Hibiscus postpones Aussie project
WAIT-AND-SEE: Company worried about access to capital, prevailing market uncertainty in O&G market, says MD
HIBISCUS Petroleum Bhd is postponing its project in Australia due to limited access to capital and the prevailing market uncertainty in the oil and gas (O&G) industry, said managing director Kenneth Gerard Pereira.
The company will be focusing on its assets in the Anasuria Cluster O&G fields in United Kingdom North Sea for now to maintain cash flow and profitability.
Analysts said many O&G players are taking a wait-and-see stance before deciding on new exploration activities.
“Getting financing has not been easy as well. It will get better once the oil price starts to stabilise at the current levels,” they added.
Pereira said for now the company will allocate capital and continue with cost management of its assets in the Anasuria Cluster, although it is comfortable with oil price trading above US$40 (RM177) per barrel.
“The company is debt-free, so I think it will be more critical for us to put together some financing to support the activities that we would like to undertake, primarily next year.
“We hope that the Anasuria Cluster will receive some capital allocation and that will help us enhance production,” he said after the company’s annual general meeting, here, yesterday.
The assets in the Anasuria Cluster are the only contributors to Hibiscus’s profitability at the moment.
Kenneth said if the current oil prices do not stabilise for a certain period of time, the project in Australia will not give the desired level of returns to cover the headroom.
“Our asset in Australia is not feasible to be developed. There is an element of risk. The level of return would be too small to cover the costs,” he said.
With plummeting oil prices due to a supply glut, demand concerns and a stronger US dollar, many exploration and production companies in the oil and gas sector had been undergoing portfolio management exercises.
Analysts said special purpose acquisition companies (SPACs) particularly have been affected by the plummeting oil prices as the market is highly driven by sentiments.
Sona Petroleum Bhd would be the first among the four SPACs listed in the local stock exchange to close shop as it faces difficulties in getting a qualifying acquisition.
However, Kenneth is optimistic that sentiments in the O&G market are turning slightly positive after it was buoyed by Organisation of the Petroleum Exporting Countries’ decision to cut output which resulted in a slight rebound in oil prices recently.
Hibiscus is also currently awaiting an approval from Petroliam Nasional Bhd to acquire a 50 per cent stake in Shell’s four oil fields offshore Sabah for US$25 million , which analysts believe would support the company’s profitability.
“We are to focus on Anasuria Cluster and the outcome of the acquisition in Sabah. Once we receive the approval, there will be a transition of certain activities there,” said Kenneth.
Meanwhile, Mercury Securities has a “buy” recommendation on Hibiscus, with a target price of 44 sen.
Hibiscus closed at 30.5 sen on the Bursa Malaysia yesterday, unchanged from Monday’s closing price. The expanded appointed overseas office framework allows non-resident traders and investors greater avenue to settle trade or investment in ringgit.