TIDMPOL
RNS Number : 5364J
Polo Resources Limited
05 December 2018
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation No 596/2014 and has
been announced in accordance with the Company's obligations under
Article 17 of that Regulation.
5 December 2018
Polo Resources Limited
("Polo" or the "Company")
HIBISCUS PETROLEUM - INVESTMENT UPDATE
Polo Resources Limited (AIM: POL), the multi-sector investment
company with interests in oil, gold, coal, copper, phosphate,
lithium, iron and vanadium, notes that its 8.75% investee company
Hibiscus Petroleum Berhad ("Hibiscus") has announced a corporate
and business update which seeks to provide an analysis of the
current operating environment and how major recent and upcoming
developments may impact the company's performance against a
backdrop of increased volatility in global oil prices.
Hibiscus carried out significant activities in 2018 which
included: i) Completion of the acquisition of a 50% participating
interest in the North Sabah Enhanced Oil Recovery Production
Sharing Contract ("North Sabah PSC") in Malaysia and commencement
of operations of this second producing asset effective 1 April 2018
under the operatorship of the company; ii) In the U.K. North Sea,
technical work on the opportunities around the Anasuria Cluster
(Hibiscus' first producing asset in which it has a 50%
participating interest) increased the volume of reserves, and a
well was drilled in the Central North Sea; iii) In October 2018
Hibiscus acquired a 50% participating interest in two discovered
fields in Blocks 15/13a and 15/13b in the Central North Sea
(together, "Marigold & Sunflower Blocks") which are currently
non-producing - marking a second major asset in the U.K. North
Sea.
Each of the above activities has involved the deployment of
capital and technical resources of the company and from third
parties with a view to value accretion. These projects have also
increased the scale and profile of Hibiscus, Malaysia's first
listed, pure play independent oil and gas exploration and
production company. Hibiscus remains committed to achieving its
Mission 2021 of achieving 100 million barrels ("mmbbls") of net
proved and probable oil reserves and net production of 20,000
barrels ("bbls") per day.
Hibiscus Petroleum Today
A. Increased Value, Scale and Market Awareness
Hibiscus' market capitalisation has increased by approximately
RM600 million (USD144.5 million), or by about 54%, over the past 12
months. As at close of trading on 3 December 2018, the company had
a market capitalisation of approximately RM1.715 billion (USD0.413
billion). Trading liquidity has also been high. Both factors have
contributed to the company's shares being added to the MSCI Global
Small Cap Index effective 30 November 2018, underscoring increasing
international market awareness of Hibiscus.
B. Improving Financial Performance
The financial health of the company has been improving. As of 30
September 2018, total cash balances stood at RM 302 million
(USD72.7 million), total assets have increased to RM 2.2 billion
(USD0.53 billion), net assets per share stood at 70 sen and we
continue to operate without debt.
C. Anasuria Cluster Update
Any increase in the value of a public company share price should
normally be driven by fundamental value creation at the level of
the assets owned by the public company. For Hibiscus Petroleum, two
activities at our North Sea Anasuria asset have recently
contributed towards increasing the valuation of the company.
1) Technical work completed on the asset has enabled independent
experts to increase our net proven and probable ("2P Oil Reserves")
to 24.4 mmbbls (as of 1 July 2018 - LEAP Energy Partners) from 20.2
mmbbls (projected by RPS Energy as of 1 March 2016). Given
production of 2.5 mmbbls during the intervening period, this
upgrade signifies that 6.7 mmbbls were added to net reserves.
2) In addition to technical work in the office, Hibiscus also
carried out value-accreting activities offshore. In mid-2018, the
existing GUA-P2 ("GUA-P2 ST") well was sidetracked into a nearby,
untapped compartment of the Forties reservoir containing a gross
recoverable oil volume of approximately 1.5 mmbbls. This
represented the company's first major capital project in the North
Sea. Upon completion of the sidetrack, Hibiscus' net daily
production from the Anasuria Cluster increased by more than
33%.
In October 2018, the Anasuria Cluster was contributing an
average of 4,229 bbls/day net to Hibiscus, compared to an average
of 3,197 bbls/day in FY2017.
Hibiscus will continue to drive towards its target of delivering
an average net production of 5,000 bbls/day by the end of FY2020
(as announced on 9 November 2017). In this respect, a water
injection well has been sanctioned on the Cook Field with the aim
of re-pressurising the reservoir. In this manner, we hope to
improve the Recovery Factor from this field thus extending the
economic life and lowering future unit operating costs.
Hibiscus is also working towards the sanctioning of a further
drilling project (within the fields at Anasuria). Apart from
arresting natural decline, Hibiscus hopes that this proposed well
will enhance production.
D. North Sabah PSC Update
Results disclosed in the first quarter of financial year 2019
("Q12019") represented the second quarter of reporting by the
company of the operations and contribution of the North Sabah PSC,
having completed the acquisition of a 50% participating interest in
March 2018. The significance of this acquisition - the first in
Malaysia for the company - is that it has provided Hibiscus with
oil-production footprints on two different continents.
Prior to the completion of this transaction, Hibiscus produced
approximately a net of 1.0 mmbbls of crude oil per annum, solely
from the Anasuria Cluster. Thus, Hibiscus was subject to business
risks concentrated around the performance of a single asset.
Periods of unplanned shutdown impacted revenues and profitability,
sometimes, significantly. The North Sabah PSC has mitigated this
risk substantially. Revenues and profits are now delivered across
two geographies. In addition, the combined annual production has
increased by approximately 2.0 mmbbls, or two-thirds that of total
current production.
To further enhance production from the North Sabah PSC,
Petroliam Nasional Berhad ("PETRONAS") had in August 2018, approved
the St Joseph Infill Drilling project through the Milestone
Review-4 maturation process, leading to the submission of a Field
Development Plan in November 2018. This project entails the
drilling of three infill producers, utilizing a triple splitter
wellhead on the St Joseph Jacket-A ("SJJT-A") platform. From an
estimated ultimate recovery ("EUR") of a gross of 2.8 million stock
tank barrels of oil, the project is expected to add approximately
gross 2,600 bbls/day of oil at peak production. This infill
drilling program will require minimal modification of topside
facilities at the SJJT-A platform.
The total capital commitment to this project is anticipated to
be approximately RM142.5 million (USD34.31 million), which will be
shared equally with Hibiscus' joint venture partner, Petronas
Carigali Sdn Bhd ("Petronas Carigali"). Drilling is expected to
commence in April 2019 and first oil production expected in June
2019.
Additional projects are also being matured that will increase
production in the mid-term.
E. Company Wide Internal Efficiencies
Against a backdrop of volatile oil prices, Hibiscus believes
that a disciplined approach to safe operations and cost management
can contribute to improved overall operational performance. The
company's objective is to (as safely as practically possible)
minimize operating expenditure per barrel of oil equivalent
("OPEX/boe") as it is critical for the long-term sustainability of
our business.
We have seen oil prices which have been higher and lower than
currently being experienced. While crude oil prices may fluctuate,
Hibiscus' business sustainability depends how it maintains
stability in its cost structure. In addition, Hibiscus recognises
that unit operating costs are a function of the volumes of oil (and
gas) produced and thus, it is extremely important to keep its
production uptime levels relatively high. Subject to being able to
maintain current operational trends, being prudent in general and
administration expenditure and efficient in the execution of
projects, Hibiscus will be able to remain cashflow positive and
continue to operate as a sustainable business.
F. Outlook
In summary, Hibiscus:
1. is working towards achieving net production of 5,000 bbls/day
at the Anasuria Cluster by the end of FY2020.
2. barring unforeseen circumstances, intends to deliver total
oil production attributable to Hibiscus in FY2019 of approximately
2.7 mmbbls to 3.0 mmbbls. Total offtakes in FY2019 are expected to
rise to approximately 10 (or 11), compared to an average of four
per year, previously. This increase in the number of offtakes will
help smoothen the average selling price per barrel of oil over the
financial year.
3. is focused on managing costs amidst volatility in global oil
prices and is striving to maintain its OPEX/boe at a level below
US$20/boe. This compares with an average selling price of crude oil
achieved by the company of US$65.69/bbl for FY2018 and US$76.36/bbl
for Q12019.
4. has, with the addition of the North Sabah PSC and a recent
upgrade of reserves at the Anasuria Cluster, increased the combined
2P Oil Reserves of the company to approximately 46 mmbbls.
5. is commencing engineering and technical studies costing
approximately US$5 million and working towards the submission of a
field development plan (for the Marigold & Sunflower Blocks) to
the relevant authorities for approval in about 18 months.
The full details of this announcement can be found at
http://www.hibiscuspetroleum.com/.
For further information, please contact:
Polo Resources Limited
- Kudzayi Denenga, Investor Relations +27 (0) 787 312 919
Allenby Capital Limited (Nominated
adviser & broker)
- John Depasquale +44 (0)20 3328 5657
Blytheweigh (Public relations)
- Julia Tilley, Jane Lenton, Fergus
Cowan +44 (0) 207 138 3204
About the Company
Polo Resources Limited is a multi-sector investment company
focused on investing in undervalued companies and projects with
strong fundamentals and attractive growth prospects. For complete
details on Polo, please refer to: www.poloresources.com.
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END
UPDBBBDDUGGBGIU
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December 05, 2018 06:08 ET (11:08 GMT)
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