KUALA LUMPUR: Hibiscus Petroleum Bhd will make its first acquisition since listing on July 25 as a special-purpose acquisition company (SPAC) by proposing to acquire 35% of Lime Petroleum Ltd, which owns three exploration concessions in the Middle East for US$55 million (RM172.2 million) in cash.
The acquisition will be done in two parts. The first is via a share subscription agreement to be entered with Lime Petroleum for approximately 76.9 million new shares or 27.2% equity stake in the enlarged capital of Lime Petroleum for US$50 million cash. Second is the purchase of a 7.8% equity stake of the enlarged Lime Petroleum from one of the major shareholders, Rex Oil & Gas Ltd, through a share purchase agreement for US$5 million.
“Once both agreements are finalised, Hibiscus will hold a 35% equity stake in the enlarged Lime Petroleum for a cash consideration of US$55 million. A further US$5 million is payable to Rex Oil & Gas when commercial oil delivery is declared,” Hibiscus managing director Dr Kenneth Pereira said on Tuesday.
The additional US$5 million payable to Rex Oil & Gas is because it owns the proprietary technologies used by Lime Petroleum in surveying and discovering potential resources in an oil and gas (O&G) block. But Lime Petroleum holds the licence to the technologies which Hibiscus will be able to tap, said Pereira.
Through the acquisition of a strategic stake in Lime Petroleum, Hibiscus is poised to gain from the three concessions already secured by the former in the Middle East, namely exploration blocks totalling 1,200 sq km and 1,600 sq km offshore Ras al-Khaimah and Sharjah in the United Arab Emirates (UAE), and 16,900 sq km of exploration block offshore Oman.
“These are exploration agreements that have been given to Lime Petroleum. Of the three, one is in Oman, which is a big block with huge potential, and the others are in the UAE. We expect to get another one by the time we finalise the acquisition. We will get four or maybe more,” said Hibiscus chairman Zainul Rahim Mohd Zain.
“The oil and gas block offshore Oman is so massive, which is equivalent to the size of Johor. That’s how big 16,000 sq km really is,” added Pereira.
None of the three blocks has started production and there are no estimates of how much of proven reserves of oil and gas the blocks possibly contain.
Hibiscus said based on an independent assessment, the net unrisked and net risked recoverable resources from the three concessions are 1,711.6 million barrels of oil equivalent (mboe) and 200.7 million mboe respectively. Net risked recoverable resources refer to internal estimates of volumes of natural gas and oil that are not classified as proven reserves but are potentially recoverable through exploratory drilling or additional drilling or recovery techniques. Net unrisked refers to estimates without factoring in the risk of extracting the oil and gas.
The valuation of Lime Petroleum concessions was arrived based on a number of factors. First, an indicative fair valuation of Lime Petroleum conducted by a third party of between US$51 million and US$57 million; second the future prospects of Lime Petroleum with its participating interests in the three concessions; and third the subscription by Schroder & Co Banque SA of shares in Lime Petroleum on Sept 9 of US$0.65 per share, which is higher than Hibiscus’ subscription price of US$0.56 per share.
Hibiscus had raised RM234 million from its IPO a few months ago through private placement and balloting of the shares issued. As an SPAC, Hibiscus is obligated to place at least 90% of its IPO proceeds in a trust account, and utilise at least 80% of the money to acquire businesses.
Zainul said through the acquisition of Lime Petroleum, Hibiscus will become an operational exploration and production (E&P) player in a very short time. Hibiscus will manage the day-to-day operations of Lime Petroleum and is appointed the project manager of the E&P works in the subsequent oil fields.
“Instead of investing in one concession, we have managed to invest in a company that has three assets in two countries, which are Oman and the UAE. The concessions are in a proven oil and gas producing region and the deal also gives us exclusive access to proprietary technology that increases our chances of finding oil and gas accumulations,” said Zainul.
On when the company will strike its first oil in the concession blocks, Pereira said if the deal gets through with the authorities and the shareholders by March next year, the company could start drilling in August or September 2012 and potentially to book its commercial value by March 2013.
If the deal goes through, Hibiscus’ IPO proceeds will be reduced to about RM40 million, according to Zainul. The company could still raise another RM175 million via warrants conversion by shareholders. The warrants were given free with the shares issued in the IPO. In the next three years, Hibiscus could still tap RM215 million in cash for development of the projects in Oman and the UAE.
However, Hibiscus intends to list Lime Petroleum as soon as it gets the deal through. Any additional expenditure needed to fund the exploration works in future could be made through Lime Petroleum. After the acquisition of Lime Petroleum, Hibiscus will become a public-listed company and could raise funds in anyway possible.
Currently, Lime Petroleum has US$30 million cash available with a potential further injection of US$7.15 million by Petroci Holdings Ltd, the state-owned corporation of Ivory Coast, as it is one of the shareholders in Masirah Oil Ltd, which owns the Oman concession block. Masirah is 74%-owned by Lime Petroleum, but Petroci could increase its stake from 26% to 65% of Masirah through an exiting call option agreement with Lime Petroleum.
From the US$30 million available, US$22 million will be utilised for the drilling of wells in offshore blocks in Ras al-Khaimah in UAE, with another US$4 million for seismic exploration in the blocks offshore Oman.
The proposed acquisition of Lime Petroleum by Hibiscus is subject to the approval by the Securities Commission and its shareholders.
This article appeared in The Edge Financial Daily, October 27, 2011.
The acquisition will be done in two parts. The first is via a share subscription agreement to be entered with Lime Petroleum for approximately 76.9 million new shares or 27.2% equity stake in the enlarged capital of Lime Petroleum for US$50 million cash. Second is the purchase of a 7.8% equity stake of the enlarged Lime Petroleum from one of the major shareholders, Rex Oil & Gas Ltd, through a share purchase agreement for US$5 million.
“Once both agreements are finalised, Hibiscus will hold a 35% equity stake in the enlarged Lime Petroleum for a cash consideration of US$55 million. A further US$5 million is payable to Rex Oil & Gas when commercial oil delivery is declared,” Hibiscus managing director Dr Kenneth Pereira said on Tuesday.
The additional US$5 million payable to Rex Oil & Gas is because it owns the proprietary technologies used by Lime Petroleum in surveying and discovering potential resources in an oil and gas (O&G) block. But Lime Petroleum holds the licence to the technologies which Hibiscus will be able to tap, said Pereira.
Through the acquisition of a strategic stake in Lime Petroleum, Hibiscus is poised to gain from the three concessions already secured by the former in the Middle East, namely exploration blocks totalling 1,200 sq km and 1,600 sq km offshore Ras al-Khaimah and Sharjah in the United Arab Emirates (UAE), and 16,900 sq km of exploration block offshore Oman.
“These are exploration agreements that have been given to Lime Petroleum. Of the three, one is in Oman, which is a big block with huge potential, and the others are in the UAE. We expect to get another one by the time we finalise the acquisition. We will get four or maybe more,” said Hibiscus chairman Zainul Rahim Mohd Zain.
Pereira (left) and Zainul at Hibiscus' press conference on Tuesday.
“The oil and gas block offshore Oman is so massive, which is equivalent to the size of Johor. That’s how big 16,000 sq km really is,” added Pereira.
None of the three blocks has started production and there are no estimates of how much of proven reserves of oil and gas the blocks possibly contain.
Hibiscus said based on an independent assessment, the net unrisked and net risked recoverable resources from the three concessions are 1,711.6 million barrels of oil equivalent (mboe) and 200.7 million mboe respectively. Net risked recoverable resources refer to internal estimates of volumes of natural gas and oil that are not classified as proven reserves but are potentially recoverable through exploratory drilling or additional drilling or recovery techniques. Net unrisked refers to estimates without factoring in the risk of extracting the oil and gas.
The valuation of Lime Petroleum concessions was arrived based on a number of factors. First, an indicative fair valuation of Lime Petroleum conducted by a third party of between US$51 million and US$57 million; second the future prospects of Lime Petroleum with its participating interests in the three concessions; and third the subscription by Schroder & Co Banque SA of shares in Lime Petroleum on Sept 9 of US$0.65 per share, which is higher than Hibiscus’ subscription price of US$0.56 per share.
Hibiscus had raised RM234 million from its IPO a few months ago through private placement and balloting of the shares issued. As an SPAC, Hibiscus is obligated to place at least 90% of its IPO proceeds in a trust account, and utilise at least 80% of the money to acquire businesses.
Zainul said through the acquisition of Lime Petroleum, Hibiscus will become an operational exploration and production (E&P) player in a very short time. Hibiscus will manage the day-to-day operations of Lime Petroleum and is appointed the project manager of the E&P works in the subsequent oil fields.
“Instead of investing in one concession, we have managed to invest in a company that has three assets in two countries, which are Oman and the UAE. The concessions are in a proven oil and gas producing region and the deal also gives us exclusive access to proprietary technology that increases our chances of finding oil and gas accumulations,” said Zainul.
On when the company will strike its first oil in the concession blocks, Pereira said if the deal gets through with the authorities and the shareholders by March next year, the company could start drilling in August or September 2012 and potentially to book its commercial value by March 2013.
If the deal goes through, Hibiscus’ IPO proceeds will be reduced to about RM40 million, according to Zainul. The company could still raise another RM175 million via warrants conversion by shareholders. The warrants were given free with the shares issued in the IPO. In the next three years, Hibiscus could still tap RM215 million in cash for development of the projects in Oman and the UAE.
However, Hibiscus intends to list Lime Petroleum as soon as it gets the deal through. Any additional expenditure needed to fund the exploration works in future could be made through Lime Petroleum. After the acquisition of Lime Petroleum, Hibiscus will become a public-listed company and could raise funds in anyway possible.
Currently, Lime Petroleum has US$30 million cash available with a potential further injection of US$7.15 million by Petroci Holdings Ltd, the state-owned corporation of Ivory Coast, as it is one of the shareholders in Masirah Oil Ltd, which owns the Oman concession block. Masirah is 74%-owned by Lime Petroleum, but Petroci could increase its stake from 26% to 65% of Masirah through an exiting call option agreement with Lime Petroleum.
From the US$30 million available, US$22 million will be utilised for the drilling of wells in offshore blocks in Ras al-Khaimah in UAE, with another US$4 million for seismic exploration in the blocks offshore Oman.
The proposed acquisition of Lime Petroleum by Hibiscus is subject to the approval by the Securities Commission and its shareholders.
This article appeared in The Edge Financial Daily, October 27, 2011.
