Keppel acquisition seen as precursor of potential IPO

CIMB thinks Keppel could also tap into KrisEnergy’s development field to supply offshore equipment.

CIMB noted:

What Happened
Keppel Corp via its Investment division has subscribed for 20m shares, or a 20% stake in KrisEnergy, for US$115m. Armed with a war-chest of US$500m, KrisEnergy was established in 2009 by former Pearl Energy founders, Keith Cameron, Chris Gibson-Robinson and Richard Lorentz, together with a
US-based private equity firm, First Reserve Corporation.

KrisEnergy’s portfolio of three offshore producing fields- B8/32, B9A in the Gulf of Thailand and Glagah-Kambuna TAC in Indonesia, which has a combined production average of 4,800 boepd in 2011 (2012 forecast: net production of 3,447 boepd).

What We Think
We are 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. It is one of KEP’s largest M&A in recent years following its 28% stake (S$87.5m) in Dynamac in 2011.

Judging from Pearl Energy’s success by the same group of founders, we are 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.

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