chart below) and given that the oil price has
been maintaining at approximately US$100 level, it does looks like a decent
industry to be in.
From Company's Prospectus
2. Use of Proceeds
Based on
the IPO price of S$1.10 for each Offering Share, the net proceeds after the IPO
expense will be approximately S$256.6 million breakdown into:
-
Approx. S$76.6 million (S$0.30/share) for acquisitions (including farm-ins)
-
Approx. S$142.2 million (S$0.55/share) for planned capital expenditures,
including exploration, appraisal and development of their existing assets
-
Approx. S$37.8 million (S$0.15/share) for general working capital
Pro forma NAV of S$0.58. As per the prospectus, the pro
forma NAV per share of the company as of 31st March 2013, is S$0.58. By pricing
the IPO at S$1.10, investor are paying a premium of approx 90%. or 1.9X book
value.
From Company's Prospectus
Loss-making company due to growth
company status. KrisEnergy
is a new company started in 2009, thus have a relatively short operating
history and most of the money will be allocated to grow and explore its asset.
Thus it is not surprising that it is loss-making given its growth company
status.
However,
they are actually generating a healthy EBITDA level (as seen below). Thus I
will not be overly concern about their negative bottom line.
From Company's Prospectus
Not
too demanding on a P/B basis against peers. I will have to qualify that I am
really no oil & gas expert for small cap company, but based on my quick
search on SGX market, it seems that most of the listed SGX players are oil
& gas services-related players. Only Mirach Energy and Interra Resources
qualified as E&P companies with exposure in South East Asia Region. It
seems that on a P/B basis, they are trading higher than KrisEnergy.
Experienced and proven management
team capability. The
founders of the company (Keith Cameron, Chris Gibson-Robinson & Richard
Lorentz) owns a proven track record having built Pearl Energy, a Southeast
Asian oil & gas player, and subsequently selling them to Mubadala, an
investment vehicle of the Abu Dhabi government, for at a level higher than its
IPO price. (IPO at S$0.70/share; sold at S$1.95/share).
Experienced and recognized
controlling shareholders. Kris Energy benefits from the expertise of First Reserve and
Keppel Corporation Limited who possess strong financial capabilities, industry
experience, business relationships and corporate governance.
First
Reserve is a private equity investment firm with substantial investments in the
energy industry.
Keppel,
which in 2012 became a strategic shareholder through a subscription of new
shares by its wholly-owned subsidiary for an effective 20% shareholding in June
28, 2013 also exercised its call option to increase its effective shareholding
in them to 36.0 per cent. Keppel is one of the world’s largest offshore marine
groups with a global footprint across more than 30 countries
Decent industry dynamic and
well-spread out portfolio. See above.
5. Investment Risk
Cyclical Sector. As mentioned, it is a
cyclical business.
Untested volatile market.
Market has been
volatile and the IPO has not been really tested. Thus this volatile and
uncertain market might not be the best time to do an IPO.
6. Technical Analysis
According
to Finance Asia, KrisEnergy are pricing their IPO at the top range due to the
strong demand from institutional investors.
See link:
http://www.financeasia.com/News/349981,krisenergy-prices-ipo-at-the-top-amid-strong-demand.aspx
Again I
like to highlight that there is a good chance the issue will do well given that
the stabilizing manager is the almighty asian brokerage house, CLSA.
In
addition, there will be the same home basis effect given they local operation
and the local staffs will be interested to get a pie into their company IPO.
Thus I
personally think that the technical bid/demand for this issue is very strong & favourable !!
7. Conclusion
I think this is a decent company and it is a interesting
sector.
I will try my luck at this issue and if it jumps high at break, I might sell it.
If not, I think I'm pretty comfortable holding on to this
company given my view that it is at a sweet spot right now and the lack of
similar E&P player in SGX.
8. Timetable
From Company's Prospectus
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