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PublicInvest says while it believed the completion of Hibiscus’ North Sabah deal is on hand, it is now only accounting for a quarter’s contribution from the asset, resulting in financial year 2018 forecasts being lowered by 49.9 per cent but which will have no effect on its valuations. (Pic from Hibiscus’ website)

KUALA LUMPUR: PublicInvest Research remains positive over Hibiscus Petroleum Bhd’s long-term prospects given its ongoing initiatives to constantly increase production levels in enhancing shareholders value.

In a note today, PublicInvest said while it believed the completion of Hibiscus’ North Sabah deal is on hand, it is now only accounting for a quarter’s contribution from the asset, resulting in financial year 2018 forecasts being lowered by 49.9 per cent but which will have no effect on its valuations.

“We understand the accounting treatment post-completion of the North Sabah deal would be akin to the Anasuria acquisition, in which a relatively large negative goodwill amount could be recorded,” it said.

For the second quarter (Q2) ended December 31, 2017, Hibiscus’ net profit increased to RM11.04 million from RM10.66 million recorded in the previous corresponding period.

Quarterly revenue increased from RM62.83 million in Q2 2017 to RM76.01 million registered in the current quarter, mainly attributed to the higher average realised oil price of US$62.93 per barrel in the current quarter versus US$51.54 per barrel, previously.

The company announced on February 7, 2017 that it planned to increase the Anasuria Cluster production by 5,000 barrels of oil per day by 2020 with the GUA-P2 side-track drilling.

PublicInvest said the period under review saw the completions of offshore turnaround of the Anasuria FPSO (floating production storage and offloading) and the GUA-P4 gas lift project.

It said based on these progresses, production rate is anticipated to improve to 350 barrels per day net to Anasuria Hibiscus (UK) Ltd from 60 barrels per day, which equates to 10 per cent increase in production, ensuring depletion of the field is arrested.

Hibiscus also recently announced that its UK joint operating company Anasuria Operating Co Ltd (AOCL) had contracted a sixth generation semi-submersible rig to drill the Guillemot-A, GUA-P2 side-track into the Forties or Fulmar reservoirs.

PublicInvest said the drilling of this side-track is part of the group’s strategy to enhance production from the Anasuria Cluster to a volume of 5,000 barrels per day by financial year 2020.

“This project is also anticipated to realise net proved and probable (2P) reserves of 1.01 million barrels, potentially enhancing valuations of the group further.

“Incremental contributions are already anticipated from July 2018 onwards upon completion of this exercise,” it said.

Besides that, PublicInvest said it is positive over Hibiscus’ impending acquisition of a 50 per cent participating interest in the 2011 North Sabah Enhanced Oil Recovery Production Sharing Contract from Sabah Shell Petroleum Co Ltd and Shell Sabah Selatan Sdn Bhd.

“We continue to be excited over this impending acquisition, though we acknowledge this has mostly priced-in at current levels.

“Nevertheless, the entitlement of an additional 6,000 barrels per day production (at the minimum) from these North Sabah operations net to Hibiscus is expected to aggregate about 9,500 barrels per day production for the Group.

“Additionally, North Sabah will provide immense opportunities to increase the Group’s production rate as there is access to 62 million barrels of 2P oil reserves and 79 million barrels of 2C contingent resources,” it said.

PublicInvest has reaffirmed its “outperform” stance on Hibiscus with a revised target price of RM1.08 from RM1.06 previously.

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