Indebted Oil Company Reports Lower-Than-Expected Oil at Cambodian Block
4 min read
Danielle Keeton-Olsen
| Tue Apr 6, 2021 6:30 pm

KrisEnergy has warned that its current production rate at Cambodia’s Apsara offshore oil block has yielded only around half the company’s projected peak rate, and it has extended debt repayment deadlines and brought in an engineering firm to assess the situation amid “material uncertainty … to continue as a going concern.”

In a shareholder announcement on March 31, the company said that the Apsara block will not be able to reach the peak production rate the company had predicted of 7,500 barrels of oil per day in its first phase of development. Average gross production rate from late February through March reached 2,883 barrels a day — less than half the predicted peak rate.

The company brought all five wells into production for its “mini” first phase of development through January and February, but the “ultimate recovery,” or total oil extracted from the wells, will most likely fall “significantly lower” than what it expected, KrisEnergy said in the disclosure.

The company said it found “smaller reservoirs with limited continuity, which are also less productive compared with the appraisal flow tests” compared to what it had predicted through models in line with industry standards. KrisEnergy added that it hired Netherland, Sewell & Associates, a petroleum engineering consultant, to reevaluate the block, with results expected in April.

Cheap Sour, the Mines and Energy Ministry’s general director of petroleum, said KrisEnergy had informed the government of its low production rates in the “initial stage” at the end of last month, and that officials were waiting to hear more from the company.

“KE will come back and explain [to] us at the end of this month or next month as they are working with their independent expert now,” he said in a message.

When asked whether this could impact Cambodia’s plans to build an oil refinery, he said the projects were separate and the government was still looking for investors.
https://vodenglish.news/indebted-oil-co ... ian-block/

KrisEnergy on verge of collapse as Cambodia bet backfires
Singapore-listed KrisEnergy – widely seen as a zombie company - is finally on the verge of collapse after production from its Apsara oilfield offshore Cambodia failed to meet expectations. Significantly, it should come as no surprise that the frontier basin disappointed.
by Damon Evans
07/04/2021, 6:15 am

Singapore-listed KrisEnergy – widely seen as a zombie company – is finally on the verge of collapse after production from its Apsara oilfield offshore Cambodia failed to meet expectations. Significantly, it should come as no surprise that the frontier basin disappointed.

The company, majority owned by Singapore conglomerate Keppel Corporation, reported last week that output at its offshore Block A concession in Cambodia was less than half of the originally expected rate.

KrisEnergy conceded that the news created “material uncertainty” over whether the company, weighed down by debts of more than $500 million, can complete its planned restructuring.

KrisEnergy had been betting on oil production from its Cambodia development, which started up in late December 2020, to provide cashflow to keep the company operating.

“Given the significantly lower estimated ultimate recovery and cashflow from the Apsara
Mini Phase 1A development, material uncertainty exists over the group’s ability to complete the restructuring exercise and to continue as a going concern,” KrisEnergy said in a statement.

The five-well platform, installed between December and February, was “less productive and continuous in nature” than had been forecast, the company said.

Average production between 23 February and 30 March was 2,883 barrels of oil per day – far short of the forecast peak production of 7,500 bopd, a goal that was now “not achievable,” reported KrisEnergy.

KrisEnergy added that it had hired an independent consultant to reassess the field’s ultimate recovery but admitted it would be “significantly lower” than forecasts.

Moreover, some industry watchers believe KrisEnergy already knew that the Apsara development about 160km off Cambodia’s coast in the Gulf of Thailand would disappoint. But KrisEnergy declined to comment on the matter.

“Many inside KrisEnergy knew that Cambodia was going to underperform, including external experts, such as reserve auditors. I have seen documents that suggest their Cambodian numbers were wildly optimistic,” a senior industry executive told Energy Voice.

“We didn’t believe their mini phase would ever have legs. They needed a story to talk up and they also did not want to lose their Block A concession, so they came up with the mini development. This kind of appeased the Cambodian government and allowed them to keep the restructuring effort going,” added the source.

The Apsara Mini Phase 1A development was designed as an initial small-scale project to observe and appraise reservoir performance in the previously unproduced Khmer basin. It will collect vital production and subsurface data to determine the long-term potential and value of the Apsara area in Block A, said KrisEnergy.

But using the development of Apsara in Block A to keep going was a desperate one. KrisEnergy initially joined Block A as a partner in 2010. Neither the then operator Chevron, nor the partners Moeco and GS Energy could see a commercial way forward to make a development worthwhile. Incredibly, in 2014 KrisEnergy paid $65 million for Chevron’s 28.5% and operatorship.

After acquiring the remaining interests in 2016, KrisEnergy tried to farm-out a share of Block A and the Apsara field to a range of companies, but all viewers rejected it as non-commercial. In 2016, the certifier NSAI gave a most likely contingent resource recoverable volume of 8.5 million barrels of oil. More recently as the development progressed, and reserves were allowed to be claimed (as a development looked likely), the most likely (2P) reserve number became 6.8 million barrels of oil. This is clearly published by KrisEnergy, as required by the Singapore Stock Exchange. Of these 6.8 million barrels, 6.4 million barrels were the company’s 95% share, but only 5.18 million barrels (76%) were their revenue entitlement volume.

Based on the NSAI certified 2P oil volume of 6.8 million barrels, production actually equates to only 2,700 bopd in the first year, declining at 10% per year for the expected 10-year field life. If one uses a more conservative 20% decline rate per year, the first year average production, as suggested by the NSAI reserves, equates to 4,075 bopd. In other words, the NSAI stated and published reserves indicate that first year production would be between 2,700 bopd and 4,075 bopd, but this was nowhere near the KrisEnergy-suggested initial 7,500 bopd. This should have been a red warning flag, but it seems to have been ignored. The actual production figures seem more in line with the NSAI work, but the year is young and average 2021 production may well fall below 2,700 bopd. On 30 March, production stood at 2,493 bopd.

“It’s sad really. It was a big bet on Cambodia. I think everybody knew there were sub-surface issues and with all the best will and intent in the world, they have not been able to solve those issues. That makes the project marginally economic, even uneconomic,” a shareholder in KrisEnergy told Energy Voice.

Based on the information KrisEnergy has made public it appears that the Block A area in the Khmer basin has a combination of poor reservoir quality and limited reservoir extent. This makes development tough as more wells, which have poor flow rates, need to be drilled, substantially increasing costs.

A year ago, KrisEnergy borrowed $87 million from Keppel to drill the wells and build the production platform. In total, KrisEnergy has probably spent close to $200 million to acquire Block A and develop it. Now it seems unlikely that the phase 1A development will be able to recoup this investment.

More here. Full article: https://www.energyvoice.com/oilandgas/a ... backfires/