KUALA LUMPUR: Hibiscus Petroleum Bhd (HPB) has the potential to earn about US$255 million (RM1.1 billion) in net cash inflow over the next five years once the acquisition of Fortuna International Petroleum Corp (FIPC) from Repsol Exploración SA (Repsol) materialise by the end of 2021.
The oil and gas (O&G) exploration and production company also estimated earnings before interest, taxes, depreciation, and amortisation (EBITDA) contribution of US$135 million (RM558.8 million) from the Spanish asset in the calendar year 2022.
Managing director Dr Kenneth Pereira said the transformative acquisition is expected to enhance HPB's financial ability to reinvest into the existing asset portfolio and expand its growth prospects by acquiring high-quality production assets while paying dividends to reward its shareholders.
"Over the last six months, we have been bidding for this asset. Thankfully, the oil prices also rebounded into a reasonable range now for us to be able to enjoy some upside from this asset," he said at a virtual press conference on Saturday.
Pereira said oil prices have bounced to about US$72 per barrel despite the ongoing Covid-19 crisis globally, as aircraft around the world are still grounded and many economic activities are hampered by the efforts to contain the virus.
"At the time when we were bidding for the FIPC asset, oil prices ranged between US$55 and US$65 per barrel but now nearing US$72 per barrel.
"We believe oil prices still hold at a strong level. If the pandemic issues get resolve gradually across the world, we believe oil prices may trend a bit higher," he added.
To recap, HPB issued a single-tier interim dividend of 0.5 sen per share for the financial year ending June 30, 2021, despite lower oil prices at the time ranging from about US$55 to US$60 per barrel.
HPB's indirect unit, Peninsula Hibiscus Sdn Bhd, has acquired FIPC for US$212.5 million (RM879.5 million) after entering into a conditional sale and purchase agreement (SPA) with Repsol on June 1.
HPB said the acquisition is a unique opportunity for the company to acquire a high-quality asset portfolio comprising five production sharing contracts (PSC) in Malaysia and Vietnam.
The acquisition also allows the company to collectively assume Repsol's role as the operator for PM314 with a 60 per cent stake, PM305 (60 per cent), 2012 Kinabalu Oil (60 per cent), PM3 CAA (35 per cent) and Block 46 (70 per cent).
The acquisition involves five PSCs in Malaysia and Vietnam, involving 205 wells and 17 platforms, while Peninsula Hibiscus will be taking on Repsol's role as operators.
Corporate finance head Joyce Vasudevan said HPB would not be raising a full amount of US$212.5 million to complete the acquisition but rather generate funding via banks borrowing and Islamic convertible redeemable preference shares (CRPS).
"Currently, we have about RM200 million accrued from CRPS. We believe it will not be an issue for us to raise another up RM250 million, possibly via CRPS, to close the acquisition deal. HPB will generate the remaining balance from banks borrowing as part of the acquisition's settlement," she said.
Joyce said HPB is a debt-free company and have a strong cash flow from its acquiring assets.
"Hence, we can take on more debts," she said, adding that the company has no plan to raise funds via a rights issue.
"We have sufficient funding ability through other sources. However, we also don't want to unnecessarily burden our shareholder by doing a rights issue at this time," she added.
HPB has guided to keep its gearing below a comfortable level of 0.3 times in the future with expected borrowing of up to RM300 million after acquiring FIPC.
Upon completion, Pereira said the acquisition would be transformational in line with its business trajectory into its next phase of growth.
"We have a high regard for the team at Repsol, and we look forward to welcoming them into the Hibiscus family and working with them to monetise opportunities within the assets further," he said.
The company's daily production and reserves are expected to increase significantly from 9,000 to 18,500 barrels per day in 2022 while daily gas production from 2.0 MMscf per day to 49 MMscf per day in 2022.