Hibiscus acquires first production asset

by **Cals** Tue 24 Jun 2014, 23:53

Business & Markets 2014

Written by Shalini Kumar of theedgemalaysia.com

Tuesday, 24 June 2014 09:57

KUALA LUMPUR: Hibiscus Petroleum Bhd has agreed to acquire a 100% stake in Talisman Resources Pty Ltd, a wholly-owned subsidiary of Canada-based Talisman Energy Inc, for US$18 million (RM57.78 million).

In a statement to Bursa Malaysia yesterday, Hibiscus said the assets of Talisman Resources include a 25% stake in the Kitan producing oilfield, which is in the Bonaparte Basin within the Australia-Timor Leste Joint Petroleum Development Area (JPDA), approximately 550km north-east of Darwin, Australia. The acquisition will be undertaken by Hibiscus’ wholly-owned unit Timor Hibiscus Ltd.

Apart from Talisman Resources, Italy-based Eni JPDA 06-105 Pty Ltd owns a 40% stake in the Kitan oilfield and Japan’s Inpex 35%, with Eni the designated operator.

“Based on current estimates, Hibiscus expects the Kitan oilfield to contribute significant net cash to the company in the second half of 2014. At current oil prices, this will allow Hibiscus to book its first operating profit in 2014,” said Hibiscus in the statement. “The company is working towards achieving first cash flow by 2015. Kitan presents an opportunity with optimal timing and consideration size to fit well with the raising of equity through the exercise of Hibiscus’ warrants.”

Hibiscus managing director Kenneth Pereira said the acquisition represents a milestone for the group’s portfolio.

“After evaluating many producing assets over the course of the past three years, we believe we have finally found a target that has a manageable risk profile with many areas of upside potential at a reasonable price,” he said.

“We also look forward to working with reputable international exploration and production companies as partners in extracting further value from this asset.”

The purchase of Talisman Resources will be funded by Hibiscus’ available internal funds, as well as the expected proceeds to be raised from the exercise of its Warrants-A and Warrants-B which will expire on July 24. The remaining proceeds from the exercise of warrants are expected to be about US$40 million.

Looking ahead, Hibiscus said it is studying infill drilling opportunities within the Kitan oilfield to accelerate the production of reserves to maximise its value.

“Active exploration activities in the adjacent licences for new reserves could provide the potential for new discoveries to be tied back to the existing Kitan production facilities. There are two existing oil discoveries in the surrounding permit called Kuda Tasi and Jahal,” it said.

The Kitan field was discovered in 2008 and started production in 2011. Wood Mackenzie has estimated 17 million barrels of remaining reserves as at Jan 1, 2014 (4.25 million barrels net to Hibiscus) and that the average production rate in 2014 is expected to be 10,000 barrels per day (2,500 barrels of oil per day net to Hibiscus).

The proposed acquisition is expected to be complete by the end of the third quarter of 2014.

Hibiscus’ stock, which had a one-hour trading suspension yesterday, ended 0.01 sen or 0.63% higher at RM1.59 — bringing its market capitalisation to RM899.5 million.

This article first appeared in The Edge Financial Daily, on June 24, 2014.