KrisEnergy

UOBKayhian on 25 Nov 2014


FY14F PE (x): n.a.
FY15F PE (x): 17.0

No major surprises in 3Q14 results. With the strong production volumes partially offset the impact of lower oil prices, 3Q14 revenue rose 33.4% yoy to US$18.2m. However, 3Q14 EBITDAX fell 20% yoy to US$5.5m due to a non-recurring adjustment associated with decommissioning costs at Glagah-Kambuna TAC, which ceased production in Jul 13. While lifting costs for 3Q14 fell 41% yoy to US$8.54/boe, this was primarily due to recognition of gas production volume from the Bangora gas field. We expect the average lifting cost to rise to US$13/boe in 2015 once oil production in Thailand commences.

Production to more than double by 2016. Based on Kris’s current field development plans, supported by data from NSAI’s competent person’s report, we estimate that Kris would more than double its production from 7,600 boe/day in 2014 to 20,900 boe/day in 2016 based on production from four oilfields. Its current production of 7,600 bopd is supported by production from its mature oilfields: a) Block 9, Bangladesh and b) Block 8/32, Thailand.

We estimate that Kris could turn profitable from 2015 onwards, backed by a strong revenue growth of 269.8% once the two abovementioned oilfields commence production. The company is unlikely be profitable in 2014 as its earnings profile in 2H14 should be similar to 1H14, seeing as there are no oilfields being brought into production for the year.

Maintain BUY. Our investment thesis is premised on four near/mid-term catalysts: a) immediate upside of 43% to share price once the government approves its pending transactions in Indonesia (Block A Aceh PSC and Tanjung Aru PSC), b) significant upside to its 2P reserves (75mmboe) by end-15, c) production to more than double from 7,800 barrels of oil per day (bopd) in 2014 to 21,000bopd in 2016, and d) attractive M&A target at current prices.