TIDMPOL
RNS Number : 8536L
Polo Resources Limited
04 May 2020
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.
4 May 2020
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 (the "Update") outlining the Group's
initiatives and action plans to ensure business continuity in an
environment of low oil prices and to safeguard its employees
against the COVID-19 outbreak.
Importantly in the Update, Hibiscus also highlighted that the
Group has signed a deed of supply and collaboration ("the Deed")
with Trafigura Pte Ltd ("Trafigura") which covers several key areas
of commercial cooperation.
With the signing of this Deed, Hibiscus and Trafigura have put
in place a framework for the following:
-- Potential future offtake of crude oil by Trafigura from
assets owned/projects undertaken by Hibiscus; and
-- Potential funding for projects and asset acquisitions pursued by Hibiscus
Jointly working with Trafigura, Hibiscus has also taken the
opportunity to lock-in the sales price for a substantial portion of
its North Sabah production over the CY2020 period.
Trafigura is one of the world's leading independent physical
commodities trading companies, and is involved in the sourcing,
storage, transport and delivery of a range of raw materials
including crude oil and refined products.
Commenting on the agreement, Hibiscus' Managing Director, Dr
Kenneth Pereira, said, "We are pleased to be able to execute such a
commercial agreement with a global institution such as Trafigura.
This will allow the Group to leverage its existing and future
production capacity with Trafigura's global purchasing, funding and
marketing capability."
"Trafigura's business in Asia has grown materially in the last
few years," said Chin Hwee Tan, CEO Asia Pacific for Trafigura.
"One of the key objectives is for us to continue to think locally
while leveraging off our global platform. In parallel, we are
continuing to expand our support to a selected number of companies
in the oil and gas upstream sector, in Asia and across the world.
Local players such as Hibiscus Petroleum, together with the local
financial system, are most important as our long-term partners as
we continue to build our business in the region. We are looking
forward to working with Hibiscus Petroleum as it continues to grow
its asset base."
Corporate and Business Update
Highlights:
-- Global storage capacity limitations have exacerbated the
adverse impact of the COVID-19 outbreak and the OPEC+ alliance's
insufficient supply response on crude oil prices.
-- Hibiscus Petroleum's asset action plans have been activated
to mitigate the effects of low oil prices over the CY2020
period:-
o Revenue - locked in future sales of 750,000 bbls at an average
price of USD35/bbl at North Sabah
o OPEX - commenced the optimisation of unit operating costs at
Anasuria and North Sabah targeting USD 18.5/boe and USD 15.0/bbl
respectively
o CAPEX - replanned development expenditure programme at North
Sabah to ensure projects continually meet economic feasibility
criteria
-- A Framework of Cooperation has been established and
formalised with Trafigura, which in addition to current funding
lines, potentially provides access to funding for working capital,
CAPEX and potential asset acquisitions whilst ensuring the offtake
of crude oil production at North Sabah.
-- Hibiscus is readying for potential new opportunities in its areas of geographic focus.
HSSE Measures in Dealing with COVID-19
Being an oil & gas company with operations in Malaysia,
Hibiscus is an essential service and has continued to operate
throughout the Movement Control Order ("MCO") period. As part of
its business continuity plan, Hibiscus has enacted various
directives to counteract the spread and impact of COVID-19.
For North Sabah, this includes work-from-home rotations for
office-based staff, with teams formed to manage critical areas
including emergency response, incident management and critical
business activities. Offshore teams have been segregated in case of
any potential quarantine scenario, with the
focus being on priority activities.
In Anasuria, non-perishable food stocks offshore have been
increased to cover a month in case supply
becomes restricted. Total number of offshore personnel has been
reduced, with ability to provide quarantine cabins if required. The
helicopter operator has begun mandatory temperature checks at the
heliport prior to entering the main building, with modified
helicopters being prepared to evacuate any potential COVID-19
cases.
Market Environment - Brent more resilient than WTI but further
supply cuts needed
Oil prices continue to remain weak due to substantial demand
reduction caused by measures taken to combat COVID-19, including
restrictions on movement and travel resulting in a significant
reduction in overall economic activity. Figure 1 by Rystad Energy
below, shows theoretical stock builds in April 2020 of over 26
million barrels per day (bpd), with further builds of approximately
14 million bpd and 6 million bpd in May and June respectively.
Under normal circumstances, any production oversupply would be
stored without issue. The recent demand destruction that has taken
place has resulted in onshore storage facilities filling up far
more rapidly than originally anticipated. The anxiety over storage
was the main driver for WTI May futures contracts to drop to
negative levels, as WTI requires physical delivery. According to
Rystad Energy, globally, the market may run out of places to store
crude oil by mid or late-May. To avoid these untested waters,
global production shut-ins need to accelerate, as shown in Figure 2
of Hibiscus' announcement.
On a positive note, Rystad believe that Brent should be more
resilient than WTI - given it is made up of multiple crude grades
and has natural egress to seaborne markets, and thus can chase
global demand in a way that WTI cannot. They expect Brent to be
connected to the physical prices in the North Sea but with
storage-linked risks that are less urgent than with WTI.
Asset Action Plans
Opex
To mitigate the risks posed by COVID-19, MCO and low crude
prices, Hibiscus' key focus is to ensure business continuity. Both
North Sabah and Anasuria teams are targeting a reduction in Unit
Production Costs ("UPC") for 2020 through the deferral of
non-critical Opex activities and managing General &
Administrative expenses. Through this careful management of Opex,
Hibiscus is focused on maintaining positive operating cashflows,
with UPC targets for 2020 in Anasuria and North Sabah of USD
18.5/boe and USD 15.0/bbl respectively.
Capex
No major Capex is planned for Anasuria in 2020, while the North
Sabah team has undertaken efforts to optimise development capex for
its 2020 drilling campaign to ensure the clear economic viability
of projects even with prevailing low crude prices. This has
resulted in the asset targeting a reduction of Unit Development
Costs from USD 14.2/bbl to USD 10.5/bbl over the CY2020 period.
Production and Offtakes
Hibiscus' total net production target for FY2020 currently
stands at 3.2 MMbbl of oil. Planned offtakes for Q4 FY2020 may
potentially be deferred to Q1 FY2021 in order to realise higher
crude price in both
North Sabah and Anasuria. As a forward step for the remaining
period of CY2020, Hibiscus has locked in future sales of 750,000
bbls at an average price of USD 35/bbl at North Sabah.
Commercial Cooperation - a commercial and funding
partnership
In April 2020, Hibiscus signed a deed of supply and
collaboration ("Deed") with Trafigura which covers several areas of
commercial cooperation. Trafigura is a physical commodities trading
company, which is involved, amongst other things, in the sourcing,
storage, transport and delivery of a range of raw materials
including oil and refined products.
With the signing of this Deed, Hibiscus and Trafigura have put
in place a framework for the following:
-- Potential future offtake of crude oil by Trafigura from
assets owned/projects undertaken by Hibiscus
-- Potential funding for projects and asset acquisitions pursued by Hibiscus
Hibiscus is pleased to be able to execute such a commercial
agreement with a global institution such as Trafigura which allows
the company to leverage its existing and future production capacity
with Trafigura's global purchasing, funding and marketing
capability.
New Ventures - on the lookout for new opportunities
Despite the weak oil price and market sentiment, Hibiscus
continues to maintain the momentum in exploring new asset
opportunities within its areas of geographic focus. Hibiscus
acknowledges that there has already been a slowdown in the pace of
potential asset divestments and that lending banks are having to
safeguard their existing client portfolios before onboarding new
clients to fund potential acquisitions.
However, Hibiscus is continuing to work through the key factors
and assumptions underpinning asset valuations as well as rework the
capital structures that would support new asset acquisitions in the
current market. Ultimately, Hibiscus is readying for the
recommencement of asset divestment programmes to be able to acquire
assets at a reasonable price to boost the company's oil production
and reserves.
Shareholders and Shareholder Value
In undertaking its business activities, the preservation of
shareholder value continues to be a core tenet of Hibiscus. Over
the first quarter of CY2020, the capital markets have seen
significant profit taking, and the company has seen some switching
in its shareholder base from institutional to retail, as shown in
Figure 3 of Hibiscus' announcement. However, the institutional
shareholding percentage in the company is still significant at
42.9% with more than half being foreign institutions. Overall,
despite the volatility in the market, the company has been
supported by several new names entering its shareholder base.
The full details of these announcements 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
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
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDBXGDURBGDGGS
(END) Dow Jones Newswires
May 04, 2020 09:20 ET (13:20 GMT)
Polo Resources (LSE:POL)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Polo Resources (LSE:POL)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
