Interview Hibiscus sees over RM210m gain from Aussie oil well, additional from Oman

by **Cals** Tue 20 May 2014, 00:02

Interview Hibiscus sees over RM210m gain from Aussie oil well, additional from Oman

Business & Markets 2014

Written by Ho Wah Foon of theedgemalaysia.com

Monday, 19 May 2014 08:45

KUALA LUMPUR (May 19): Hibiscus Petroleum Bhd (HPB) has forecast a gain in net present value of US$65 million (RM210 million) over five years from mid-2015, if its 2015 production plan goes well for its West Seahorse Oil Field (VIC L31) in Australia.

And if HPB is also able to discover oil in adjacent Sea Lion Field (within the VIC P57 concession area), estimated to have 11 million barrels of oil, the gain to be netted from this field will be even more than US$65 million, according to HPB officials in an interview.

Hibiscus Petroleum, an independent exploration and production firm, has a 50.1% interest in offshore block VIC/P57, off Australia’s Victoria, which it intends to increase to 55.1% soon.

This VIC/P57 block consists of West Seahorse (L31), with proven oil discovery, as well as multiple exploration prospects that include Sea Lion, Felix, Flinders and Salsa.

Certified by Gaffney Cline & Associates in 2014, the West Seahorse field contains 6.5 million barrels of proven oil reserves and contingent resources of 1.5 million barrels of oil. Production from this field is targeted to commence in 2015.

Hibiscus Petroleum’s managing director Dr Kenneth Pereira said at an interview on Thursday: “We are at the most exciting phase of HPB since our listing on Bursa in July 2011. We have two oil production projects (West Seahorse and Oman Well) to work on now, which is expected to generate cash flow for the company.”

“The signing of the umbrella heads of agreement (HOAs) this week is a big step to get Australia going. We have a well (L31) to drill before mid-2015. And if we are successful, the whole economics of West Seahorse will be different.

“The HOAs give us a clear path to the monetisation of L31. And because of the drilling of L31, there is value accretion to the whole of Block VIC/P57.”

Under one HOA, Hibiscus's 41%-owned HiRex Petroleum Sdn Bhd will take up a 20% stake in the VIC/P57 exploration permit from its Australia-listed partner 3D Oil Ltd, in exchange for use of the Rex Virtual Drilling (RVD) technology “to assess the best targets for drilling” off Victoria.

Another component of the HOAs signed among 3D Oil, Carnarvon Hibiscus Pty Ltd (unit of HPB), Althea Corporation Ltd and HiRex will see an additional 5% stake in the VIC/P57 exploration permit transferred to HPB.

HiRex is a joint-venture between Hibiscus Petroleum and the Singapore-listed Rex International Holding Ltd, the licence holder of the proprietary RVD technology.

The HOAs will also allow Carnarvon Hibiscus to have an exclusive option to increase its stake in the proven VIC/L31 West Seahorse oilfield to 100% stake at market value, from current 50.1%.

And the HOAs will also allow Carnarvon Hibiscus to raise its stake in Britannia rig to 100% from current 50.1% by paying US$7.5 million (RM24 million) to 3D Oil for its 49.9% stake.

On prospects in VIC/P57 concession, HPB’s chief development officer Steve Dechant said at the interview: “There is now a firm plan in place to drill well in the first half of 2015 in Sea Lion Field, and advanced plans are in place. These include engineering work and contracts negotiations.”

According to Pereira, HPB will utilise internal funds to finance the purchase of Britannia rig. The company expects to raise US$50 million from the exercise of Hibiscus-WA, which expires in July 2014 and has a 50 sen strike price and a one-for-one conversion ratio.

On the latest development in Oman, Pereira said the new oil discovery there is expected to generate cash flow soon but further details could only be disclosed after HPB gets approval from the Oman government.

On March 7 this year, the company announced that the second exploration well in Block 50 by Masirah Oil Ltd, an associate company, had achieved a light oil flow rate of up to 3,000 barrels per day.

This news in oil discovery in the second well in Oman came two months after the bad news that the first oil well failed to make commercial oil extraction and had to close down due to safety reasons.

Indeed, shares of Hibiscus Petroleum plunged 31 sen or 16.85% to close at RM1.53 on Dec 26, 2013, after the bad news on the first well. But the oversold share later rebounded.

While the excitement now is in Australia and Oman, Hibiscus also has plans laid out for the other regions in which it has interests.

In the Middle East, it has plans to drill one exploration well in Sharjah Offshore, UAE. In Norway, it plans to drill one exploration well by the first quarter of 2015.

And HiRex, its 41%-owned unit, will seek to secure two to three concessions.

Hibiscus Petroleum, an investment holding company focusing on the development of small and medium-sized oil and gas fields, became a full-fledged oil and gas exploration company after acquiring 35% stake in Lime Petroleum Plc in April 2012. Lime has oil and gas concessions in the Middle East and Norway.

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