KUALA LUMPUR (May 4): Hibiscus Petroleum Bhd said today it had activated asset action plans and established a framework of cooperation with commodities trading company Trafigura Pte Ltd to ensure Hibiscus’ business continuity as the company mitigates the impact of the Covid-pandemic on the oil and gas sector.
In statements to Bursa Malaysia today, Hibiscus said its asset action plans — comprising revenue, operational expenditure (opex) and capital expenditure (capex) components involving the Anasuria and North Sabah oil and gas fields — aim to mitigate the effects of low oil prices on the company in 2020. The Anasuria field is located within the North Sea.
"Hibiscus Petroleum’s asset action plans have been activated to mitigate the effects of low oil prices over the CY2020 (calendar year 2020) period. [For] revenue — [we have] locked in future sales of 750,000 bbl (barrels) at an average price of US$35 (RM151.01)/bbl in North Sabah.
"[For] Opex — [we have] commenced the optimisation of unit operating costs in Anasuria and North Sabah targeting US$18.5/boe (barrel of oil equivalent) and US$15/bbl respectively. [For] capex — [we have] replanned a development expenditure programme in North Sabah to ensure projects continually meet economic feasibility criteria.
"A framework of cooperation has been established and formalised with Trafigura, which in addition to current funding lines, potentially providing access to funding for working capital, capex and potential asset acquisitions while ensuring the offtake of crude oil production in North Sabah. We are readying ourselves for potential new opportunities in our areas of geographic focus,” Hibiscus said.
To mitigate risks posed by Covid-19, Malaysia’s movement control order (MCO) and low crude oil prices, Hibiscus said its key focus is to ensure business continuity.
Both its North Sabah and Anasuria teams are targeting a reduction in unit production cost (UPC) in 2020 through the deferral of non-critical opex activities and managing general and administrative expenses, according to Hibiscus.
"Through this careful management of opex, we are focused on maintaining positive operating cash flows, with UPC targets for 2020 in Anasuria and North Sabah of US$18.5/boe and US$15/bbl respectively,” it said.
On capex, Hibiscus said no major capex is planned for Anasuria in 2020, while the North Sabah team had undertaken efforts to optimise development capex for its 2020 drilling campaign to ensure clear economic viability of projects even with prevailing low crude prices.
Hibicus said this had resulted in the North Sabah asset targeting a reduction in unit development cost from US$14.2/bbl to US$10.5/bbl in 2020.
"Our total net production target for FY20 (financial year ending June 30, 2020) currently stands at 3.2MMbbl of oil. Planned offtake for 4QFY20 may potentially be deferred to 1QFY21 in order to realise higher crude prices in both North Sabah and Anasuria. As a forward step for the remaining period of CY20, we have locked in future sales of 750,000bbl at an average price of US$35/bbl in North Sabah,” Hibiscus said.
Hibiscus’ framework of cooperation with Trafigura is a commercial and funding partnership. Hibiscus said today it signed in April a deed of supply and collaboration with Trafigura. Hibiscus said the deed covers several areas of commercial cooperation.
"Trafigura is a physical commodities trading company, which is involved, among other things, in the sourcing, storage, transport and delivery of a range of raw materials, including oil and refined products.
"With the signing of this deed, Hibiscus and Trafigura have put in place a framework for the following: Potential future offtake of crude oil by Trafigura from assets owned/projects undertaken by Hibiscus; and potential funding for projects and asset acquisitions pursued by Hibiscus.
"Despite the weak oil price and market sentiment, we continue to maintain the momentum in exploring new asset opportunities within our areas of geographic focus. We acknowledge that there has already been a slowdown in the pace of potential asset divestments and that lending banks are having to safeguard their existing client portfolios before onboarding new clients to fund potential acquisitions.
"However, we are continuing to work through the key factors and assumptions underpinning asset valuations as well as rework the capital structures that would support new asset acquisitions in the current market. Ultimately, we are readying ourselves for the recommencement of asset divestment programmes to be able to acquire assets at a reasonable price to boost the company’s oil production and reserves,” Hibiscus said.
Hibiscus is also mindful of the company’s shareholder value. The company said the preservation of shareholder value continues to be a core tenet of the company.
The company said today that in the first quarter of 2020, capital markets saw significant profit taking, and the company saw some switching in its shareholder base from institutional to retail.
"However, the institutional shareholding percentage of the company is still significant at 42.9% with more than half being foreign institutions. Overall, despite the volatility in the market, the company has been supported by several new names entering its shareholder base,” Hibiscus said. The firm did not elaborate.
On Bursa today, Hibiscus shares were traded unchanged at 49 sen as at 3:45pm, with a market capitalisation of about RM770.29 million. The stock had seen some 80 million shares traded.
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