Hibiscus Petroleum sees enhanced prospects over mid-term period

KUCHING: Hibiscus Petroleum Bhd's ( Hisbiscus) prospects is poised to gradually improved over the medium term following the potential acquisition of Shell Malaysia's 50 per cent stake in North Sabah production sharing contract (PSC) with Petronas Carigali Sdn Bhd (PCSB), expected to be completed by this year.

The research arm of Public InvestmentBankBhd(PublicInvest Research) in a report yesterday remained excited about the group's prospects going forward, with the potential acquisition of Shell Malaysia's 50 per cent stake in the North Sabah PSC with PCSB.

The addition of North Sabah PSC would see Hibiscus' performance increase to 57.7 million barrels of oil per day (mbbls) of 2P reserves, it said, with 44.0 mbbls of 2C resources and hence, translating into a collective of 13,000 barrels of oil (bbls) per day of production.

It gathered that Hibiscus's mission from 2016 to 2018 is to ensure that the group achieves a reserve level of 50 mbbls of 2P reserves, translating to 10,000 bbls per day of production.

Besides that, PublicInvest Research gathered that the group has outlined a strategic mission to add a further 50 mbbls of 2P reserves or 2C resources by 2020.

The research firm believed the group will successfully achieve its core mission and by more than 50 per cent with the completion of the potential North Sabah asset acquisition.

To recap, Hibiscus in a filing to Bursa Malaysia on October 12, 2016 said the group via its indirect wholly-owned subsidiary, SEA Hibiscus Sdn Bhd (SEA Hibiscus) signed a conditional sales and purchase agreement (SPA) with Sabah Shell Petroleum Company Ltd and Shell Sabah Selatan Sdn Bhd to acquire a 50 per cent participating interest in the 2011 North Sabah Enhanced Oil Recovery (EOR) PSC with PCSB for US$25 million.

The deal is contingent on approval from Petroliam Nasional Bhd (Petronas) and if approved, is expected to be completed by the middle of 2017 at the latest.

PublicInvest Research opined that Hibiscus has been able to capitalise on its working relationship with Shell Malaysia through signing the conditional SPA for the group to acquire the 50 per cent stake of the North Sabah Enhanced Oil Recovery (EOR) PSC.

It opined that with the asset, a partnership with PSCB seems to be in the bag this year.

As a sweetener to the acquisition if successful, the deal structure will recognise contributions to the group back-dated to January 1, 2017 onwards.

Apart from that, Hibiscus holds a 78.3 per cent effective interest as a concession operator in VIC/P57 (West Seahorse Field Exploration in Australia) which comes with an exploration permit and a 100 per cent effective interest as a concession operator in VIC/L31 with a production license through its acquisition in the Bass Straits of Australia in January 2013.

For the West Seahorse Field, the group has a development license whereby a field development planned has been approved with a production license obtained.

The company has indicated that when oil prices stabilise at the US$60 per bbl levels, a final investment decision will then be made, to ascertain economic viability of the field.

On another note, PublicInvest opined that the monetisation of the asset will be positive for the group for the longer-term if the group decides to dispose the asset, assuming oil price levels remain below US$60 per bbl,

Meanwhile, PublicInvest Research said Hibiscus Group's core operations are supported by contributions from its first producing field, the Anasuria Cluster in UK acquired from Shell UK Limited, Shell EP Offshore Ventures Limited and Esso (Exxon) Exploration and Production UK Limited (vendors).

The research firm noted Hibiscus Group's operation for the Anasuria Cluster, UK has 26.7 mbbls per day of 2P reserves and 6.8 mbbls of 2C resources for the West Seahorse Field in Australia.

Both operations currently producing 4,000bbls of oil per day is expected to provide a steady production base and earnings contribution to the group.