The whole 3D Oil deal will open a new phase for Hibiscus.
The farm-in deal agreement for the VIC/P57 field sees Hibiscus assuming operating control of the field which includes the proven West Seahorse field and two exploration prospects, Sea Lion and Felix, Dr Pereira said.
“We have two development options but need to get the regulatory clearance for the production licence to develop the West Seahorse field. The production licence will extend the concession period for another 20 years and raise the value of the concession itself,” he said.
He also expects to undertake some enhancement work on the Felix and Sea Lion prospects.
This may lead Hibiscus to consider raising its stake in 3D Oil or at the very least see its current market value of 3D Oil shares rise due to the work done on the field and prospects, said Dr Pereira. The VIC/P57 concession, in the mature Gippsland basin, was won by 3D Oil in 2004. One well, West Seahorse, supposedly holds an estimated ultimate recoverable reserve of about 9.2 million light oil barrels. However, Hibiscus conservatively estimates it to contain 7.5 million barrels.
Assuming the shallow water West Seahorse field is brought to production with first-oil by mid-2014, Hibiscus will take 75% of the cashflow for the first 12 months until it recovers the RM88 million invested to develop the field. Total development cost of the West Seahorse field is estimated at A$145 million (RM469.39 million) with bankers ready to provide loans for up to 60% of the cost.
Of the sum raised from the IPO, about RM170 million has been used to acquire a 35% stake in explorer Lime Petroleum Ltd. The remainder will be used to support the group's work programme. Hibiscus will raise some RM165 million when its warrants are fully exercised by 2014.
TDO Price at posting:
7.4¢ Sentiment: Buy Disclosure: Held
