KUALA LUMPUR: PublicInvest Research has affirmed its outperform call on Hibiscus Petroleum Bhd
with an unchanged target price of RM1.08 as its subsidiary SEA Hibiscus Sdn Bhd announced the completion of the 50% acquisition of its North Sabah asset.
It said a large negative goodwill amount will likely be recognised considering crude oil prices are significantly higher than when the deal was negotiated in 2016.
A free warrant issue may be dilutive in the near-term, but the research firm sees potential uplifts to valuation from the conversion of 2C to 2P reserves in the North Sabah field.
"Assuming a 50% conversion, we are estimating the Group’s overall fair value to be bumped up to RM1.17 (post-dilution)."
According to PublicInvest Research US$15mil has been paid with two more payments of RM5mil payable in 2019 and 2020.
"As at 1 January 2018, the fields have 40.9mn barrels of proven and probable (2P) reserves which are readily exploitable, and 79.0m barrels of contingent resources (2C) which could be tapped on, depending on capital expenditures and regulatory approvals."
Production rights in the North Sabah field running up to 2040 are equally shared with Petronas Carigali Sdn Bhd.
PublicInvest Research said Hibiscus now has an additional revenue stream in addition to the Anasuria Cluster, which increases production to about 9,500bbls/day. The group has a 2021 production target of 20,000bbls/day, which will likely be supplemented by other asset acquisitions although management is in no hurry at present.
The research firm added that SEA Hibiscus has entered into an offtake agreement for the sale of its entitlement of crude oil with Trafigura Pte Ltd on a 3-year (+2-year extension) term.
"Typically transacted in cargoes of approximately 300,000 barrels per offtake, it is anticipated that there will be at least 6-7 offtakes per year for this field."
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