Can Pereira finally take Hibiscus to next level?

by **Cals** Mon 10 Aug 2015, 01:11

Can Pereira finally take Hibiscus to next level?

Saturday, 8 August 2015
By: RISEN JAYASEELAN

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Pereira: ‘This acquisition will complete Hibiscus’ strategy of acquiring a balanced portfolio of assets, which includes exploration, development and producing assets within five years of listing.’
His biggest challenge has been to keep investors believing in him and the firm
THE introduction of special purpose acquisition companies or SPACs in Malaysia’s stock market back in 2011 has been a watershed event. It put Bursa Malaysia on the capital markets map as it is one of the few exchanges the world over to allow the listings of these cash shells.
One of the main reasons for the creation of SPACs is to enable entrepreneurs to raise capital for venturing into businesses that they are knowledgeable in.
And inadvertently, the first entrepreneur to embark on a SPAC listing here has become a sort of poster boy for SPACs in Malaysia.
Dr Kenneth Pereira had spent a good 19 years at the then known Sapura Crest Petroleum Bhd, rising to the position of chief operating officer. Sapura Crest was then Malaysia’s largest oil and gas service provider, which later morphed into Sapura Kencana Bhd.
Following his long stint at Sapura, Pereira then jumped at the opportunity to start Malaysia’s first SPAC, Hibiscus Petroleum Bhd. He assembling a small core team and had initially worked out of a house in Damansara, Kuala Lumpur.
Since Hibiscus’ floatation in July 2011, 57-year-old Pereira hasn’t stopped working to make Hibiscus a success.
Aside from almost single-handedly raising some RM6mil from pre IPO investors, and following that with raising RM235mil from the actual listing exercise, Pereira led Hibiscus to raise another RM170mil via a couple of post listing fund raising exercises.
On July 2011, Hibiscus inked its qualifying acquisition (QA) to buy a 35% stake in Lime Petroleum plc for RM165mil. Lime Petroleum is an early-exploration outfit and owns three oil exploration concessions in Middle East,
Following that, Hibiscus signed numerous other deals, which have led it to having a presence in oil and gas assets in such far reaches as Norway, Middle East and Australia. Hibiscus transformed from a SPAC into an independent oil and gas exploration and production company.
But despite all this activity, Hibiscus has yet to show any significant cash flows from its acquisitions, its critics have pointed out.
Pereira’s biggest challenge has been to keep investors still believing in him and the company.
Ultimately, companies like Hibisbus would have to show sufficient cash flows, to put them in a good position to reward their shareholders via dividends, for example.
The oil price crash since a year ago, has put a major dampener on all companies involved in this space.
Incidentally, other oil and gas SPACs which have listed after Hibiscus, have sought to focus on only acquiring producing assets.
This was to ensure that they would be buying assets which are cash-flow producing from the start.
However, buying such assets have not been easy. For example, after months of pursuing and agreeing on initial terms, Sona Petroluem Bhd, the third SPAC to get listed on Bursa Malaysia, eventually called off its proposed deal with UK-listed Ophir Energy Plc with regards to the acquisition of Salamander Energy (Bualuang) Ltd’s gas producing assets offshore Thailand.
Sona’s head honcho Datuk Seri Hadian Hashim is another popular name in this sphere of business.
With SPACs being given a three year time frame to wrap up their qualifying acquisition (QA), Sona, which listed in 2013, has only about a year to get it done, failing which monies raised from its IPO will be returned to shareholders.
Another oil and gas SPAC, which listed after Hibiscus and before Sona, CLIQ Energy Bhd, has yet to complete its QA and is also running out of time to so.
In this regard, Pereira stands out as the only SPAC CEO to have not only gone through the QA but also having kept investor interest in his company alive despite not showing any significant earnings yet.
But just this week, Hibiscus announced a watershed deal, one which could finally nudge it into a position of generating healthy cash flows.
On Thursday, Hibiscus said it had entered into a sale and purchase agreement to acquire a 50% stake in the producing fields of the Anasuria Cluster oil and gas fields in the North Sea, for US$52.5mil (RM199.1mil).
The Anasuria Cluster has been producing oil since 1996 and as such has a proven and producing resource base. It averaged approximately 5,500 barrels per day in 2014.
According to the terms of the agreement, the deal is being back-dated to Jan 1, 2015.
Hence if the agreement is concluded and taking into account Hibiscus’ 50% stake, this would roughly translate into a revenue of some US$30mil, assuming an average oil price of US$50 per barrel produced over seven months.
According to the stock exchange filing by Hibiscus, the cluster has 40.4 million barrels of proven and probable (2P) oil reserves and 27.9 billion standard cubic feet of 2P gas reserves, all of which could potentially translate into lucrative earnings for Hibiscus, despite the depressed oil and gas prices.
Clearly, these are promising numbers.
As Pereira himself put it: “This acquisition will complete Hibiscus’ strategy of acquiring a balanced portfolio of assets which includes exploration, development and producing assets within five years of listing.”
But time will tell if Pereira and Hibiscus will be able to finally achieve positive cash flows from the assets that it has acquired, and thus lay claim to becoming the first SPAC to have transformed from idea to profit.