• The UK NSTA has approved Hibiscus Petroleum (Hibiscus) plan to acquire Rapid Oil’s 42.5% stake in P2451 that contains undeveloped Fyne field.

• The company plans to tie-back a single well development from Fyne field to Anasuria FPSO. We are positive with this as it augurs well with its plan to arrest production decline from the facility and extend its remaining lifetime.

• Maintain Hibiscus as a BUY with a revised DCF-derived TP of RM3.40 (post share consolidation). We remain optimistic with its growth story underpinned by higher oil price environment.

Expansion in the UK

Recently Hibiscus announced that the North Sea Transition Authority (NSTA) has approved its joint plan with DNeX’s Ping Petroleum to enter into a farm-in agreement with Rapid Oil Production Ltd. The farm-in agreement is to allow both companies to separately acquire 42.5% equity interest each in Licence P2451 with the balance 15% to remain with the latter. The licence contains Fyne field which is an undeveloped oil field located in North Sea with estimated 75mn barrels of oil equivalent (MMboe) stock tank oil initially in place (STOOIP). While the farm-in fee is not disclosed, we are generally positive with the transaction due to (i) Hibiscus will be appointed as the operator for the field development, and (ii) the proposed tie-back of a single development well to Anasuria FPSO will arrest the decline in production and extend the remaining life of the vessel.

A Challenging Marginal Field to be Developed

Note that Fyne field was first discovered by Mobil in 1987. It has a long history given that various companies has assumed the operatorship to develop the field but to no avail. Rapid Oil who was the most recent operator has proposed to develop it via a single development hub together with Orcadian Energy’s Crinan and Dandy North Sea discoveries. However, the company has abandoned this option given that the acquisition has failed. Should Hibiscus is able to forge through with its own proposed development solution, we believe this will enhance its image as a reputable O&G operator that is capable to monetise marginal field in the UK.

Earnings Impact

We make no changes to our forecast given that there’s still no visibility in the proposed development project.

Maintain BUY with a revised TP RM3.40 We maintain Hibiscus as a BUY with a revised DCF-derived TP of RM3.40 taking into account its share consolidation exercise. Our TP implies 0.9x FY24F P/B and 6x FY24F P/E.

Source: BIMB Securities Research - 18 Oct 2023