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KUALA LUMPUR (May 4): Hibiscus Petroleum Bhd said today that it activated asset action plans and established a framework for cooperation with commodity trading company Trafigura Pte Ltd to ensure Hibiscus business continuity as the company mitigates the impact of the Covid pandemic in the oil and gas sector.
Speaking to Bursa Malaysia today, Hibiscus said that its asset action plans, which comprise revenue, operating expense (opex) and capital expenditure (capex) components involving the Anasuria and North Sabah oil and gas fields, have as their 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 during the CY2020 period (calendar year 2020). [For] income – [we have] blocked 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] optimization of unit operating costs began in Anasuria and North Sabah with a target of US $ 18.5 / boe (barrel of oil equivalent) and US $ 15 / bbl respectively. [For] capex – [we have] A development spending program was re-planned in North Sabah to ensure that projects continually meet the criteria for economic viability.
“A framework for cooperation with Trafigura has been established and formalized, which, in addition to current lines of financing, potentially provides access to financing for working capital, capital expenditure and possible asset acquisitions while ensuring the extraction of production from crude oil in North Sabah. We are preparing ourselves for possible new opportunities in our geographic focus areas, “said Hibiscus.
To mitigate the risks posed by Covid-19, Malaysia’s Motion Control Order (MCO) and low oil prices, Hibiscus said his key focus is to ensure business continuity.
Both their North Sabah and Anasuria teams are aiming for a reduction in unit cost of production (UPC) in 2020 by postponing non-critical opex activities and managing general and administrative expenses, according to Hibiscus.
“Through this careful management of opex, we focus on maintaining positive operating cash flows, with UPC targets for 2020 in Anasuria and North Sabah of $ 18.5 / boe and $ 15 / bbl respectively,” he said.
Regarding capital spending, Hibiscus said no major capital spending is planned for Anasuria in 2020, while the North Sabah team had made efforts to optimize capital development for its 2020 drilling campaign to ensure economic viability. clear of projects, even with low oil prices.
Hibicus said this had resulted in North Sabah’s asset targeting a reduction in unit development cost from $ 14.2 / bbl to $ 10.5 / bbl in 2020.
“Our total net production target for FY20 (financial year ending June 30, 2020) is currently 3.2MMbbl of oil. The planned extraction for 4QFY20 could potentially be deferred to 1QFY21 to obtain higher oil prices in both Sabah and North as in Anasuria “. One step ahead for the remaining CY20 period, we have secured future sales of 750,000bbl at an average price of US $ 35 / bbl in North Sabah, ”said Hibiscus.
Hibiscus’ framework for cooperation with Trafigura is a financing and trade association. Hibiscus said today that it signed a supply and collaboration deed with Trafigura in April. Hibiscus said the deed covers several areas of business cooperation.
“Trafigura is a physical products trading company that is involved, inter alia, in the supply, storage, transportation and delivery of a range of raw materials, including oil and refined products.
“By signing this deed, Hibiscus and Trafigura have established a framework for the following: possible future absorption of crude oil by Trafigura from Hibiscus’ property / project assets; and possible financing for projects and acquisitions of assets pursued by Hibiscus.
“Despite weak oil prices and market sentiment, we continue to maintain momentum to explore new asset opportunities within our geographic focus areas. We acknowledge that there has already been a slowdown in the pace of potential asset divestments and that Lender banks are having to safeguard their existing client portfolios before adding new clients to finance potential acquisitions.
“However, we continue to work through the key factors and assumptions that underpin asset valuations, as well as rework the capital structures that would support new asset acquisitions in today’s market. Ultimately, we are preparing to to restart asset divestment programs capable of acquiring reasonably priced assets to boost the company’s oil production and reserves, ”said Hibiscus.
Hibiscus is also aware of the value to the company’s shareholders. The company said preserving shareholder value remains a fundamental 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 changes in its shareholder base from institutional to retail.
“However, the company’s institutional shareholding percentage remains significant at 42.9% with more than half being foreign institutions. Overall, despite volatility in the market, the company has been backed by several new names that they go into their shareholder base, “Hibiscus said. The firm did not elaborate.
In Bursa today, Hibiscus shares traded unchanged at 49 sin at 3:45 pm, with a market capitalization of approximately RM770.29 million. The stock had seen some 80 million shares traded.
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