Mainboard-listed oil and gas producer KrisEnergy is planning a preferential bond offering to raise up to $140 million amid deepening energy industry woes. The company is receiving a lifeline from major shareholder, rig builder Keppel Corp, which said yesterday that it will subscribe to the bond offer.
The zero-coupon secured notes with free detachable warrants will be offered on a pro-rata basis to all existing KrisEnergy shareholders.
Each warrant will carry the right to subscribe to one new share in KrisEnergy at an exercise price of 11 cents per share. The warrants, if fully exercised, would provide KrisEnergy with an additional $138 million.
A Keppel spokesman said the company will subscribe to its pro-rata share of the notes, and also to all excess notes that are not successfully subscribed for. Keppel owns a 39.9 per cent stake in KrisEnergy through its subsidiary Devan International.
Keppel said it remains confident of KrisEnergy's long-term fundamentals: "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."
KrisEnergy is among a growing number of oil and gas firms struggling to meet debt commitments due to tumbling oil prices.
In a separate announcement yesterday, the company said it is looking to extend by five years the maturities of its $130 million bond due next year and a $200 million bond due in 2018. It also proposed reducing the bonds' coupons to 4 per cent, from 6.25 per cent and 5.75 per cent respectively.
The company's shares rose by as much as 9 per cent in morning trade yesterday, despite lacklustre third-quarter results.
The group sank into the red in the third quarter, recording a net loss of US$31.6 million (S$43.8 million), from a net profit of US$9.5 million in the same period last year.
Revenue for the three months ended Sept 30 more than tripled to US$44.4 million from a year ago as production in the period increased by 68.4 per cent.
However, this was accompanied by a surge in operating costs to US$33.6 million, from US$6.6 million in the corresponding period a year ago, partly due to the full-quarter contributions to production from the Wassana and Nong Yao fields.
Higher production also raised depreciation, depletion and amortisation charges by 87.2 per cent.
Loss per share was 2.1 US cents for the quarter, from earnings per share of 0.8 US cent a year ago. Net asset value per share was 28 US cents as at Sept 30, down from 33 US cents as at Dec 31.
"Although we saw a slight improvement in market conditions in the third quarter from the first half of 2016, the oil and gas environment remains challenging. Oil prices in the fourth quarter to date have been on a slightly firmer footing but sentiment is uncertain," said interim chief executive Jeffrey MacDonald.
The company is restructuring its finances and operations in the light of lacklustre industry conditions, he said, adding: "We have substantially reduced costs over the last two years and significantly cut capital expenditure this year."
If successful, the proposed financial restructuring will "provide the group with a stable and sustainable capital structure, reduced short-term cash debt service obligations and greater liquidity", the company said yesterday.