KS Energy to add oil rigs, buy stakes

By Ovais Subhani and Neil Chatterjee

SINGAPORE (Reuters) - Singapore's KS Energy Services (KSTL.SI: Quote, Profile, Research, Stock Buzz) aims to expand by adding two rigs a year to its fleet of onshore and offshore oil drilling rigs and may take stakes in assets or firms in a booming oil services sector.

"The plan is to add at least a couple of rigs per annum, onshore or offshore," chief executive Kris Wiluan told reporters at the Reuters Global Energy Summit in Singapore on Tuesday, with each rig costing from $20 million to $200 million.

He said with oil prices CLc1 rising to record highs the demand for oil equipment was strong. KS Energy would not expand on a speculative basis but aimed for steady growth in its core focus of land rigs and shallow water jack-up rigs, Wiluan said.

The company plans longer term to move into semi-submersible rigs for deepwater exploration, as recent large finds off Brazil spur hopes for further discoveries, and is also considering supplying services to a growing offshore wind energy industry.

KS Energy's fleet of about 20 onshore and offshore rigs have been rented out to companies such as oil major BP Plc (BP.L: Quote, Profile, Research, Stock Buzz), China's state-owned CNOOC Ltd (0883.HK: Quote, Profile, Research, Stock Buzz) and Danish shipping and oil group A.P. Moeller-Maersk (MAERSKb.CO: Quote, Profile, Research, Stock Buzz).

"We plan to expand aggressively, both organically and through acquisitions if there is an opportunity," Wiluan said, adding the firm is focused on Southeast Asia, North Africa and the Middle East.

"There is huge pent-up demand in Iraq and Iran -- we have the right people but we don't want to put them at risk," added the firm's Dubai-based vice-chairman John O'Leary, saying security had not been a problem for its operations in Kurdistan, Iraq.

Wiluan said the company, which had about S$89 million ($65 million) in cash reserves at the close of the first quarter, could take a stake in a rig being used or under construction, or in a company that has an expanding fleet.

It would fund the transaction through a mix of cash and debt. Tighter access to credit markets following U.S. subprime mortgage defaults was not expected to hurt expansion plans.

Wiluan, ranked 31st on Forbes 2006 list of richest Indonesians, also owns Singapore's Aqua Terra (AQUA.SI: Quote, Profile, Research, Stock Buzz) and SSH Corp (SSHL.SI: Quote, Profile, Research, Stock Buzz), Jakarta-listed Citra Tubindo (CTBN.JK: Quote, Profile, Research, Stock Buzz), and last year bought and delisted Norway's Atlantic Oilfield Services.

HIGH OIL, STRONG DAY RATES

KS Energy, with a market cap of about $383 million, competes with local rival Ezra Holdings (EZRA.SI: Quote, Profile, Research, Stock Buzz) in an industry dominated globally by U.S. companies like Transocean Inc (RIG.N: Quote, Profile, Research, Stock Buzz) and Diamond Offshore (DO.N: Quote, Profile, Research, Stock Buzz), and Norwegian firm SeaDrill (SDRL.OL: Quote, Profile, Research, Stock Buzz).

Shares in KS Energy were down 1.9 percent by 0640 GMT on Tuesday, against a 1.3 percent fall in the benchmark Singapore index .STI. Shares have picked up this quarter but remain 37 percent down this year, after a 29 percent jump in 2007.

"Oil prices have gone up to unprecedented levels and may come off a bit. But I think that some of the most expensive projects in the industry will not be affected even if oil slips back to $80 and we don't expect oil to fall that much," said O'Leary.

"It wouldn't affect our cash flow but would affect our share price," he said, adding the firm aimed for more stable long-term contracts from the growing might of state-owned oil companies.  Continued...