Poor output at Cambodia’s first oil well puts operator at risk

PHNOM PENH — Four months after becoming the first company to draw oil from a Cambodian well, Singapore-listed KrisEnergy is warning that its future as a going concern is at risk.

The company revealed last week that production at the offshore concession, known as the Apsara oil field, was far lower than forecast, creating “material uncertainty” over whether the debt-laden company can complete its planned restructuring.

Adding to its woes, Cambodia’s Ministry of Mines and Energy, which owns a 5% participation stake in the venture, warned the company this week it needed to provide a satisfactory explanation for the shortfall or face the consequences. 

Cheap Sour, director general of the ministry’s General Department of Petroleum, said if KrisEnergy is unable to “fix” the situation, the government could levy a fine or even scrap the company’s agreement, he told Nikkei Asia on Monday.

Sour said the government expected an explanation by the end of May at the latest, adding that the project’s success was important for Cambodia.

“It will help the sector to grow as well as attracting the investors. [It also adds to] government revenue to develop the country,” he said.

The threat of government action adds to KrisEnergy’s woes.

The company is restructuring in an attempt to alleviate its debt load and had been betting on cash from its Cambodia project to fund its operations.

But 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 Feb. 23 and March 30 was 2,883 barrels of oil per day — far short of the forecast peak production of 7,500 bopd, a target that was now “not achievable,” according to KrisEnergy.

KrisEnergy said it had contracted a consultant to reassess the field’s ultimate recovery, but conceded it would be “significantly lower” than forecasts.

The company said the underperformance threatens its restructuring efforts and even its future.

“Given the significantly lower estimated ultimate recovery and cash flow 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,” it told shareholders.

Previously a minor partner, KrisEnergy acquired the controlling stake in the Block A concession in 2014 from Chevron. The U.S. energy giant held the rights since 2002 but exited after setbacks, including disagreements on tax and revenue sharing terms with authorities.

After signing a production agreement with the government in 2017, KrisEnergy was expected to pump oil within two years but ran into trouble as oil prices fell, revenue dropped and debt piled up.

The company was recently granted an extension to its restructure deadline, giving it until April 16 to complete an arrangement with creditors.

When asked for comment, a KrisEnergy spokesperson said the company “will release any material information to all stakeholders as and when appropriate.”

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