Hibiscus, Trafigura enter offtake agreement

The group signed a deed of supply and collaboration with Trafigura which covers several key areas of commercial cooperation

By SHAHEERA AZNAM SHAH / Pic TMR

HIBISCUS Petroleum Bhd has entered into a framework of cooperation with commodity trading company Trafigura Pte Ltd for a potential offtake of crude oil that will ensure business sustainability for the upstream company battered by weak crude oil prices due to the Covid-19 pandemic.

Under the agreement, Hibiscus secures the sale prices for a substantial portion of its production at North Sabah for the firm’s calendar year 2020 (CY20).

“The group has signed a deed of supply and collaboration with Trafigura which covers several key areas of commercial cooperation, including the potential of future offtake of crude oil by Trafigura from assets owned, or projects undertaken by Hibiscus.

“It also includes the potential funding for projects and asset acquisitions pursued by Hibiscus,” the small field niche producer stated in a filing to Bursa Malaysia yesterday.

Hibiscus MD Kenneth Pereira (picture) said the collaboration with trader Trafigura allows the oil and gas firm to leverage its current and future production capacity on Trafigura’s global funding and purchasing capability.

Trafigura is one of the world’s independent physical commodities trading companies and involved in the sourcing, storage, transport and delivery of raw materials, including crude oil and refined products.

In a separate filing, Hibiscus stated that to mitigate the effect of low crude oil prices, the firm has locked in future sales of 750,000 barrels at an average price of US$35 (RM150.50) per barrel for its North Sabah operation.

Its total net production target for financial year 2020 ending June 30 (FY20) stood at 3.2 million barrels of oil, but the planned offtakes in the fourth quarter of FY20 (4QFY20) may potentially be deferred to 1Q21 in order to realise a higher crude price in both North Sabah and Anasuria.

“As a forward step for the remaining period of CY20, we have locked in future sales of 750,000 barrels at an average price of US$35 per barrel at North Sabah,” it said.

Hibiscus has also commenced the optimisation of the unit operating costs at its indirect wholly-owned Anasuria Hibiscus UK Ltd and North Sabah operation, targeting US$18.50 per barrel of oil equivalent and US$15 per barrel respectively.

“To mitigate the risks, our key focus is to ensure business continuity through a reduction in unit production costs for 2020 at North Sabah and Anasuria operations,” it said.

It added that there is no major capital expenditure (capex) set for its Anasuria operation for 2020, while the North Sabah operation has undertaken efforts to optimise development capex to ensure the project viability amid the low crude prices.

The company’s share price closed unchanged at 49 sen yesterday, giving it a market capitalisation of RM778 million.

On a one-year basis, the stock price is down 55% with the fall seen in March caused by the fall in world crude oil prices and the lockdown introduced to contain the spread of the coronavirus.