Extraordinary General Meeting Presentation - 10 October 2024

Summary

Hibiscus Petroleum is proposing the acquisition of Total Energies Brunei, which holds a 37.5% operated interest in the Blan B concession offshore Brunei. This strategic acquisition will increase Hibiscus’ daily production by 37% and reserves by 36%, positively impacting earnings. The purchase, valued at $29.4 million, is fully funded by internal resources, with no equity issuance required. Key benefits include operational control, a commitment to carbon emission reductions, and access to Brunei’s gas market. The transaction aligns with Hibiscus’ growth targets, and the directors recommend shareholder approval for this high-value opportunity.

Takeaways

• 😀 The acquisition of Total Energies Brunei by Hibiscus Petroleum will significantly increase production from 21,000 to 30,000 barrels of oil equivalent per day, a 37% increase.
• 😀 The acquisition will also increase 2P reserves by 36%, from 60.9 million barrels to 82.6 million barrels.
• 😀 Hibiscus expects the acquisition to positively impact its earnings, with a projected 37% uplift in profit after tax and a 26% increase in earnings per share.
• 😀 The acquisition provides Hibiscus direct control as the operator of the Brunei asset, enhancing its ability to optimize production and reduce costs.
• 😀 A major part of the acquisition is its alignment with Hibiscus's energy transition goals, including decarbonization projects like methane emission reductions and a solar facility to offset CO2 emissions.
• 😀 Gas from the Brunei asset represents 84% of production, making it a key contributor to Hibiscus’s low-carbon energy transition, as gas emits fewer pollutants than oil and coal.
• 😀 The acquisition also gives Hibiscus indirect access to the growing global LNG market through a long-term gas sales agreement with Brunei LNG, ensuring steady demand for gas until 2033.
• 😀 Hibiscus will collaborate with reputable partners like Shell and Brunei Energy, strengthening its position in Brunei’s oil and gas sector.
• 😀 The transaction is valued at USD 29.4 million, with no new equity issuance required, and will be funded by Hibiscus’s internal cash flow and debt facilities.
• 😀 Potential risks include fluctuating oil and gas prices, operational risks, and the expiration of the concession in 2029, which may affect long-term profitability.
• 😀 The acquisition supports Hibiscus’s growth targets, bringing the company closer to its 2026 goals of 35,000 barrels per day production and 100 million barrels of reserves.

Q & A

What is the purpose of this presentation?

The presentation aims to provide an overview of Hibiscus Petroleum's proposed acquisition of Total Energies Brunei, helping shareholders understand the transaction and make an informed decision during the Extraordinary General Meeting (EGM).

What is the key asset that Hibiscus Petroleum is acquiring?

Hibiscus Petroleum is acquiring 100% of Total Energies Brunei, which holds a 37.5% operated interest in the Blan B concession, a gas-producing asset in offshore Brunei.

How will this acquisition affect Hibiscus Petroleum's production and reserves?

The acquisition will increase Hibiscus Petroleum’s daily production from 21,000 to 30,000 barrels of oil equivalent (BoE), a 37% increase, and boost the company’s 2P reserves from 60.9 million barrels to 82.6 million barrels, a 36% increase.

What are some of the immediate financial benefits expected from this acquisition?

The acquisition is expected to positively impact Hibiscus Petroleum's earnings. For example, Total Energies Brunei generated a profit of 150 million ringgit in 2023, which would increase the group’s profit by 37% if combined with Hibiscus’ 2023 profits.

How is Hibiscus Petroleum planning to operate the Brunei asset post-acquisition?

Hibiscus Petroleum will take over the operation of the Brunei asset as its operator. The company plans to optimize production, manage work programs and budgets, and implement its tested approach to asset management, focusing on cost reduction and production enhancement.

How does the acquisition align with Hibiscus Petroleum’s energy transition goals?

The acquisition aligns with Hibiscus Petroleum’s decarbonization objectives by evaluating projects to reduce methane emissions and exploring the development of a 13-megawatt solar facility, which will contribute to offsetting CO2 emissions.

What are the major risks associated with this acquisition?

Key risks include fluctuations in oil and gas prices, potential operational issues (e.g., cost overruns or safety/environmental risks), the possibility that the concession agreement may not be renewed after 2029, and the finite lifespan of the asset's reserves.

What is the total purchase consideration for the acquisition?

The total purchase consideration for the acquisition is $29.4 million, supported by an independent valuation of $250 million by RPS Energy, based on the discounted cash flows of the asset from 2023 to 2039.

How will the acquisition be funded?

The acquisition will be fully funded using Hibiscus Petroleum’s internal cash and available debt facilities, with no equity issuance required. The closing amount after adjustments is estimated at $146.8 million.

What is the outlook for the oil and gas industry, and how does it affect the acquisition?

The oil and gas industry is facing a supply-demand gap due to reduced investment in production, while global demand continues to rise. Projections indicate that oil prices will remain elevated, making acquisitions like this one strategically valuable for securing long-term supply and profitability.