Oil & Gas Sector - OCBC Investment 2016-08-25: (2) Casualties To Date

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OIL & GAS

Oil & Gas Sector - CASUALTIES TO DATE

Casualties To Date 

1. Technics Oil & Gas
   • Offshore services provider – integrates compression systems and process modules, amongst others
   • Filed for judicial management in end May 2016
   • Net gearing of 0.49x as of Mar 2016 was below sector average
   • Main banker: UOB 
2. Linc Energy
   • Upstream E&P – Unconventional gas, coal deposits
   • Delisted from the ASX to float on the SGX in late 2013
   • Entered into voluntary administration in Apr 2016 
3. Lime Petroleum
   • Upstream E&P with exploration licenses
   • 65% owned by SGX-listed Rex International, 35% by Gulf Hibiscus, subsidiary of Malaysian-listed Hibiscus Petroleum
   • Filed for winding up application on Mar 2016 
4. Swiber Holdings
   • Offshore Engineering, Procurement, Commissioning (EPC) provider
   • Winding up application on 28 Jul 2016
   • Main bankers: 
     1. 2015 Annual report: BoA ML, Citi, DBS, Deutsche Bank, ICICI, Maybank, RHB, HSBC, Siam, UOB 
     2. 2014 Annual report: 16 banks in total 

Currently in discussion with bondholders 

1. Ausgroup
• Provides fabrication, construction and maintenance services to natural resources sectors in Australia and Asia
• Market Cap: S$32m
• Main banker: DBS 

Companies’ financial positions and debt servicing abilities 

1. ASL Marine has a S$100m bond coming up for maturity in Mar next year while its 3QFY16 results showed that it had S$28m of cash then and S$627m of debt (S$385m current debt). 9MFY16 saw cash outflow of S$60m from operations.
2. Ausgroup is currently in discussion with bondholders due to breach of covenants. KPMG is helping in the restructuring process.
3. Dyna-Mac Holdings’ net order book has gone down to S$38m, which is about a quarter’s worth of revenue. It has to secure new orders soon to avoid a significant fall-off in earnings. On a more positive note, it is in a net cash position due to prudent management of the company.
4. As of 31 May 2016, EMAS Offshore had US$43m in cash along with US$602m of bank borrowings (US$192m current) and US$56m of lease obligations (US$1.5m current). Just considering the bank borrowings would yield a net gearing of 1.5x which is above industry average.
5. Ezion Holdings had US$181m in cash alongside US$372m of current debt and US$1,217m of non-current debt as of end Jun 2016, resulting in a net debt/equity of 1.1x. Its earliest bond maturing is in Aug 2018 (S$60m).
6. Ezra Holdings has been divesting its assets, and its JV with Chiyoda will also help to alleviate its balance sheet stress. Moreover, its only bond maturing is in Apr 2018 (S$150m), so there is still some breathing space for the company. As at 31 May 2016, it had US$109m of cash, of which US$66m were pledged. Current debt stood at US$524m and non-current debt at US$687m.
7. As at 31 Mar 2016, Falcon Energy had US$30m in cash, current debt of US$105m and non-current debt of US$106m, resulting in a net gearing of 0.52x. The group had ordered a US$226m jack-up rig from Keppel in Apr 2013 and the unit has not been delivered yet. Delivery was scheduled to be in 4Q15, but this has been deferred to 2016. It has a S$50m bond maturing in Sep 2017.
8. Keppel Corp had cash and cash equivalents of S$1.8b and was in a net debt position of S$7.3b as at 30 Jun 2016, resulting in a net gearing of 0.62x. Net operating cash outflow was S$361m in 1H16 and S$705m in FY15.
9. KrisEnergy announced in Jul that its revolving credit facility has been transferred to a single lender, DBS. Hence its previously disclosed requirements for (i) repayment and cancellation of US$55.0m of the facility by 29 Jul 2016; and (ii) raising minimum new capital of US$100.0m and US$50.0m by 30 Jun 2016 and 30 Nov 2016, respectively, will no longer apply. It has a S$130m bond maturing in Jun 2017.
10. The auditor of KS Energy has raised concerns about its ability to continue as a going concern. The group is also looking for buyers for its distribution business. As mentioned in its 2Q16 results, the group also plans to refinance the $45m of 6% convertible bonds and $7.5m of 6% convertible bonds maturing in Sep 2016, as well as the secured borrowings repayable in the next 12 months. Other plans include a rights issue should there be a need for further funding.
11. As at 30 Jun 2016, Marco Polo Marine had S$18m cash, S$186m of current debt and S$67m of non-current debt, resulting in a net gearing of 1.4x. The group is currently embroiled in a lawsuit with Sembcorp Marine with regards to a jack-up rig which it previously ordered from the yard. It also has a S$50m bond maturing in Oct this year.
12. As at 30 Jun 2016, Nam Cheong had RM260m in cash, current debt of RM505m and non-current debt of RM1.16b, resulting in net gearing of 0.9x. As the group has not received new orders for about two years and outlook remains dim, bank support is critical going forward. It has a S$90m bond maturing in Aug 2017.
13. Otto Marine will convene an EGM on 14 Sep 2016 to seek shareholders’ approval for a delisting, following the satisfaction of certain conditions. Recall that major shareholder Mr. Yaw had earlier made a delisting offer.
14. As at 30 Jun 2016, Pacific Radiance had US$30m in cash, US$101m of current debt, and US$396m of non-current debt. It is currently working closely with its bankers to refinance its loans. As the group expects the challenging operating environment to last for possibly the next two to three years, it will constantly evaluate and pursue opportunities to enhance its liquidity position and raise additional cash to ensure business stability and position the group for potential market opportunities.
15. As at 30 Jun 2016, POSH had US$11.5m in cash, US$495m of current debt and US$106m of non-current debt. However, it has in July already refinanced its US$300m term loan (under current debt) with new 5 and 7 years term facilities.
16. Rex International had US$36m in cash as of 30 Jun 2016, along with US$61m of current debt; zero long-term debt. Its subsidiary, Lime Petroleum, filed for winding up application earlier this year.
17. RH Petrogas had US$8m in cash along with US$13m current debt and US$15m of non-current debt as of 30 Jun 2016. The group is in a negative equity position. The auditor has raised concerns about its ability to continue as a going concern, and a capital injection is likely required.
18. Ramba Energy had S$17m in cash and S$7m of debt as at 30 Jun 2016, alongside S$53m in equity. Management believes that the group’s small portfolio of quality assets should yield positive returns when they are developed and put into production. As it still has oil and gas fields in the exploration phase, it expects to incur high capital costs to carry out the necessary exploration and development activities.
19. Sembcorp Marine had S$968m in cash, S$655m of current debt and S$3.3b of long-term debt as of 30 Jun 2016, resulting in a net gearing of about 1.1x. In July, the group received more than S$900m from customers with the deliveries of Noble Lloyd Noble and other major projects, improving its cash position.
20. Swiber Holdings is currently in judicial management.
21. Swissco Holdings had US$9.6m in cash, US$72.5m of current debt and US$149m of non-current debt as of 30 Jun 2016, resulting in net gearing of 0.8x. It is currently working with its financiers to improve its financial position.
22. Triyards Holdings had US$46.5m of cash as of 31 May, of which US$26m was pledged. Current debt stood at US$153m while noncurrent debt was US$16m; net gearing was 0.67x. It has not issued any bonds.
23. As at 30 Jun, Vallianz Holdings had US$8m of cash, US$142m of current debt and US$226m of non-current debt against US$277m of equity. The group has a S$60m bond maturing in Nov this year. 
24. VARD Holdings had NOK 908m of cash as at 30 Jun, along with NOK 9,415m of current debt and NOK 1,127m of non-current debt. Most of its current debt is from construction loans, which mature on vessel delivery and secured by the vessels under construction.

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-08-25

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