Outperform with a target price (TP) of RM1.06: Hibiscus Petroleum Bhd has received Petronas Carigali Sdn Bhd’s (PCSB) unconditional consent under the joint operating agreement (JOA) to the assignment of Shell’s 50% interest in the 2011 North Sabah Enhanced Oil Recovery (EOR) production sharing contract (PSC). We are elated by this news, knowing that the deal is another step closer to completion. Our current valuation of Hibiscus includes the North Sabah acquisition based on its proven and probable reserves only, which we believe would add another 48 sen to the group’s underlying fair value of 58 sen.
The JOA is for its indirect wholly-owned subsidiary SEA Hibiscus Sdn Bhd (SEA Hibiscus) to acquire a 25% operating interest in the 2011 North Sabah EOR PSC from Sabah Shell Petroleum Company Ltd and a further 25% non-operating interest in the PSC from Shell Sabah Selatan Sdn Bhd. PCSB is the other PSC partner and will retain a 50% non-operating interest.
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Headline crude prices for the week beginning 10 February 2020 – Brent: US$53/b; WTI: US$49/b
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