Hibiscus associate secures 4th Mideast concession

PETALING JAYA: Just two days after announcing that its associate, Lime Petroleum Plc, had secured four additional concessions in Norway, Hibiscus Petroleum Bhd announced that Lime had secured a fourth concession in the Middle East, more specifically in Ras Al Khaimah (RAK).

“The award of this fourth concession to Lime represents the final condition precedent as set out in the share-subscription agreement and share-purchase agreement between Hibiscus and Lime,” Hibiscus told Bursa Malaysia yesterday.

Hibiscus is not required to pay anything more for these concessions, as under its earlier agreement with Lime, any future acquisitions will only be paid by Lime.

Hibiscus bought a 35% stake in Lime for US$55mil (RM165mil) in October last year through a subscription of new shares (US$50mil) and a purchase of existing shares (US$5mil).

Last month, Hibiscus received more than 99% approval from its voting shareholders for its 35% acquisition of Lime, thus fulfilling the last mandatory condition for the exercise.

Hibiscus closed the day down 3 sen to RM1.69 on volume of 413,400 shares while the warrant was also down 3 sen to RM1.10 on volume of 1.99 million shares.

On the RAK onshore concessions, an exploration and production sharing agreement was signed between Baqal Petroleum Ltd, a wholly-owned subsidiary of Lime, and the government of Ras Al Khaimah which allows for the rights to explore and produce hydrocarbons from the designated area.

“The RAK onshore concession covers an area of 886 sq km and is located in the southern part of the Emirate of Ras Al Khaimah. Baqal is the contractor and operator of the concession,” said Hibiscus in a statement to Bursa.

The initial term of the contract is 18 months, while the second term is two years. Upon a declaration of commerciality, the term will be 20 years with rights to request for renewal for an additional five years.

Hibiscus said there were several benefits to the Lime group in securing the RAK onshore concession. Firstly, it is securing an onshore concession in an highly-prospective region.

“Onshore concessions are generally cheaper to explore and develop and, in the event of drilling and appraisal success, are quicker to put into production,” said Hibiscus.

The onshore fields in a developed area will have access to production, transportation and storage facilities.

The infrastructure has been established and also has a highly-developed network of trunk gas pipelines covering in excess of 1,300km.

In Ras Al Khaimah, around 24 wells, eight onshore and 16 offshore, have been drilled since the mid-1960s. The UAE ranked eighth among the major oil-producing nations as of 2010 with 3.5% of the global market share.

On Tuesday, Lime had signed a letter of intent with North Energy ASA and Rex Oil & Gas Ltd to acquire a proportion of North Energy’s interest in four concessions, located in the Norwegian Continental Shelf offshore Norway.

This was considered a bonus, as it was receiving four additional concessions on top of the RAK onshore concessions that it was already receiving.

The Norwegian Petroleum fiscal system also reimburses 78% of exploration expenditure at the end of each year, irrespective of whether production is achieved.

“This is really a significant incentive which allows a company with a relatively modest capital structure and some technical capability to take a position in the exploration segment of the oil and gas industry of a mature market. Whilst financial returns from such an investment may not be spectacular, risks are at a moderate level so Lime’s profile is virtually a perfect fit for the opportunity that has come its way,” said Hibiscus managing director Dr Kenneth Pereira.