Malaysia's Hibiscus finds oil in Oman

by **Cals** Thu 26 Dec 2013, 09:30

Published: Wednesday December 25, 2013 MYT 12:00:00 AM
Updated: Wednesday December 25, 2013 MYT 10:18:01 AM
Malaysia's Hibiscus finds oil in Oman

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PETALING JAYA: Hibiscus Petroleum Bhd, the first special-purpose acquisition company (SPAC) to be listed on the local bourse, has discovered oil in its Oman assets, but the first well is not commercially viable.
The oil and gas exploration outfit told Bursa Malaysia that Masirah Oil Ltd, a jointly controlled entity of Lime Petroleum Plc, had suspended its first exploration well, Masirah North North 1 (MNN 1) in Block 50 Oman, for further evaluation on safety reasons.
The group noted in a press statement that the well had been drilled to a total depth of about 1,000m below the mean sea level.
“Mud losses in two carbonate sections of the well prevented Masirah Oil from reaching its planned target depth,” it said.
Hibiscus’ data acquisition, coring and logging programme of the formations that were drilled was completed on Dec 21, 2013, indicating the presence of non-commercial hydrocarbons.
“Datasets acquired from the coring and logging programmes are now being utilised to refine the geological understanding of the area. In addition, the information acquired has assisted all partners in the Oman Block 50 project to identify a second exploration well as the next drilling location.
“It is anticipated that drilling at this location would commence within the next two weeks,” the group said, subject to the approval of the Omani government.
Hibiscus was suspended from trading on Monday, pending the announcement. Its share price tumbled 29% from RM2.59 on Dec 17 to RM1.84 prior to its suspension. Its warrants fell 34% from RM2.01 on Dec 17 to RM1.32 before their suspension. The counter will resume trading tomorrow.
Managing director Kenneth Pereira said: “Whilst we are disappointed with the final result of the MNN 1 drilling programme, we are proud that as a young company with a small technical team, we have demonstrated our ability to conduct a safe drilling operation, in a remote offshore area of a foreign country without health, safety or environmental issues.”
Using the data obtained from the drilling of MNN 1, the group said all partners in the Block 50 Oman project were now in the process of finalising the next drilling location.
“The proposed well would be defined by 3D seismic mapping and would have strong Rex Virtual Drilling (RVD) indications in various formations. The prospect would also have been analysed using conventional techniques.”
Pereira added that the RVD technology had been tested exhaustively in 41 locations in Norway and had performed successfully on 40 occasions.
“It is a tool that is and would continue to drive a great deal of growth in Lime Norway and is expected to do the same elsewhere for us and our partners, Rex International Holdings. Our current drilling programme was developed to take into account both successful and non-successful outcomes at MNN 1,” he said.
When the counter was suspended on Monday morning, anticipation was high for the company to announce development related to the venture, in which the SPAC has a 22% net share.
The firm had previously estimated the prospective resources of about 160 million barrels of oil, worth about RM3.3bil, in the two areas.
To recap, Hibiscus was said to be spending some RM100mil to drill two wells – MNN 1 and Masirah North East 1 – in Oman. This implied the company would have to write off RM50mil from its books for the non-produceable well, an analyst said.
Analysts pointed out there could be two main reasons why Hibiscus found oil which was not commercially viable: one, it could have been a drilling mistake, and two, it could boil down to undesirable oil properties. In Hibiscus’ case, it was the latter.
“If they found heavy oil in the first well, it is likely that the oil quality for the whole reserve is not commercially viable, because the wells are usually located within a close vicinity,” an analyst noted.
However, another analyst said there was a possibility that pressure at the first well was not high enough for oil to flow out, which was why it was moving to the second well.
The drilling programme does not stop at whether or not Hibiscus strikes oil. It will also impact investors’ perception towards Rex Technology.
According to one analyst, this proved that the Rex Technology is able to detect oil. Another analyst, however, is less optimistic, as this venture served as a test case for the company.
Hibiscus had acquired a 35% stake in Lime for US$55mil (RM181mil) as its qualifying acquisition in April 2012 due to its portfolio of assets and access to RVD.
The Block 50 Oman concession, in which Lime has a 64% participating interest, is estimated to have risked resources of almost 390 million barrels of oil based on the fourth quarter 2011 study by an independent petroleum sub-surface consultant, Aker Geo AS of Norway.
Masirah’s other shareholder is Petroci Holding, the national oil company of Ivory Coast, which has a 36% participating interest in Block 50 Oman.