Keppel Corp

Keppel Corp: Announced the acquisition of a 20% stake in independent upstream O&G co, KrisEnergy, for US$115m. KrisEnergy operates 6 out of the 14 licences they hold in Cambodia, Indonesia, Thailand and Vietnam, covering 63,000 sq km. With certified proven reserves of 14.4 mmboe (million barrels of oil equivalent), its portfolio has 3 offshore producing assets: the Kambuna gas-condensate field in Indonesia and the B8/32 and B9A oil and gas blocks in the Gulf of Thailand. In 2011, KrisEnergy's three producing fields averaged 4,800 boepd (barrels of oil equivalent per day). The acquisition was funded internally and is not expected to have material impact on NTA or EPS of Keppel Corp for FY12. As a rough guide, the acquisition values Kris Energy Proven Oil Reserves at approximately $40/barrel. (See table below for comparison against Interra Resources) CIMB note that it is positive of the acquisition, although EPS contribution will not materialize soon. KrisEnergy made a loss of US$36m in FY11 and a profit of US$1.5m in 1Q12. Losses could continue in FY12 with higher drilling costs. The acquisition price represents 1.5x P/NTA and is one of KEP’s largest M&A in recent years following its 28% stake ( $87.5m) in Dynamac in 2011. Judging from Pearl Energy’s success by the same group of founders, house is more interested in a potential IPO for KrisEnergy. There are also prospective alliances between KrisEnergy and KEP’s O&M division for the supply of offshore equipment. House maintains O/p with $14.80 TP.