KPMG doubts KS Energy's ability to continue operations
The firm incurred a net loss of $53.9m for FY2018.
KPMG LLP has expressed doubts over energy services provider KS Energy’s ability to continue as a going concern, according to a filing with the Singapore Exchange (SGX).
It noted in its independent auditors' report that it has taken into account that the group incurred a net loss of $53.94m for FY2018 and, as at end-2018, the group’s current liabilities exceeded current assets by $18.33m and $2.51m, respectively. The group and company also had deficits in shareholders' equity totalling $10.3m (excluding non-controlling interests) and $11.67m, respectively.
An estimated $31m of the group's bonds are also subject to a proposed redemption through a proposed issuance of new ordinary shares to be approved by shareholders at an upcoming extraordinary general meeting. The group also has capital commitments of $489.02m at end-2018, and there are currently no financing arrangements put in place to meet the obligations.
"It is the intention of the group to continue to operate as a going concern. However, due to the above matters, there is significant doubt about the group's and the company's ability to continue as a going concern," KPMG said.
Although the group expects the overall operating environment to remain challenging in the next twelve months, it anticipates generating positive cash flows from existing rig charter contracts and prospective rig charter contracts, it highlighted. It further added that it hopes to secure additional work for its rigs in Southeast Asia over the course of the year ahead with contract values of at least $40.66m (US$30m).
In addition, KS Energy is seeking to divest any surplus assets when opportunities arise and currently expects to generate at least $1.63m (US$1.2m) from such divestments over the course of 2019.
“The group shall continue to work closely with its bankers and is confident of extending loan repayments of $5.7m currently within current borrowings to allow the group to meet its debt obligations as and when they fall due,” the firm said.
"If for any reason the group is unable to continue as a going concern, it could have an impact on its classification of assets and liabilities and the ability to realise assets at their recognised values and to extinguish liabilities in the normal course of business at the amounts stated in the financial statements," KPMG added.
“As the group also plans to raise the necessary funding for the new build contracts, there is no adjustment considered for the carrying value of the assets under construction of $64.21m as at 31 December 2018. Should the group decide subsequently to discontinue the new build contracts, adjustment to the carrying values of these rigs may be required,” KPMG said.