ks energy limited annual report 2013

8/12/2019 KS Energy Limited Annual Report 2013

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AN INTEGRATED GROUP FOR

OIL & GAS SERVICESANNUAL REPORT 2013


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CONTENTS1 Corporate Prole

2 Chairmans Message to Shareholders

5 Operations Review

7 Financial Review

10 Financial Highlights

11 Corporate Data

12 Board of Directors

15 Key Management

16 Corporate Social Responsibilityand Employee Volunteerism

18 KS Energy Group Structure and Global Network

19 KS Distribution Ofces

20 KS Drilling Ofces andProperties owned by the Group

21 Corporate Governance Statement

40 Financial Contents


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A GLOBALLY A

AND INTEGRATE

SERVICE

CO

KS Energy Limited (the Company), its scompanies (the Group) are together an in

provider to the global oil and gas, marine an

Headquartered in Singapore, the shares of tthe Main Board of SGX-ST, part o

The core activities of the Group are capital equipmdrilling and rig management services, and specialised e

The Groups principal operating segment is held underKS Drilling Pte Ltd (KS Drilling) KS Drilling is


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DEAR SHAREHOL

In the financial year ended 31

KS Energy Limited and its subsa net profit after tax of $0.5M

$2.8M in the previous corresp

Revenues in FY2013 totalled

revenues from the Drilling seg

In addition, revenues from ou

which is now treated as a j

higher by 12.3% compared toprevious year.

As an international oil and

fortunate to be located in So

growth has remained strong

product (GDP) grew 5.8% i

6.2% in 2012. Our drilling s

consolidated revenues from Innatural energy resources and

help it to remain as one of the

the world and the largest do

Asia.

In Indonesia, we jointly manag

offshore rigs with our joint

Drilling Services Indonesia. In Nour offshore drilling charter

Oilfield was extended for anot

In June 2013 we announced

jack-up drilling rig capable of d

KS ENERGY LIMITEDANNU AL REPORT 2013

2

CHAIRMANS MESSAGETO SHAREHOLDERS


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$462.4 million of that revenue. In 2013, the revenue

generated by our distribution business increased by 12.3% to

$519.3 million. However, due to changes in financial reporting

standards, our 55.35% equity interest in KS Distribution

Pte Ltd, is no longer consolidated into our Group financial

statements for 2013.

KS Distribution reported a 12% revenue growth in FY2013

due to strong project deliveries, a higher contribution from

maintenance, repair and operations (MRO) sales and a higher

contribution from overseas units in particular from China

and Indonesia. To help the business remain cost efficient,

KS Distribution will invest in new warehousing facilities in

Batam, Indonesia as warehouse rental charges in Singapore

have increased and are expected to continue to increase

going forward.

The Group has improved its financia l posi tion with cash

and cash equivalents amounting to S$43.2 million as at

31 December 2013. The Groups net gearing (defined as

net borrowings to equity) has decreased to 0.52 as at 31

December 2013 when compared to 0.76 as at 31 December

2012.

GOING FORWARD

In February 2014 our Drilling segment, KS Drilling, was

awarded a US$58 million contract from Vietsovpetro.

I was also pleased to announce on 28 February 2014,

the Court of Appeal found that KS Energy Limited did not

breach its joint venture agreement with BR Energy (M) Sdn

Bhd (BRE) and annulled the

claimed by BRE to be asse

findings, the Court of Appeal i

allowing the appeal by KS Ene

the High Court and Court of A

by BRE.

The current outlook remains p

and we plan to deploy mor

Our Distribution business wil

contributor to our bottom-line

As a Group, we wil l contin

investment opportunities to m

the oil and gas industry.

In closing, I would like to take t

shareholders, customers, ban

associates for their trust in us.

in the new financial year as we

ahead of us.

Yours Sincerely ,

Kris Taenar Wiluan

Executive Chairman and Chie

27 March 2014

CH


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Our track record and

experience in both the

Drilling and Distribution

businesses over the years

have given us strong

credentials to secure more

projects in the regionsgrowing oil and gas industry.


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The main activ ities of the Group are the provision of dril ling

and rig management services, specialised engineering

and fabrication services and the distribution of parts and

components. KS Energy Limited is an investment holdingcompany. The revenue of the Group is principally generated

by KS Drilling which provides drilling and rig management

services and accounts for 89% of the Groups consolidated

revenue in 2013. The financial result of our distribution

business is no longer consol idated within our Group

financial statements but instead treated as a joint venture

under revised financial reporting standards. The notes to

the financial statement include detailed disclosure on the

financial results of our joint ventures.

KS DRILLING PTE LTD

2013 has been a year of continued growth for KS Drilling Pte

Ltd (KS Drilling), marked by several key developments for

the company.

We have further enhanced the KS Drilling leadership team

in 2013 through the promotion and recruitment of several

key management personnel. KS Drilling boasts a seasoned

management team with extensive international experience

within the drilling industry, allowing KS Drilling to achieve our

vision of becoming the global drilling contractor of choice by

delivering world class drilling solutions.

KS Drilling has continued to seek out new opportunities in

various markets. In Indonesia, KS Drilling has entered intoan agreement for a proposed joint venture with Pertamina,

the national oil and gas company. Currently, KS Drilling

has two joint operations agreement under which KS Drilling

and Pertamina will jointly manage and operate both land

and offshore drilling rigs. The joint venture proposal thus

represents further developme

and a strengthening of our ties

Construction on the two ultrathe KS Orient Star 1 and the K

smoothly, and the rigs are on s

Drilling has also continued on o

a purchase agreement for a n

jackup rig, named KS Java St

water depths of up to 300 feet

to 30,000 feet. KS Java Star 2

2014, and these new jackup rig

our fleet next year.

The ex is ti ng rigs have al so

performance for our clients.

the KS Discoverer 4 and the

in the year, while the KS Dis

KS MedStar-1 and KS Java

contract extensions during

Discoverer 8 and KS Discovere

for ExxonMobil in 2013. After tregularly exceeded the targete

our peoples competency and t

design. Both rigs contributed

man hours Hurt Free campaign

Al l these events mark an ex

development as an internatio

enable KS Drilling to expand ou

markets globally.

With an experienced leaders

of drilling assets in place, KS

world-class drilling solutions

2014 and beyond.

OPERATIONSREVIEW


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KS DISTRIBUTION PTE LTD

KS Distribution Pte Ltds (KSD) sales

grew 12%, from $462.4m in FY 2012to $519.3m in FY 2013. The increased

demand from our major customers,

larger penetration into the regional

markets, new products sales and better

project deliveries drove year on year

revenue growth.

From an industry perspective, KSDsresults were driven by demand from

the regional oil and gas sector. The

introduction of new drilling equipment,

like mud pumps, draw works, rotary

tables etc. and consumables, l ike

spa res , l i gh t ings and dr i l l p ipes

contr ibuted to increased demand.

However continued weakness in themarine industry, kept FY2013 revenues

flat against last year.

From a geographical perspective,

i m p r o v e d d e m a n d f r o m b o t h

international and domestic markets

ensured better results. Growth from

KSDs international markets, particularlyChina and Indonesia, outperformed

Singapore due to broadened customer

base and increased product offerings

across most locations.

O ll fi i d b $

Operating expenses increased by about

$13m from $70m to $83m mainly due

to rising cost of wages, rental expenses,

provision for inventory and doubtful

debts and depreciation. The impact of

rising operational expenses resulted in

the profit after tax being reduced from

$15.6m in FY 2012 to $7m in FY 2013.

To ensure KSD cont inues to de liver

posi t ive shareholder s va lue, the

management has undertaken somem e a s u r e s t o a d d r e s s t h e t w i n

challenges of rising rental and wages.

To mitigate the rising storage costs in

Singapore, KSD plans to relocate part

of its warehousing needs into Batam.

This strategy will not only reduce costs

but also further optimize the groups

inventory management. In addition,other cost rationalization measures

have been taken to manage the rising

cost of wages through productivity and

process changes. This has taken place

with the completion of the new ERP

system at the end of FY2013.


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OPERATIONSREVIEW


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YEAR ENDED 31 DECEMBER 2013

OVERVIEWFor the full year ended 31 December 2013 (FY2013), the

Group posted consolidated revenue of $161.8 million (FY2012:$237.8 million), the $76.0 million drop in revenue was mainlydue to non-recurring revenue in FY2012 of $85.4 million arisingon the sale of a drilling rig to a joint venture.

REVENUEDrilling Business:Revenue from the Drilling business fell 30.8% to $144.0 million inFY2013 compared to FY2012. The revenue drop was due to thesale in FY2012 of the KS Java Star rig to a joint venture for $85.4million (US$68.2 million). Ignoring the rig sale, recurring revenuefrom the Drilling business increased $21.2 million from $122.8million in FY2012 to $144.0 million in FY2013, generated by thecommencement of charter contracts for assets recently deployedin Indonesia. Revenue contribution from the Drilling businessmakes up about 89.0% of the Groups consolidated revenue forFY2013.

Engineering Business:Revenue from the Engineering business grew 54.8% to $8.6million in FY2013 compared to FY2012 due to an increase inprojects secured. Revenue contribution from the Engineeringbusiness makes up about 5.3% of the Groups consolidatedrevenue in FY2013.

Others Segment:Revenue generated by the Group but not attributable to either theDrilling segment or the Engineering segment fell 58.9% to $10.4million in FY2013 compared to FY2012 due to the completion ofa charter project at the end of FY2012. Revenue contribution fromthis segment makes up about 6.4% of the Groups consolidatedrevenue in FY2013.

GROSS PROFITThe Groups gross profit after direct depreciation fell $8.0million, or 19.0%, to $34.4 million in FY2013 from $42.4 millionin FY2012. The drop in gross profit after direct depreciation is

Other Operating Expenses feFY2012 to $12.2 million in FY2

This is mainly due to lower alloin FY2013 versus FY2012.

When capital equipment is offallocated to Other Operating hire, depreciation charges are aDepreciation charges allocaExpenses and Direct DeprecFY2013 compared to $33.5 m$4.4 million. The higher overall

is attributable to the capital expequipment incurred in FY2013 wmillion in FY2012).

FINANCE INCOME AND Finance Income increased frommillion in FY2013 mainly due to inin December 2012 to a joint ventu

Finance Costs decreased $2.

FY2012 to $14.2 million in Fmillion lower finance cost on cCompany.

SHARE OF RESULTS OFThe Groups share of resu lts from a $7.9 million gain for FY2FY2013, an increase of $10.6 mdue to the profit earned on the and partially due to the profitdrilling rig which started operati

Included in the share of resCompanys share of results froits subsidiaries (the KS DistribFY2013 and $7.7 million for FYDistribution Group was $519.3

FINANCIALREVIEW


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Drilling Business:As a result of the deployment of additional drilling rigs in FY2013,the profit before tax of the Drilling business increased $18.7million compared to FY2012. The Drilling business segment wasthe main profit contributor to the Group in the current financialyear.

Engineering Business:Although revenues in the Engineering business increased from$5.5 million for FY2012 to $8.6 million for FY2013, the marginearned was significantly lower leading to an overall loss of $1.9million for FY2013.

Others Segment:The segment recorded a loss before tax of $7.4 million forFY2013, compared to a profit before tax of $7.7 million forFY2012 due to the completion of a charter project at the endof FY2012. Costs reported in this segment include the financecosts on the convertible bonds issued by the Company andadministrative expenses incurred in relation to overseeing ofGroups operations.

RETURN ATTRIBUTABLE TO SHAREHOLDERS

Despite the higher profit before tax contribution, the profit aftertax attributable to equity holders amounted to $23,000 forFY2013, compared to a profit of $562,000 for FY2012.

STATEMENT OF FINANCIAL POSITION REVIEWThe Groups total non-current assets increased 13.3% from$499.3 million as at 31 December 2012 to $565.5 million as at31 December 2013. The increase was principally attributable tothe acquisition of property, plant and equipment during the year.

Non-current assets mainly comprise of the plant andequipment of our Drilling business. The carrying value of Rigsand Vessels increased from $318.4 million as at 31 December2012 to $390.2 million as at 31 December 2013.

Investments in joint ventures decreased by $3.7 million to$128.9 million as at 31 December 2013 due to the sale ofa jointly owned vessel during the year Investments in joint

The Groups net gearing (definstood at 0.52 as at 31 Deceas at 31 December 2012. Ho$6.4 million higher than curre2013. Steps will be taken to fasset position of the Group.

Equity attributable to owners omillion from $268.0 million as amillion as at 31 December 2due to favourable movementsreserve and the rights issue exe

Capital Structure of the Group:

Current Borrowings Secure

Current Borrowings Unsecu

Non-current Borrowings

Secured

Non-current Borrowings

Unsecured

Consolidated Total Borrowing

Cash and Cash Equivalents

Consolidated Net Borrowings

Shareholders Equity

Non-controlling Interests

Tota l Equity

Net Gearing (Debt/Equity)

Secured borrowings are generand equipment and serviced uplant and equipment.

Unsecured current borrowingsas at 31 December 2012 to $2013. The balance as at 31 Ddue to an aggregate principal aconvertible bonds due in Marc


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FINANCIALREVIEW


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STATEMENT OF CASH FLOWSREVIEWAs at 31 December 2013, cash and cashequivalents amounted to $43.2 million(31 December 2012: $34.8 million),of which unpledged cash and cashequivalents amounted to $29.5 million(31 December 2012: $21.0 million).

Cash Flow from Operating ActivitiesOperating activities generated a net cashinflow of $41.4 million for FY2013. Thenet cash flow from Operating Activitiesof $41.4 million comprised a cash inflowof $34.9 million arising due to operatingprofits before changes in working capital;a cash inflow of $11.6 million arising dueto changes in working capital; and acash outflow of $5.1 million arising dueto income taxes paid.

Cash Flow from Investing ActivitiesNet cash f lows used in invest ingactivities amounted to $27.3 millionfor FY2013. This is attributable mainlyto purchases of plant and equipmentwhich generated a cash outflow of $97.6million for FY2013, partially offset byrepayments of loans from joint ventureswhich generated a cash inflow of $65.3million for FY2013. The repayment ofloans from joint ventures was mainlyattributed to the sale of the KS Titan-2

lift-boat and the sale of the KS Java Stardrilling rig.

Cash Flow from Financing ActivitiesNet cash f lows used in f inancingactivities amounted to $6.7 million forFY2013.


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20

For the year ($000)

Revenue 161

Gross Profit After Direct Depreciation 34

EBIT 15

Profit before tax 4

Profit/(Loss) after tax

Profit attributable to the owners of the Company

EBITDA 53

Operating Cashflow 41

Capital Expenditure 97

At year end ($000)

Current assets 124

Non-current assets 565Total assets 690

Current liabilities 131

Non-Current liabilities 173

Equity attributable to owners 328

Non-controlling interest 56

Total Liabili ties and equity 690

Cash and cash equivalents 43

Key Ratios

Gross Profit Margin (%) 2

EBITDA Margin (%) 33


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FINANCIALHIGHLIGHTS


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BOARD OF DIRECTORS

KRIS TAENAR WILUAN

Executive Chairman and

Chief Executive Officer

LIM HO SENG

Lead Independent Director

BILLY LEE BENG CHENG

Independent Director

WONG MENG YENG


ERNEST SEOW TENG PENG


LAWRENCE STEPHEN BASAPA


AUDIT & RISK MANAGEMENT COMMITTEE

LIM HO SENG Chairman

WONG MENG YENG

BILLY LEE BENG CHENG

ERNEST SEOW TENG PENG

NOMINATING COMMITTEE

WONG MENG YENG Chairman

KRIS TAENAR WILUAN

LIM HO SENGBILLY LEE BENG CHENG

REMUNERATION COMMITTEE

BILLY LEE BENG CHENG Chairman

LIM HO SENG

WONG MENG YENG

REGISTERED OFFICE

19 Jurong Port Road

Singapore 619093

Tel: + 65 6577 4600Fax: + 65 6577 4618

Website: www.ksenergy.com.sg

Company Registration No: 19830

SHARE REGISTRAR

Tricor Barbinder Share Registratio

(a division of Tricor Singapore Pte

80 Robinson Road #02-00

Singapore 068898

AUDITORS

KPMG LLP

Public Accountants and Chartered

16 Raffles Quay

#22-00 Hong Leong Building

Singapore 048581

Partner-in-charge: LUCAS TRAN

Year of appointment: 2010

PRINCIPAL BANKERS

Australia and New Zealand Bankin

DBS Bank Ltd

Malayan Banking Berhad

Oversea-Chinese Banking Corpor

PT Bank Mandiri (Persero) Tbk

Standard Chartered BankThe Hong Kong and Shanghai Ban

United Overseas Bank Limited

CORPORATEDATA


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KRIS TAENAR WILUANExecutive Chairman andChief Executive Officer

MR WILUAN is the Executive Chairman and Chief E

Limited. He is also the founder of the Citramas G

businesses that he founded in 1980. The Citramas Gro

oilfield equipment manufacturing, shipping and logisticsdevelopment comprising port and ferry terminals, hot

production company as well as other interests in the h

Under the umbrella of the Citramas Group is the Ind

Tubindo Tbk a manufacturer of tubular products for

shares are quoted on the Jakarta and Surabaya Sto

subsidiaries with activities spanning different countrie

The Citramas Group provides employment to more tha

region. In addition to his role as the President of the also the President Director of PT Citra Tubindo Tbk,

Bonang, a Jakarta-based manufacturer and distribut

food products. PT Citra Bonang Group of companies

throughout Indonesia and employs a workforce of mo

A graduate from London University with a BSc Honou

Computer Science, Mr Wiluan was awarded CEO of

in 2007 and in the following year, he was named T

magazine. In 2009, he was awarded Entrepreneur o

Indonesia, representing Indonesia in the EY Global En

MR LIM was appointed as an Independent Directo

Independent Director of the Company on 1 Septem

respectively. He is also the Chairman of the Audit and

and a member of the Remuneration and Nominating C

He is the Chairman of Baker Technology Ltd. In the pr

an Independent Director of Kian Ann Engineering Ltd a

Retail Trust Management Ltd. Mr Lim was the former C

FairPrice Cooperative Ltd.


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BOARD OFDIRECTORS


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BILLY LEE BENG CHENGIndependent Director

WONG MENG YENGIndependent Director

MR LEEwas appointed as Independent Director of th

He is also the Chairman of the Remuneration Committ

and Risk Management and Nominating Committees of

Mr Lee has extensive experience in the oil and gas

worked in the oil refining and petrochemical sectors, o

construction including drilling several oil and gas we

in Asia. He held senior positions in several public-lis

hydrocarbon industry in Singapore, Malaysia and Chi

the listed Shenzhen-Chiwan Petroleum Supply Base, C

Petroleum Supply Base, President of Sembawang Ma

known as Sembawang Maritime Ltd), Managing Direct

Petroleum Ltd.

Mr Lee holds a First Class Honours Degree in Mechan

of Science from Leeds University, UK. He is also a mem

of Management, the Institute of Engineers Singapore

Directors.

MR WONGwas appointed as Independent Director of t

He is also the Chairman of the Nominating Committee a

Risk Management and Remuneration Committees of t

Mr Wong has been an advocate and solicitor in Singa

corporate law. He is currently a director of Allianc

co-founded in 2001. He is also an independent dire

Technology Ltd and Keong Hong Hold ings Ltd.

Mr Wong graduated from the National University of Sing

of Laws (Honours) Degree.

BO


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ERNEST SEOW TENG PENGIndependent Director

MR ERNEST SEOWwas appointed as Independent

Audit and Risk Management Committee of the Compa

Mr Ernest Seow has been in the public accounting40 years, and has functioned as an audit partner of in

firms for 24 years. In 2004, he retired as a partner

During his time in the public accounting profession,

partner for a number of public listed companies in Sing

public listing of several companies on the Singapore

of his professional work, he also provided advice on

restructuring and financial matters.

Mr Ernest Seow was an Independent Director for a nuLtd a public listed company in Singapore (until it was

public listed company in Australia. He was formerly th

Chairman of C K Tang Limited for a few years until soo

SGX. He was also an Independent Director of SSH Cor

2005 until it was delisted pursuant to the integration

KS Energy Limited in 2010.

He is a Non-Executive Director of several private com

Mr Ernest Seow is an associate member of the Ins

Accountants and the Inst itute of Chartered Accounta

member of CPA Australia.

MR LAWRENCE STEPHEN BASAPAwas appointe

a member of the Remuneration Committee of the Com

Mr Basapa worked initially in journalism, covering s

developments for newspapers and international mag

hydrocarbons industry, working mainly for a multinatio

conglomerate, which he served in various capacities in

more than 20 years. He was also an Independent Direc


14

BOARD OFDIRECTORS


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SAM CAREW-JONESGroup Chief Financial Officer

Mr Carew-Jones has been withKS Energy since 2009 and was

our Director of Treasury prior to hisappointment as Group CFO in October2012. He has over fourteen yearsexperience in the finance sector beforejoin ing KS Energy, including nine yearsin the banking industry with a majorfinancial institution in Europe and theUS and four years in practice as anauditor in London. Mr Carew-Jonesqualified as a chartered accountant in

the UK in 1999 and graduated in 1995with a bachelors degree in Physicsfrom Imperial College, London.

RICHARD JAMES WILUANDirector, Corporate Development of

KS Energy Limited

Executive Director of

KS Distribution Pte Ltd

Mr Wiluan was appointed asDirector, Corporate Developmentof KS Energy Limited in July 2012.He is an Executive Director ofKS Distribution Pte Ltd (KSD), theconcurrent Managing Director of itstwo subsidiaries, SSH CorporationLtd and KS Flow Control Pte Ltd(the Group). He plays a key role inthe expansion of our project-relatedbusiness, dealing with major Europeanand Asian pipe-mills and is responsiblefor the Groups business developmentinitiatives. He is also instrumental inthe implementation and review of thebusiness operations within the Groupfor performance improvement andbusiness expansion Prior to joining the

DR ADAM PAUL BRUNETDeputy Chairman of

KS Drilling Pte Ltd

Dr Brunet has worked in the oil

industry since he left college in 1977and started work as a Field Engineerfor Schlumberger S.A. in West Africa.In 1983 Dr Brunet was involved inestablishing PT Citra Tubindo Tbk(Tubindo) and was their TechnicalDirector until 2013. From 2006 to2010, Dr Brunet acted as an ExecutiveDirector of KS Energy focusing onthe capital equipment division and

later Managing Director of Oil, Gasand Energy Services. In January2009, Dr Brunet was appointed asthe Executive Director of KS Energyssubsidiary, Atlantic Oilfield ServicesLtd and became its CEO on 1 May2009. In 2011 Dr Brunet became CEOof KS Drilling when it was formed ina merger of Atlantic Oilfield Servicesand the Capital Equipment Divisionof KS Energy, and was appointedas Deputy Chairman of KS Drilling inSep 2013. Dr Brunet, a postgraduatefrom Oxford University, is also anestablished academic who specialisesin operations management.

JUMEIDI DIRWAN ALEXANDERChief Executive Officer of

KS Drilling Pte. Ltd.

Mr Alexander was appointed as theCEO of KS Drilling Pte. Ltd (KSDR) on1 September 2013. He is responsiblefor leading the development andexecution of KSDRs long and shortterm plans in accordance with itsstrategy The role is also responsible for

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KEYMANAGEMENT


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KS Energy (KSE) Group encourages

its employees to be responsible citizens

who are environmentally conscious

and who make every effort to

conserve energy and reduce wastage.

Employee volunteerism is also strongly

encouraged and the Company strives

to play its part in corporate giving

and philanthropy. This is part of our

Corporate Social Responsibility (CSR)

initiatives.

Our employee volunteerism programme,

which started in 2011 with the card-making sessions with the Muscular

Dystrophy Association of Singapore

(MDAS), continued to draw active

participation from our employees in

2013. This is the third consecutive

year of the programme. Our employee

volunteers attended these quarterly

sessions and assisted our friends from

the MDAS in the card making which

provided all participants with much

enjoyment. These handmade cards are

then given out to all employees on their

birthdays together with a gift voucher

through their respective supervisors or

Head of Departments.

Community Engagement

The Group considers it our responsibili ty

and privilege to make a difference to

the well-being of the communities we

operate in. As a Group whose business

spans several regions, we leverage

our network and resources to engage

the community through economic,

environm

These a

as a cr

partner

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16

CORPORATE SOCIAL RESPONSIBAND EMPLOYEE VOLUNTEERISM


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Incredibowls and KS Energy Strikers. The

meaningful event was a successful night of

fun and camaraderie.

KSE also participated in the annual MDASfundraising event, Go The Dystance

Carnival. The event was attended by many

established companies in the industry and

KSE was proud to be part of the event. In

December 2013, KSE and MDAS organized

the Gifts that Give Back MDAS Christmas

Roadshow, featuring products from Art

with a Heart, a social enterprise project

that creates job opportunities for peoplewith severe physical disabilities. This event

enabled KSE to assist in the empowerment

of the less fortunate in the society.

The Group also volunteered to deliver food

hampers to the less fortunate with The

Boys Brigade Share-A-Gift Project. This is

the second year that we have participated

in this project; employees used their own

transportation to deliver food hampersof daily necessities personally to the less

fortunate, and brought them much cheer

during the Christmas festive season through

the collection of gifts.

People Development through Community

Engagement

We believe there is a strong correlation

between the empowerment of our employees

and the growth of our business. Throughgroup volunteering, we allow room for

employees to build confidence and develop

skills. Throughout the year, groups of KSE

employees teamed up for various challenges

outside their usual routines. A team of staff

continued our annual participation in the

CORPORATE SOC

AND EMPLO


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Kurdistan

KS ENERGY

ITOCHU Corporation

Actis LLP

45%

20%

80%

100%

55%100%

100%

100%

100%

100%

KS Drilling Pte Ltd

KS Fabrication andEngineering Pte Ltd

KS DistributionPte Ltd

82% GloEng

100% Rigope

Operating Segment

Joint Venture

Key partners

AquPte

AquSer

KS

Ori

SS

80%OceEng


18

KS ENERGYGROUPSTRUCTURE


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SINGAPORE

KS DISTRIBUTION PTE. LTD.19 Jurong Port RoadSingapore 619093

Tel: +65 6415 0808

Fax: +65 6415 0807www.ksdistribution.com.sg

SSH CORPORATION LTD.19 Jurong Port RoadSingapore 619093

Tel: +65 6265 6088Fax: +65 6661 5511

AQUA-TERRA LOGISTICS PTE. LTD.19 Jurong Port RoadSingapore 619093

Tel: +65 6536 1003Fax: +65 6532 4033

AQUA-TERRA O ILFIELD EQUIPMENT & SERVICES PTE. LTD.19 Jurong Port RoadSingapore 619093

Tel: +65 6319 4666Fax: +65 6268 4455

KS FLOW CONTROL PTE LTD19 Jurong Port Road

Singapore 619093Tel: +65 6415 0808Fax: +65 6415 0809

OCEANIC OFFSHORE ENGINEERING PTE. LTD./KS MARINEHUB PTE. LTD.14 Jalan TukangSingapore 619253

Tel: +65 6774 7780/6262 6662Fax: +65 6777 8364/6898 1676

ORIENT MARINE PTE LTD15 Joo Yee RoadSingapore 619200

Tel: +65 6266 6168Fax: +65 6266 6368

CHINA

KS DISTRIBUTION (SHANGHAI) LTD/KS EQUIPMENT (SHANGHAI) LTD/RAYMONDS SUPPLY (SHANGHAI) CO., LTD

AQUA-TERRA SUPPLY (TIANJIN) OILFIELDEQUIPMENT TRADING CO., LTD

Room B306 Tian Run Ke Ji YuanNo. 110, Sixth Street, TEDA

Tianj in 300457

P.R. ChinaTel: +86 22 2576 2793Fax: +86 22 2576 7241

HONG KONG

RAYMONDS SUPPLY CO., LTD./SURE LINK TRANSPORTATION CO., LTDBlock A, Unit 11, G/FShatin Industrial Centre5-7 Yuen Chun CircuitShatin, N.T.Hong Kong

Tel: +852 2637 2828Fax: +852 2649 3118

INDONESIA

PT KSD INDONESIA(Jakarta Head Office)Kompleks Rukan Puri MutiaraBlok A28-29, Jl. Griya UtamaSunter, Jakarta Utara 14350Indonesia

Tel: +62 21 6531 4266/6531 0321Fax: +62 21 6531 4267/6531 0320

(Batam Branch)Jalan Mas Surya Negara Kav. A9Kabil Industrial EstateBatam 29467Indonesia

Tel: +62 778 711131/711645/711643Fax: +62 778 711222

PT AT OCEANIC OFFSHORE(Jakarta Head Office)Kompleks Rukan Puri MutiaraBlok A28-29, Jl. Griya Utama

Sunter, Jakarta Utara 14350Indonesia

Tel: +62 21 6531 4268Fax: +62 21 6531 4269

(Batam Branch)Jalan Hang Kesturi IIILot D1-4 Blok I-19BK bil I d i l E

MALAYS

KS DISTRIBSuite 3A-Solaris M50480 Ku

MalaysiaTel: +60 Fax: +60

(Kuantan B-230 Ja25300 KuPahang DMalaysia

Tel: +60 Fax: +60

THAILANKS DISTRIB(FormerlyLimited)20/22-23ChatuchoKwaeng ABangkok

ThailandTel: +66 Fax: +66

(Rayong 267/78 SMaptaput

ThailandTel: +66 Fax: +66

VIETNAM

KS DISTRIBUnit 2, 10CentrePo106 NguyWard-8 PHo Chi M

VietnamTel: +84 Fax: +84

AUSTRA

KS DISTRIBCommerc

KS DISTRIBUTIONOFFICES


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SINGAPORE

KS DRILLING PTE LTD

19 Jurong Port Road

Singapore 619093

Tel: +65 6577 4600

Fax: +65 6577 4619

www.ksdrilling.com

UNITED ARAB EMIRATES

ATLANTIC MARINE SERVICES (CYPRUS)

GROUP LIMITED

DUBAI BRANCH

Al Waha Community Building

Block F, Office No. 1003Nadd Al Hammar Road

PO Box 28717 Dubai

United Arab Emirates

Tel: +971 4 605 9500

Fax: +971 4 605 9600

EGYPT

ATLANTIC MARINE SERVICE EGYPT S.A.E

22 Beirut Street

8th Floor Apt 13 Heliopolis

11341 Cairo

Egypt

Tel: +20 22 256 5004/5/6

Fax: +20 22 256 5014

INDONESIA

PT. ATLANTIC OILFIELD SERVICES/

PT. PETRO PAPUA ENERGI

Wisma Metropolitan I

10th& 11thFloor

Jl. Jend. Sudirman Kav. 29-31

Jakarta 12920

Indonesia

Tel: +62 21 525 6242

Fax: +62 21 525 4327

KURDISTAN

ATLANTIC ONSHO RE SERVICES B.V.

KURDISTAN BRANCHERBIL OFFICE

Office House No. 240/9/29

Ashte St reet, Ankawa Erbi l

Kurdistan

Iraq

Tel: +964 662 640 771

Mobile: +964 750 114 7231

+964 770 836 5340

PAKIST

ATLANTIC

PAKISTA

Office D9

Clifton K

Pakistan

Tel: +92

Fax: +92

Details of properties owned by the group are as follows:

Description/Location Gross Floor Area Tenure of Land / Last

PROPERTIES OWNED BY THE GR


20

KS DRILLINGOFFICES


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CORPORATE GOVERNANCESTATEMENT

KS Energy Limited (the Company) is committed to maintaining high standards of corporate

Groups business and believes that strengthening corporate transparency through sound corpor

and internal controls would enable the Company to safeguard its assets and interests while it s

and attain sustainable growth and value for its shareholders. This report describes the Compractices with specific reference to the 2012 Code of Corporate Governance (the 2012 Co

than the deviations which are explained in this statement, the Company has complied with the

The Board and Management have taken steps to al ign the Groups governance f ramework wit

2012 Code, where they are applicable, relevant and practicable to the Group. The 2012 Cod

Annual Report for the financial year ended 31 December 2013 (FY2013).

BOARD OF DIRECTORS

Principle 1: Boards Conduct of its Affairs

The Board has the duty to protect and enhance the long-term value of the Company and ach

Group. It sets the overall strategic direction of the Company and oversees the proper conduc

and affairs of the Group. Board members are expected to act in good faith and exercise inde

interests of the Group.

Apart from its fiduciary duties under the law, the principal functions of the Board include:

a) To set values and standards (including ethical standards) of the Group and ensure oother stakeholders are understood and met;

b) To identify key stakeholders groups and recognise that their perceptions affect the Gr

c) To provide entrepreneurial leadership, approve corporate policies and strategies to ens

and human resources are in place for the Group to achieve its objectives;

d) To establish goals for Management and monitor and review Managements performan

e) To oversee the processes for evaluating the adequacy of internal controls and risk ma

operational, information technology and compliance risk areas, identified by the Audit &

(ARMC), that need to be strengthened for assessment and the ARMCs recommendat

address and monitor the areas of concern;


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22

To faci litate effective management and assist the Board in discharging its duties, certain func

delegated to various Board Committees, namely the ARMC, the Nominating Committee (NC)

(RC). Each Board Committee has specific functions enumerated in its respective Terms of Ref

recommendations to the Board on matters under its purview. The Terms of Reference of the B

revised in FY2013 to align with the 2012 Code. The ultimate responsibility and final decision on

the Board. In addition, the Company has an established internal policy on the types of transa

authorization limits that require Board approval.

The Board conducts scheduled meetings on a quarterly basis. These meetings are schedule

individual Directors planning in view of their ongoing commitments. Ad-hoc meetings are conve

any significant issues that may arise in-between the scheduled meetings. Where physical me

communication with members of the Board and Board Committees can be achieved through el

of written resolutions for approval by the Board or relevant Board Committees. The CompanArticles) provide for Board meetings to be conducted by way of telephonic, video confere

means of communication.

Directors are welcome to request for further explanation, briefings or discussions on any asp

or business from Management. When required, Board members meet to exchange views outs

Board meetings.

The attendance of the Directors at meetings of the Board and Board Committees as well the

during the year ended 31 December 2013 is set out in the table below:

Name of Director Board

Audit & Risk

Management

Committee

Nom

Co

Mr Kris Taenar Wiluan 4 N/A

Mr Lim Ho Seng* 4 6

Mr Wong Yeng Meng 4 6

Mr Billy Lee Beng Cheng 4 6

Mr Ernest Seow Teng Peng** 2 3

Mr Lawrence Stephen Basapa*** 2 N/A

Total No. of meeting(s) held in 2013 4 6


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Principle 2: Board Composition and Guidance

The Board of Directors compr ises the following:

Name Date of appointment

Executive Director

Mr Kris Taenar Wiluan 2 May 2006

Independent Directors

Mr Lim Ho Seng 1 September 2005

Mr Billy Lee Beng Cheng 15 April 2002

Mr Wong Meng Yeng 15 April 2002

Mr Ernest Seow Teng Peng 1 June 2013

Mr Lawrence Stephen Basapa 1 June 2013

Appointed as Lead Independent Director on 1 May 2008.

There is an independent element on the Board. Five of the six Directors of the Company aIndependent Directors contribute to the Board process by monitoring and reviewing Manag

goals and objectives. Their views and opinions provide alternate perspectives to the Group

Managements proposals or decisions, they bring independent judgement to bear on busine

involving conflicts of interest and other complexities.

The size of the Board is reviewed on an ongoing basis and its current size is considered ap

effective decision making. As a team, the Board collectively provides core competencies in th

knowledge, legal, accounting, finance, business and management experience.

The duties and responsibili ties of the Directors are clear ly set out in their respective engagem

Each Director is responsible for his own training needs and may access a training budget prov

abreast of developments in law, regulations, accounting and industry practices and changes


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24

Principle 3: Chairman and Chief Executive Officer (CEO)

The Board is of the opin ion that there is a strong independent element on the Board to enab

and objective judgment on the corporate affairs of the Group. The Independent Directors of the

of the Board. There are adequate safeguards and checks in place to ensure that the process of

is based on collective decision of the Directors, without any concentration of power or influence

Board, with the concurrence of the NC, believes that vesting the roles of both Chairman and C

knowledgeable in the business of the Group provides strong and consistent leadership, thus allow

and execution of long-term business strategies. As such, there is no need for the role of the

separated. The NC will review the need to separate the roles from time to time and make its r

The Executive Chairman and CEO, Mr Kr is Taenar Wiluan, p lays an instrumental role in develop

and provides the Group with strong leadership and vision. He is responsible for the operationGroup. He also has the responsibility of setting the meeting agenda of Board meetings, lead

promoting high standards of corporate governance and maintaining effective communication with

He ensures that Board meetings are held at least quarterly and ensures that Board member

adequate and timely information. The Company endeavors to send Board papers to Directo

advance for Directors to be adequately apprised of matters to be discussed at meetings. Memb

to attend Board meetings as and when necessary to provide additional insight on matters to b

The Executive Chairman and CEOs performance and appointment to the Board are reviewed remuneration package is reviewed by the RC. Both the NC and RC are chaired by Independe

Lead Independent Director (LID)

Mr Lim Ho Seng was appointed the LID on 1 May 2008. As the LID, Mr Lim is the principal lia

concerns, for which direct contact through normal channels of the executive Chairman and CE

or for which such contact is inappropriate. He can also facilitate periodic meetings with the o

board matters, when necessary and provides his feedback to the executive Chairman after suc

roles as LID are as follows:

a) act as liaison between the Independent Directors and the executive Chairman and C

Directors to provide non-executive perspectives in circumstances where it would be i

Chairman to serve in such capacity and to contribute a balanced viewpoint to the Boa


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BOARD COMMITTEES

Nominating Committee

Principle 4: Board Membership

The NC compr ises the following members:

Mr Wong Meng Yeng Chairman (Independent Director)

Mr Billy Lee Beng Cheng (Independent Director)

Mr Lim Ho Seng (Lead Independent Director)

Mr Kris Taenar Wiluan (Executive Director)

The funct ions of the NC include the following:

a) review and recommend to the Board the structure, size and composition of the Board

b) identify, review and recommend candidates for appointment to the Board and Board Co

Management positions in the Company;

c) evaluate the effectiveness of the Board as a whole and assess the contribut ion by eac

of the Board;

d) determine annually, on a discretionary basis, whether or not a Director is independent

and criteria set forth in the 2012 Code and any other salient factors;

e) in respect of a Director who has multiple board representat ions on various companies,

Director is able to and has been adequately carrying out his duties as a Director, hav

commitments; and

f) make recommendations to the Board on the re-appointment or re-election of the

Companys Annual General Meetings (AGMs), having regard to the Directors contrib

The NC had adopted the 2012 Codes definition and criteria for independence. Each Indep

submit a Confirmation of Independence form annually, for the NCs review.


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26

Having considered the above and weighing the need for progressive refreshing of the Board

both Mr Lee and Mr Wongs tenure had not affected their independence or ability to bring abou

judgement to bear in the discharge of their duties as members of the Board. According ly, the

Board that they continue to be considered independent notwithstanding they have served on

years from the date of their first appointment. Both Mr Lee and Mr Wong, being NC members,

and voting on the matter.

None of the aforesaid Independent Directors are related to and do not have any relationship

corporations, its 10% shareholders, or its officers or are in any circumstances that could interfe

to interfere, with the exercise of their independent business judgement with a view to the best

Board had concurred with the NCs assessment.

In selecting prospective new Directors to the Board, the NC will take into consideration theidentify the required skills, experience and competencies necessary to enable the Board to fulfil

candidates are sourced through an extensive network of contacts or where required, external

are engaged. Candidates are rigorously reviewed by the NC based on key attributesinter al ia

and competencies and ability to carry out his duties as a Director (in particular where the Direc

and has principal commitments). The NC will thereafter submit its recommendation to the Boa

evaluated by the Board to ensure that the recommendations are objective and well supported

A Director with mult iple board representations is expected to ensure that suff icient time and

of the Company. The NC is of the view that the number of directorships a Director can hold ashould not be prescriptive as the time commitment for each board membership will vary. The

listed company board representations which each Director holds on an annual basis or from time

The NC, having considered the conf irmations received from the Independent Directors, is of

representations and principal commitments of the Independent Directors do not hinder them fr

the Company. The NC is satisfied that sufficient time and attention have been accorded by th

the affairs of the Company. The Board concurred with the NCs views.

In accordance with the provisions of the Companys Articles, one-third of the Directors will ret

to re-election at every AGM. New Directors appointed during the year will retire and submit th

following AGM.

Mr Kris Taenar Wiluan is retiring by rotation pursuant to Article 91 of the Companys Article

Peng and Lawrence Stephen Basapa who were appointed during the year will retire pursuant

Articles Pursuant to Section 153(6) of the Companies Act Cap 50 a person of or over the ag


29/148


Principle 5: Board Performance

The NC has in place an annual Board performance evaluation to assess the effectiveness discussion to enable the Board to discharge its duties more effectively. The annual Board per

out by means of a questionnaire relating to the size and composition of the Board, informaprocedures and accountability, matters concerning CEO/senior Management and standards obeing completed by each Director.

In line with the recommendations of 2012 Code, annual performance evaluation exercises weCommittees. The performance evaluation process for the ARMC, NC and RC similarly involved tcompleted by Board Committee members relating to the following matters:-

(i) ARMC:

Membership and appointments, meetings, training and resources, financial reporting,risk management systems, IA process, external audit process, whistle-blowing, relcommunication with shareholders.

(ii) NC:

Membership and appointments, meetings, training and resources, reporting, process of new Directors, nomination of Directors for re-election, independence of Directors, Bsuccession planning, Director who has multiple board representation, standards of conshareholders.

(iii) RC:

Membership and appointments, meetings, training and resources, remuneration framconduct and communication with shareholders.

No external facilitator had been used to-date.

The results of the completed quest ionnaires of the Board and Board Committees are collatedperformance evaluation are tabled for discussion by the NC and the Board, with comparatives fr

where applicable. The findings of the Board Committees performance evaluation are discuCommittees and reported to the Board directly.

The aim of the evaluation of the Board and Board Committees was to review the effectiveneseach of the Board Committee and provide an opportunity to obtain constructive feedback fthe Board/respective Board Committees procedures and processes had allowed them to disMembers of the Board and Board Committees are encouraged to propose changes to enhan


30/148



28

The NC had noted that the overall rating for FY2013 had improved compared to FY2012 and

results of the Board performance evaluation for FY2013, which indicated areas of strengths and

further. No significant problems were identified. The NC had discussed the results with Board

on those areas that could be improved further.

On the evaluation of the respective Board Committees, FY2013 being the first year of im

comparatives from the previous years results. Feedback from these evaluations were reviewe

Board Committees before submitting to the Board for discussion and determining areas for im

of each Board Committees effectiveness and overall contribution to the Board.

Principle 6: Access to Information

Management provides the Directors with monthly management reports, information, backgpertaining to areas such as budget, forecasts, funding positions and quarterly financial statem

all relevant information on material events and transactions are circulated to Directors as and

The Executive Chairman and CEO sits on the board of the Groups key businesses, KS Distrib

Pte. Ltd. He is an important link between the Board and the boards of the key businesses. He k

of key developments affecting the Group as well as any material transactions. All Board membe

Management and the Company Secretary. The appointment and removal of the Company Sec

the Board.

The Company Secretarys responsibili ties include ensuring that:

a) Board procedures are followed;

b) applicable requirements of the Companies Act, Cap. 50 and Listing Manual of the S

Trading Limited (SGX-ST List ing Manual) are complied with ; and

c) there is adequate and timely information flow between senior Management and No

meetings and on an ongoing basis.

All Board members also have separate and independent access to senior Management. All Board

whether as a group or individually, in the furtherance of their duties, can take independent pro

at the Companys expense. The appointment of such independent professional advisor is sub


31/148


The funct ions of the RC include the following:

a) recommending to the Board base salary level, benefits and incentive programs, and

which can best be used to focus Management staff on achieving corporate objectives

b) approving the structure of compensation programmes (including but not limited to Direc

bonuses, options and benefits-in-kind) for Directors and key management personnel to

competitive and sufficient to attract, retain and motivate key management personnel of

Company successfully;

c) reviewing, on an annual basis, the compensation packages of the Chairman, key ma

employees related to the Directors of the Company;

d) reviewing the remuneration of the Non-Executive Directors, taking into account factors

and responsibilities; and

e) functioning as the committee referred to in the KS Energy Employee Share Option Schem

Share Plan and having all the powers set out in both schemes.

The Companys remuneration package comprises a base/fixed salary component and a vari

linked to the Company/Group and individual performances.

The RC will review the Companys obligations aris ing in the event of a terminat ion of the

management personnels contracts of service and the need to adopt provisions allowing the

components of remuneration from Executive Directors and key management personnel in

misstatement of financial results or of misconduct resulting in financial loss to the Company.

Disclosure on Directors Remuneration

In setting the remuneration packages of Executive Directors, the RC takes into account the re

Group and of the individual. In its deliberation, the RC takes into consideration, remuneratio

conditions within the industry and benchmarked against comparable companies.

The structure of fees paid to the Independent Directors is as follows:

Board ARMC NC


32/148



30

The RC is of the view that the current remunerat ion of the Independent Directors is appropr ia

such as effort and time expended and responsibilities. Other than Directors fees, the Independe

other form of remuneration from the Company. The RC had recommended the payment of D

FY2013. This recommendation had been endorsed by the Board and will be tabled at the Com

approval.

The RC had also carr ied out an annual review of the Chairman and key management personn

ensure that their remuneration are commensurate with their performance, giving due regard to

business needs of the Group. For FY2013, the RC is satisfied with the Chairman and key manage

packages and has recommended the same for Board approval. The Board concurred with th

No remuneration consultants were engaged in FY2013. The RC members or Directors did n

concerning their own remuneration.

The following table shows a breakdown (in percentage terms) of Directors remunerat ion for th

bands:

Breakdown of the Directors

Salary & CPF

(%)

Fee

(%)

Bonus & CPF

(%)

Above S$750,000 to S$1 mill ionMr Kris Taenar Wiluan 89 9

Above S$500,000 to S$750,000

Above S$250,000 to S$500,000

S$250,000 & Below

Mr Koh Soo Keong * 100

Mr Abdulla Mohammed Saleh*

(Alternate: Nelson McCallum Gibb) 100

Mr Lim Ho Seng 100


33/148


The remuneration of the top seven key management personnel , who are not Directors of the C

the following remuneration bands:

Remuneration Bands

No. of

Executives

Salary & CPF

(%)

Fee

(%)

Bonus & CPF

(%)

Above S$500,000 to S$750,000 2 55 15 9

Above S$250,000 to S$500,000 5 78 11

S$250,000 & Below

The remunerat ion and names of key management personnel are not disclosed given the comp

disadvantages that this might bring. In aggregate, the total remuneration paid to the key man

is S$3,344,874. The total remuneration includes payment to Mr Eng Chiaw Koon who resigne

There are two key management personnel with in the remuneration band of S$250,000 to S$5

Chairman and CEO and one of whom is an immediate family member. Richard James Wiluan, s

and CEOs total remuneration falls between the range as detailed below:

Remuneration Bands

Salary & CPF

(%)

Fee

(%)

Bonus & CPF

(%)

$400,000 to $450,000 80 6

No options or performance shares were granted under the KS Energy Employee Share Op

Performance Share Plan. Details of both schemes are disclosed on pages 42 to 43 of the Dire

Principle 10: Accountability

The Board is responsible for providing a balanced and understandable assessment of the G

position and prospects. On a monthly basis, Management provides Board members with manaReports on the Groups financial position and competitive conditions of the industry in which the

on a quarterly basis.

Relevant information on material events and transactions are reviewed by the Board, as and

updated on amendments/requirements of the Singapore Exchange Securities Trading Limited (

d l i f i i

KS ENERGY LIMITED32


34/148



32

Audit & Risk Management Committee

Principle 11: Risk Management and Internal Controls

The ARMC, through the assistance of internal and external auditors, reviews and reports to

the adequacy and effectiveness of the Groups internal controls, including financial, operationa

technology controls, established by Management. In addition, the Board reviews and determ

tolerance and risk polices, and oversee the design, implementation and monitoring of the risk m

systems. In assessing the effectiveness of internal controls, the ARMC ensures primarily that ke

assets are properly safeguarded, fraud or errors in the accounting records are prevented or

are accurate and complete, and reliable financial information is prepared in compliance with ap

and regulations.

Since FY2012, the Group has an Enterprise Risk Management (ERM) Framework, which

process in the Group. Through this Framework, risk capabilities and competencies are cont

Framework also enables the identification, prioritization, assessment, management and monitor

key controls to the Groups business. The ownership of these risks lies with the respective bus

heads with stewardship residing with the Board. The key risks of the Group are deliberated by

the ARMC quarterly. The ARMC reviews the adequacy and effectiveness of the ERM Framewo

risk management and vis--vis the external and internal environment which the Group operate

Complementing the ERM framework is a Group-wide system of internal controls, which incluand procedures, proper segregation of duties, approval procedures and authorities, as well

into the business processes. The Group has in place a risk management process that requ

the effectiveness of their internal controls. In addition, to ensure that internal controls and ris

adequate and effective, the ARMC is assisted by various independent professional service prov

assurance over the risk of material misstatements in the Groups financial statements. Intern

that controls are adequate and effective over the key risks of the Group.

The Board has received assurance from the CEO and CFO that, as at 31 December 2013:

(a) the financial records have been properly maintained and the financial statements give a tr

operations and finances: and

(b) the Groups risk management and internal control systems were adequate and effe

operational compliance and information technology risks The Group CEO and the Gro


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Opinion on Adequacy of the Groups Internal Controls

Based on the review of the key risks identified through the ERM process, and the internal contr

by the Group, work performed by the internal and external auditors, reviews performed by Ma

the aforesaid assurances from the CEO and CFO, the Board, with the concurrence of the ARM

to Rule 1207(10), that the Groups internal controls, addressing financial, operational, complian

risks, were adequate as at 31 December 2013.

The Board acknowledges that i t is responsible for the overal l internal contro l framework, but re

internal control system will preclude all errors and irregularities, as a system is designed to ma

risk of failure to achieve business objectives, and can provide only reasonable and not absol

misstatement or loss.

Principle 12: Audit Committee

On 15 May 2013, the Companys Audit Committee was re-named Audit and Risk Manageme

recommendation of the 2012 Code.

The ARMC comprises the following members:

Mr Lim Ho Seng Chairman (Lead Independent Director)

Mr Billy Lee Beng Cheng (Independent Director)Mr Wong Meng Yeng (Independent Director)

Mr Ernest Seow Teng Peng (Independent Director)

The Board is of the view that the ARMC members are appropriately qual ified, having the n

accounting and/or related financial management expertise or experience as the Board int

discharge their responsibilities.

The ARMC meets at least four times a year and as and when requ ired to carry out its duties.

The ARMC performs the following funct ions:

a) reviews with the external auditors, their audit plan, evaluation of the accounting controls

which the external auditors wish to discuss;

KS ENERGY LIMITED34


36/148

CORPORATE GOVERNANCE

STATEMENT

ANNU AL REPORT 201334

f) conducts annual reviews of the cost effectiveness of the audit, independence and obje

including the volume of non-audit services provided by the external auditors, to satisfy it

of such services will not prejudice the independence and objectivity of the external au

re-nomination;

g) the appointment or re-appointment of the internal and external auditors and matters rela

of the auditors;

h) arrangements by which staff of the Group or members of the public may in confidence,

improprieties in financial reporting or, other matters;

i) potential conflicts of interests, if any;

j) advises the Board on the Companys overall risk tolerance and strategy;

k) oversees and advises the Board on the current risk exposures and future risk strategy

l) in relation to risk assessments:

(i) keeps under review the Companys overall risk assessment processes that inform

(ii) reviews regularly and approve the parameters used in these measures and the

(iii) sets a process for the accurate and timely monitoring of large exposures an

importance;

m) reviews the Companys capability to identify and manage new risk types;

n) before a decision to proceed is taken by the Board, advises the Board on proposed s

in particular on risk aspects and implications for the risk tolerance of the company, an

advice where appropriate and available;

o) reviews reports on any material breaches of risk limits and the adequacy of proposed

p) provides advice to the Remuneration Committee on risk weightings to be applied to perfo

in executive remuneration;


37/148


STATEMENT

The Company has in place a Whistle-blowing Policy to prov ide an accessible channel thro

Group may report and raise in good faith and in confidence, any concerns about possible imp

malpractices within the Group in a responsible and effective. The objective of the Whistle-

independent investigation of such matters and for appropriate follow-up action. This policy has b

can be made verbally or in writing to any member of the ARMC whose contact numbers and

the said policy. In addition, external parties may access the Whistle-blowing Policy which is ava

at http:/www.ksenergy.com.sg. An independent investigation of the matters raised would b

follow-up action would be undertaken. There were no whistle-blowing reports received in FY2

The ARMC has full authority to commission investigations and review find ings into matters w

fraud, irregularity, failure of internal controls or infringement of any law that may likely have a m

operating results. It also has full access to and co-operation from Management and full disc

executive officer to attend its meetings as well as reasonable resources to enable it to discha

The ARMC meets with the Groups internal and external auditors and Management to review ac

reporting matters so as to ensure that an effective system of control is maintained in the Grou

(i) held 6 meetings;

(ii) reviewed the quarterly and full-year financial statements and, considered both the exte

(iii) reviewed the adequacy of internal control procedures and transactions with Interested

(iv) met with both the internal and external auditors, without the presence of Manage

Managements co-operation during the audit and on other matters that may warrant th

internal and external auditors had confirmed that they had access to and received fu

from Management and no restrictions were placed on the scope of their audit;

(v) undertook a review of all non-audit services provided by the external auditors and is

and provision of such services would not affect the independence and objectivity of the

auditors have affirmed their independence in this respect. The following fees amounting t

Audit fees

Non-audit fees*


36


38/148


STATEMENT

ANNU AL REPORT 201336

Principle 13: Internal Audit

The Company engages an independent audit firm, BDO LLP, as its internal auditors to supp

team. Both report directly to the ARMC. The role of the internal auditors is to support the AR

maintains a sound system of internal controls by highlighting weaknesses in the current proces

were conducted in accordance with established policies and procedures and to identify areas fo

can be strengthened. The ARMC reviews the adequacy of the internal auditors to ensure that

and able to perform their function effectively and objectively. For FY2013, the ARMC is sat

experience of BDO LLP, the internal audit engagement partner and his team assigned to the in

adequate to meet their internal audit obligations.

During the year under review, the internal auditors had reviewed key processes to test the ef

within the Group. In addition, the external auditors have, during the course of their audit, test

of certain controls over the Groups financial reporting process. Any lapses in compliance or

corrective measures, are reported to the ARMC. No material issues or lapses in internal cont

auditor in the course of their audit. The ARMC will review the internal and external auditors com

that there are adequate internal controls in the Group and follow up on actions implemented.

Management had provided assurance in respect of the Companys financial statements as at

(i) the financial records have been properly maintained and the financial statements gi

Companys operations and finances;

(ii) nothing had come to Managements attention which might render the financial results of

2013 to be false or misleading in any material aspect;

(iii) Management was aware of their responsibilities for establishing, maintaining and eval

risk management and internal control systems of the Company; and

(iv) there were no known significant deficiencies in the risk management and internal co

preparation and reporting of financial data as at 31 December 2013 and that Manageme

SHAREHOLDERS RIGHTS AND RESPONSIBILITIES

Principle 14: Shareholders Rights

Principle 15: Communication with Shareholders


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STATEMENT

At general meetings of the Company, shareholders are given the opportunity to express their view

the Company and the Group. The Board welcomes questions from shareholders who may ask

either informally or formally before or at the general meetings. The Notice of AGM is despatc

with explanatory notes or a circular on items of special business, at least 14 days before the m

and 21 days before the meeting for special r esolutions. There are separate resolutions on eac

of each Board Committee is present at the shareholders meetings to address questions whic

respective Board Committees. The external auditors and key management personnel of the Co

shareholders queries about the conduct and the preparation and content of the auditors rep

For FY2013, the Board does not recommend payment of dividends as they have set aside the p

be applicable for meeting contingencies of the Company.

The Board may from time to time review the prov isions of the existing Art icles of the Comp

with good corporate governance practices as recommended by the 2012 Code. If the Board

necessary amendments for shareholders approval. Guideline 14.3 of the Code recommendin

corporations which provide nominee or custodial services to appoint more than two proxies

shares through such corporations can attend and participate in general meetings as proxies

the law is changed to allow unequal treatment of shareholders holding the same class of ord

of shareholders (nominees) can be entitled to appoint more than two proxies.

The Company will be work ing towards compliance with Guideline 16.5 to put all resolutions t

meetings and make an announcement of the detailed results showing the number of votes cast and the respective percentages by FY2015.

SECURITIES TRANSACTIONS

The Company has adopted a policy governing dealings in the securit ies of the Company for Dire

and employees are prohibited from dealing in the securities of the Company during the period c

the announcement of the Companys financial statements for the first and third quarter of its

before the announcement of the Companys half year and full year financial statements, as the

the date of the announcement of the relevant results.

Directors and employees of the Company are also prohibited from dealing in the securities of the

of price-sensitive information. The Company issues circulars regularly to notify its Directors,

personnel who have access to or are in possession of unpublished material price-sensitive info

aforementioned prohibition and of the requirement to report their dealings in shares of the Co


38


40/148


STATEMENT

ANNU AL REPORT 2013

INTERESTED PERSON TRANSACTIONS

The Group has established procedures to ensure that al l transactions with in terested persons a

to the ARMC and within threshold levels and had been conducted on an arms length basis and

procedures. When a potential conflict of interest arises, the Director concern does not particip

from exercising any influence over other members of the Board.

The ARMC and Board had reviewed the proposed mandates for IPTs with PT DWI Sumber

Drilling Indonesia to be tabled for shareholders approval at the forthcoming AGM. Details of th

enumerated in the Appendix to the Notice of AGM.

Save as disclosed below, there are no interested persons transactions between the Company

its interested persons during the financial year under review.

Name of Interested Person

Aggregate value of

all IPTs during

the financial year

under review

(excluding transactions

less than $100,000 and

transactions conducted

under shareholdersmandate pursuant to

Rule 920)

PT Dwi Sumber Arca Waja, its subsidiaries and its

associates (DSAW Group)

Provision of goods and services to and from the DSAW

Group

Provision of other Equipment and services by the DSAWGroup

0

0

Dutco Tennant Aqua Terra LLC

Sale of goods S$160,606


41/148


STATEMENT

* With reference to the IPT Mandate approved by shareholders at the EGM held on 7 DecembeNovember 2012, the Group provided financing to PT KS Drilling Indonesia and its subsidiaries accrues interest at the rate of 7% per year. The principal amount outstanding in respect of such Pte Ltd, an 80% subsidiary of the Company, to PT Java Star Rig, to finance the acquisition of the was US$28.2 million as at 31 December 2013.

** KS Drilling Pte Ltd, an 80% subsidiary of the Company, has extended a corporate guarantee in faStar Rig for 100% of the bank loan facility. The principal amount outstanding in respect of the bankrig named KS Java Star was US$31.7 million as at 31 December 2013.

USE OF PROCEEDS

Proceeds Description on use of proceeds

Net proceeds of approximately

$40.9 million from issuance of

102,586,443 ordinary shares in

share capital of the Company

pursuant to a rights issue

To redeem an aggregate principal amount of $75,000,000

3.00% convertible bonds due 2015 (the Convertible Bon

which the Company received notices for the exercise of t

Option. Accordingly, the Company required a total amo

$76,125,000 (being the principal amount together with a

and unpaid interest) for the redemption of such Conv

Bonds on 26 March 2013.

Net proceeds of approximately

$44.6 million from the issue

of an aggregate $45,000,000

in principal amount of 6.00%

convertible bonds due 2016

To redeem an aggregate principal amount of $75,000,000

3.00% convertible bonds due 2015 (the Convertible Bon

which the Company received notices for the exercise of t

Option. Accordingly, the Company required a total amo

$76,125,000 (being the principal amount together with a

and unpaid interest) for the redemption of such Conv

Bonds on 26 March 2013.

To redeem an aggregate principal amount of $15,000,

the Convertible Bonds on 21 March 2013

The util isat ion of proceeds from the rights issue and the issue of convertible bonds are in a

Shareholders dated 11 March 2013 and announcement made on 7 March 2013.


42/148

FINANCIAL

CONTENTS41 Directors Report

46 Statement by Directors

47 Independent Auditors Report

49 Consolidated Statement of Prot or Loss

50 Consolidated Statement of Comprehensive Income

51 Statements of Financial Position

52 Consolidated Statement of Changes in Equity

54 Consolidated Statement of Cash Flows

56 Notes to the Financial Statements

135 Statistics of Shareholders

137 Notice of Annual General Meeting

Proxy Form


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DIRECTORS

REPORT

We are pleased to submit this annual report to the members of the Company, together with th

for the financial year ended 31 December 2013.

DIRECTORS

The directors in office at the date of this report are as follows:

Kris Taenar Wiluan

Lim Ho Seng

Billy Lee Beng Cheng

Wong Meng Yeng

Ernest Seow Teng Peng (Appointed on 1 June 2013)

Lawrence Stephen Basapa (Appointed on 1 June 2013)

DIRECTORS INTERESTS

According to the register kept by the Company for the purposes of Section 164 of the Compan

particulars of interests of directors who held office at the end of the financial year (including th

infant children) in shares, debentures, warrants and share options in the Company and in re

wholly-owned subsidiaries) are as follows:

Direct

Name of director and corporation

in which interests are held

Holdings at

the beginning

of the year/

date of

appointment

Holdings at

the end

of the year

Holdings at

21 January

2014

Holdings

at the

beginning

of the year

The Company

Ordinary shares fully paid

Kris Taenar Wiluan 231,598,690

Lawrence Stephen Basapa 50,000 50,000 50,000

By virtue of Section 7 of the Act, Kris Taenar Wiluan is deemed to have interests in the shar

subsidiaries at the beginning and at the end of the financial year.

E t di l d i thi t di t h h ld ffi t th d f th fi i l


42


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DIRECTORS

REPORT

During the financial year, the Company and/or its related corporations have in the normal co

transactions with parties which are affiliated to the directors, being related parties and parties

are deemed to have an interest, with the directors having disclosed their interests in such tra

156 of the Companies Act, Chapter 50. Such transactions may comprise sale and purcha

arrangements, consultancy services and/or other transactions carried out on normal commecourse of business of the Company and/or its related corporations. However, the directors hav

entitled to receive any benefit arising out of these transactions other than those to which the

and members of these corporations.

Except as disclosed above and for salaries, bonuses and fees and those benefits that are d

Notes 6 and 25 to the accompanying financial statements, since the end of the last financial ye

become entitled to receive a benefit by reason of a contract made by the Company or a related

or with a firm of which he is a member, or with a company in which he has a substantial finan

SHARE OPTIONS

The KS Energy Employee Share Option Scheme (the Scheme) and KS Energy Performance

approved at the Companys Extraordinary General Meeting held on 2 July 2009. The Plan conte

shares to Participants after performance targets have been met and is targeted at key employe

to drive the growth of the Company through superior performance while the Scheme is target

in general and is meant to be more of a loyalty driven time-based incentive scheme. Details

outlined in the Companys circular dated 16 June 2009.

Both the Scheme and the Plan are administered by the Remuneration Committee (the Comm

Billy Lee Beng Cheng (Chairman) (Independent Director)

Wong Meng Yeng (Independent Director)

Lim Ho Seng (Lead Independent Director)

Lawrence Stephen Basapa (Independent Director) (Appointed on 1 June 2013)

Other information regarding the Scheme and the Plan is set out below:

(a) No options have been granted since the commencement of the Scheme and no share

commencement of the Plan.

(b) Subject to the absolute discretion of the Committee options/shares may be granted


45/148

DIRECTORS

REPORT

shall not exceed 15% of the total number of issued ordinary shares, excluding treasu

Company on the day preceding the relevant date of grant.

Furthermore, the aggregate number of ordinary shares over which options/shares may b

Plan to Controlling Shareholders and their Associates shall not exceed 25% of the ordinScheme/Plan, and the number of ordinary shares over which options/shares may be gra

each Controlling Shareholder or his Associate shall not exceed 10% of the ordinary shar

(d) The Scheme/Plan shall continue to be in force at the discretion of the Committee, su

ten years commencing on the date on which the Scheme/Plan is adopted by sharehold

meeting, provided that the Scheme/Plan may continue beyond the aforesaid period

shareholders of the Company in general meeting and of any relevant authority which m

(e) The subscription price of the options shall be fixed by the Committee at its absolute d

the Market Price, determined by reference to the price equal to the average

Share, as determined by reference to the daily official list or other publication pu

consecutive market days immediately preceding the offer date of that option, rou

cent in the event of fractional prices;

or at a discount to the Market Price, the quantum of such discount to be det

its absolute discretion, provided that the maximum discount shall not exceed 2approved by shareholders of the Company in general meeting in a separate res

(f) Options granted with the Exercise Price set at the Market Price may be exercised at any

of the date of grant, provided that the option shall be exercised before the tenth anni

such earlier date as may be determined by the Committee, failing which the unexercise

null and void.

(g) Options granted with the Exercise Price set at a discount to the Market Price may be

second anniversary of the date of grant, provided that the option shall be exercised bthe date of grant or such earlier date as may be determined by the Committee, failing

shall immediately be null and void.

During the financial year, there were:


44


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DIRECTORS

REPORT

AUDIT AND RISK MANAGEMENT COMMITTEE

The members of the Audit and Risk Management Committee during the year and at the date

Lim Ho Seng (Chairman) (Lead Independent Director)Billy Lee Beng Cheng (Independent Director)

Wong Meng Yeng (Independent Director)

Ernest Seow Teng Peng (Independent Director) (Appointed on 1 June 2013)

The Audit and Risk Management Committee performs the functions specified in Section 201

Manual and the Code of Corporate Governance.

The Audit and Risk Management Committee held six meetings since the last directors report.

Audit and Risk Management Committee met with the Companys external and internal auditor

work, the results of their examination and evaluation of the Companys internal accounting co

The Audit and Risk Management Committee a lso reviewed the following:

assistance provided by the Companys officers to the internal and external auditors;

quarterly financial information and annual financial statements of the Group and the Com

to the directors of the Company for adoption; and

interested person transactions (as defined in Chapter 9 of the SGX Listing Manual).

The Audit and Risk Management Committee has full access to management and is given th

discharge its functions. It has full authority and the discretion to invite any director or executive


47/148

DIRECTORS

REPORT

AUDITORS

The Audit and Risk Management Committee has reviewed the level of audit and non-audit

independence and objectivity of the external auditors as required under Section 206 (1A) of t

to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment aAnnual General Meeting of the Company.

In appointing our auditors for the Company, subsidiaries and significant associated companies

712 and 715 of the SGX Listing Manual.

The auditors, KPMG LLP, have indicated their will ingness to accept re-appointment.

On behalf of the Board of Directors

Kris Taenar Wiluan

Director

Lim Ho Seng

Director

27 March 2014


46


48/148

STATEMENT BY

DIRECTORS

In our opinion:

(a) the financial statements set out on pages 49 to 134 are drawn up so as to give a tru

affairs of the Group and of the Company as at 31 December 2013 and the results, cha

of the Group for the year ended on that date in accordance with the provisions of thChapter 50 and Singapore Financial Reporting Standards; and

(b) at the date of this statement, there are reasonable grounds to believe that the Compa

as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these f inancial statemen

On behalf of the Board of Directors

Kris Taenar Wiluan

Director

Lim Ho Seng

Director

27 March 2014


49/148

INDEPENDENT

AUDITORS REPORT

Members of the Company

KS Energy Limited

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of KS Energy Limited (the Comp

Group), which comprise the statements of financial position of the Group and of the Company

statement of profit or loss, statement of comprehensive income, state

ks energy limited annual report 2013

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