State-run KNOC in capital impairment as liabilities overwhelm assets

2021.04.20 13:56:27

[Photo provided by Korea National Oil Corp.]이미지 확대

[Photo provided by Korea National Oil Corp.]

South Korea’s state-run oil company Korea National Oil Corp. (KNOC) has booked negative in its capital balance last year for the first time since 1979 founding as its liabilities exceed assets due to snowballing losses and debt.

KNOC’s liabilities reached 18.64 trillion won ($16.7 billion) in 2020, up 513.9 billion won from 2019, according to All Public Information in One (ALIO), a state website offering data on the government and public organizations on Tuesday.

Its assets declined 1.16 trillion won to 17.54 trillion won over the same period, leading to impairment in the state utility firm’s capital balance.

The company’s liabilities swelled from about 3.5 trillion won in 2006 to more than 20 trillion won in 2011. It remained around 17 trillion won in 2017 and 2018 but rose to 18.1 trillion won in 2019 before exceeding its assets in 2020.

Its debt-to-capital ratio, calculated by dividing its interest-bearing debt by the total capital, stood at 83 percent. Its interest-bearing liabilities amounted to 14.67 trillion won and it pays more than 400 billion won on interests annually.

Its debts have piled up due to the snowballing losses from the failed overseas projects initiated during the former Lee Myung-bak administration including the 4.8-trillion-won worth takeover of Canada’s oil and gas producer Harvest and 1 trillion won worth oil projects in Iraq.

Falling crude prices amid the Covid-19 pandemic have also dealt another blow to the company. The prices of Dubai crude oil dropped 33 percent to $42.29 per barrel last year on average from $63.53 in the previous year, lowering the value of KNOC’s overseas assets including oil fields.

The company has been stepping up its self-rescue measures by disposing of poorly performing subsidiaries and downsizing. But its liabilities are predicted to reach 20 trillion won in 2024, according to the company’s mid- to long-term financial plan.

By Pulse

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