The Repsol deal is projected to increase Hibiscus’ daily production by 3-fold

by SHAFIQQUL ALIFF / graphic by TMR

HIBISCUS Petroleum Bhd’s move to purchase the brownfield assets in Malaysia and Vietnam from Spanish energy and petrochemicals concern, Repsol SA, amid higher energy prices has attracted fresh interest from investors.

The upstream company’s share price hit a 13-month high of RM1.04 in intraday trade before closing the day at RM1 a share yesterday supported by higher energy prices on rising political tensions on the Ukraine-Russia border.

Hibiscus’ share price is still below the RM1.18 a share fair value given by AmInvestment Bank Bhd which forecast slightly lower earnings for the company for the financial year 2022 (FY22) by 2% as the acquisition of Fortuna International Petroleum Corp (FIPC) from Repsol was completed on Jan 24 this year instead of end 2021.

Its analyst Alex Goh stated that the lower earnings projections is mostly offset by the rising crude oil assumption by US$5 (RM20.90) per barrel to US$75.

The analyst has also raised Hibiscus’ FY23 earnings by 12% and a milder 3% increase in FY24 on the assumption oil price level remains at US$60 per barrel.

The finalised purchase price for Repsol’s assets has been lowered by 35% from US$212.5 million to US$138.7 million cash from the distribution of dividends from cashflows acquired since Jan last year, net of time value adjustments.

“The finalised price is at a slight 2% below our earlier assumption as guided by management,” Alex stated in a report last week. The Repsol deal is projected to increase Hibiscus’ daily production by threefold.

Hibiscus founder and MD, Dr Kenneth Gerard Pereira, in a recent statement, noted that the acquisition opens a new chapter in Hibiscus’ next phase of growth. He stated almost 50% of the Repsol asset’s production comprises gas and the addition of gas production to Hibiscus’ portfolio is expected to present a better balance to the group’s asset portfolio in terms of price stability, markets, and operations.

“The diversification represents a key aspect of our energy transition strategy as natural gas has been regarded as an important bridging fuel as the world transits to a lower-carbon energy mix. This transaction has been made possible with the strong support of our shareholders, industry regulators both in Malaysia and Vietnam as well as our business partners.

Alex noted that the US$124 million outstanding will be paid from the RM197 million proceeds raised by Hibiscus from its earlier RM204 million convertible redeemable preference shares that were issued in November 2020 and Hibiscus has already paid the deposit of US$15 million.

“We remain positive on Hibiscus’ completed acquisition of Repsol’s assets which will transform the group’s earnings trajectory, effectively tripling the group’s daily production to 26.8K barrels of oil equivalent and increasing its 2P reserves by 72% to 81 million boe (barrel of oil equivalent),” the Aminvest report noted.