• Hibiscus is taking over Repsol’s Malaysian assets and 1 production block in Vietnam for USD212.5m.

• We are positive with this acquisition and we view the purchase price as attractive given current relatively higher oil price environment.

• We expect this asset to more than double its 2P reserves and production. Nonetheless, we made no change to our earnings forecast pending more details from the company.

• Reiterate BUY on Hibiscus with unchanged TP of RM1.20. We think this is fair given potential earnings contribution from the acquisition of this asset. Hibiscus will resume trading tentatively on Tuesday 8 June.

Acquiring producing assets from Repsol

Hibiscus entered into conditional SPA with Repsol to purchase the latter’s Malaysian E&P assets (Table 1) and Block 46 CN in Vietnam for USD212.5m. To recap, it previously launched an RM2bn fundraising as part of its acquisition drive to acquire up to 3 producing assets in SEA.

Positive on the acquisition

While details are scarce, we are positive with this acquisition as the company is delivering on its promise to acquire producing assets. It has paid USD7.5m (will be funded via a portion of recent RM203m RCPS proceeds) for deposit and it expects to complete the acquisition this year. Once the purchase is completed, we believe this will enhance its profile as a capable and prominent E&P player hence opening up opportunities to acquire larger assets including Exxon’s Malaysian asset.

Attractive price, we think

Based on our estimate, these assets have a combined 2P oil reserves of 80 million barrels of oil equivalent (MMboe), implying potential acquisition cost of USD2.7/bbl. Although this is slightly higher than its previous acquisitions of producing assets (Table 2), we think that it is still attractive given current higher oil price environment. Besides that, the price tag also falls near the lower end of price range estimate between USD200m to USD400m provided by oil consultancy firms such as Rystad Energy and IHS Markit.

Shall boost 2P reserves to more than 100MMbbls

At this juncture, we maintain our earnings forecast pending more details from the company. Upon completion of the transaction, we expect this asset to more than double its 2P reserves to 126MMbbls (from 46MMbbls) while raising its production to more than 20,000 boepd (from 9,000 bpd).

Source: BIMB Securities Research - 3 Jun 2021