Further details of the Proposed Free Warrants Issue are set out in the ensuing sections.

Transcription

1 HIBISCUS PETROLEUM BERHAD ( HIBISCUS PETROLEUM OR COMPANY ) PROPOSED FREE WARRANTS ISSUE 1. INTRODUCTION On behalf of the Board of Directors of Hibiscus Petroleum ( Board ), RHB Investment Bank Berhad ( RHB Investment Bank ) wishes to announce that the Company proposes to undertake a proposed issue of up to 317,645,744 free warrants in Hibiscus Petroleum ( Warrants ) on the basis of one (1) new Warrant for every five (5) existing ordinary shares in Hibiscus Petroleum ( Shares ) held on an entitlement date to be determined later ( Proposed Free Warrants Issue"). Further details of the Proposed Free Warrants Issue are set out in the ensuing sections. 2. DETAILS OF THE PROPOSED FREE WARRANTS ISSUE 2.1 Basis and number of Warrants to be issued The Proposed Free Warrants Issue would entail the issuance of up to 317,645,744 new Warrants on the basis of one (1) new Warrant for every five (5) existing Shares held by the entitled shareholders of Hibiscus Petroleum whose names appear in the Record of Depositors of the Company ( Entitled Shareholders ) on an entitlement date to be determined later ( Entitlement Date ). The number of issued ordinary share capital of the Company as at 5 December 2017 (being the latest practicable date prior to the date of this announcement ( LPD )) is 1,543,923,291 Shares. As announced on 31 May 2017, the Company proposed to undertake a proposed private placement of up to 144,384,429 Shares, representing up to ten percent (10%) of its existing issued ordinary share capital, under the general mandate pursuant to Section 132D of the Companies Act 1965 (which has now been replaced by Sections 75 and 76 of the new Companies Act 2016 ( Act )) obtained from the shareholders of Hibiscus Petroleum at the Company s sixth (6 th ) Annual General Meeting convened on 6 December 2016 ( Proposed Private Placement of Shares ). The general mandate for the directors of the Company to allot and issue shares pursuant to Sections 75 and 76 of the Act has been renewed by the shareholders at the Company s seventh (7 th ) Annual General Meeting held on 5 December As at the LPD, the Company has allotted and issued 100,079,000 Shares under the Proposed Private Placement of Shares. Assuming the completion of the Proposed Private Placement of Shares, the number of issued ordinary share capital of the Company will increase from 1,543,923,291 Shares to 1,588,228,720 Shares ( Enlarged Share Capital ). Based on the Enlarged Share Capital, the maximum number of Warrants to be issued is 317,645,744 Warrants. Accordingly, the maximum number of new Shares to be issued upon full exercise of Warrants is 317,645,744 Shares. Any fractional entitlements arising from the Proposed Free Warrants Issue shall be dealt in such manner and on such terms and conditions as the Board at its absolute discretion deems fit or expedient and in the best interest of the Company. 1

2 The Proposed Free Warrants Issue will be implemented in a single issuance within three (3) months after the receipt of all relevant approvals for the Proposed Free Warrants Issue. Indicative salient terms of Warrants are set out in Appendix I of this announcement. 2.2 Basis of determining the issue price and exercise price of Warrants Warrants will be issued at no cost to the Entitled Shareholders. The exercise price of Warrants will be determined and announced at a later date by the Board after obtaining the relevant approvals (as set out in Section 6 of this announcement) but before the Entitlement Date. The exercise price of Warrants will be determined and fixed accordingly after taking into consideration, amongst others, the following: (i) (ii) (iii) (iv) (v) the historical volatility of the underlying Shares; the historical price movement of Shares; the prevailing market conditions; the potential future earnings of Hibiscus Petroleum and its subsidiaries ( Group ); and that the Warrants are exercisable at any time from the date of issue of Warrants up to the end of the tenure. The exercise price of each new Warrant is subject to a fixed annual step-up of RM0.06 per year on each of the anniversary dates from the date of first issuance of the Warrants (each referred to as Anniversary Date ), in the manner set out in Appendix I of this announcement (Indicative Salient Terms of Warrants). For illustration purposes, the indicative exercise price of Warrants of RM0.94 per Warrant up to one (1) Market Day prior to the first Anniversary Date, represents a premium of approximately 30% over the five (5)-day volume weighted average market price of Shares up to and including the LPD of RM Thereafter, the exercise price of the Warrants will be adjusted upwards by RM0.06 on a yearly basis, as described further in Appendix I of this announcement. The Board wishes to emphasise that the indicative exercise price of RM0.94 per Warrant should not be taken as a confirmation of or reference to the actual exercise price of the Warrants, which will be determined and announced on the price-fixing date. 2.3 Ranking of the new Shares to be issued upon the exercise of Warrants The new Shares to be issued upon the exercise of Warrants shall, upon allotment and issuance, rank equally in all respects with the existing Shares, save and except that they will not be entitled to any dividends, rights, allotments and/or any other distributions which may be declared, made or paid to the shareholders of the Company, for which the entitlement date is prior to the date of allotment of the new Shares to be issued pursuant to the exercise of Warrants. 2.4 Listing of and quotation for Warrants and the new Shares to be issued upon the exercise of Warrants An application will be made to Bursa Malaysia Securities Berhad ( Bursa Securities ) for the admission of new Warrants on the Official List of Bursa Securities as well as the listing of and quotation for Warrants and the new Shares to be issued upon the exercise of Warrants. 2

3 3 UTILISATION OF PROCEEDS The Proposed Free Warrants Issue is not expected to raise any funds as Warrants will be issued at no cost to the Entitled Shareholders. The quantum of proceeds to be raised by the Company pursuant to the exercise of Warrants would depend on the actual number of Warrants that are exercised during the exercise period of Warrants. As such, the timeframe and manner for utilisation of the proceeds cannot be determined at this juncture. For illustration purposes, assuming full exercise of Warrants at the exercise price of RM0.94 per Warrant, 317,645,744 new Shares are expected to be issued and the Company is expected to raise proceeds of approximately RM million. Such proceeds to be raised, as and when Warrants are exercised, are expected to be utilised for the potential expansion and capital expenditure*, repayment of borrowings (in future, if any) and future working capital requirements of the Group, which include payment to trade and other payables, staff costs and corporate expenses. The proceeds to be utilised for each component of working capital are subject to the Group s operating requirements at the time of utilisation and therefore cannot be determined at this juncture. Note: * Potential expansion and capital expenditure would primarily relate to expenditure for the maintenance and upgrading of assets to maintain/improve operational efficiency as well as to potentially enhance production and asset life. 4. RATIONALE FOR THE PROPOSED FREE WARRANTS ISSUE The Warrants 2011/2014 previously issued by Hibiscus Petroleum has expired on 24 July Therefore, the Board intends to undertake the Proposed Free Warrants Issue to reward the Entitled Shareholders for their continuous support by enabling them to own the Warrants, which will be tradable on Bursa Securities, without incurring any cost and at the same time provide an opportunity for the Entitled Shareholders to increase their equity participation in Hibiscus Petroleum arising from the exercise of Warrants, while potentially enabling the shareholders to benefit from any capital appreciation arising thereof. Additionally, the Proposed Free Warrants Issue will allow the Company to strengthen its capital base and market capitalisation. Although the Proposed Free Warrants Issue is not primarily intended for the purpose of raising funds, the Warrants will provide additional funds to the Group as and when they are exercised. In addition, the step-up pricing mechanism is expected to encourage shareholders to exercise their Warrants earlier to leverage on the lower exercise price. This would facilitate Hibiscus Petroleum s earlier receipt of additional funds from the exercise of the Warrants. The additional funds will be utilised for the potential expansion and capital expenditure, repayment of borrowings (in future, if any) and future working capital requirements of the Group as set out in Section 3 of this announcement. Warrants will be also traded separately from Shares, which will provide the Entitled Shareholders an avenue to monetise the Warrants should they choose to do so. 3

4 5. EFFECTS OF THE PROPOSED FREE WARRANTS ISSUE The effects of the Proposed Free Warrants Issue on the issued ordinary share capital of the Company, net assets attributable to the equity holders of the Company ( NA ), NA per share and gearing of the Group and shareholdings of the Company s substantial shareholders are set out in the following manner: 5.1 Issued ordinary share capital The proforma effects of the Proposed Free Warrants Issue on the issued ordinary share capital of Hibiscus Petroleum are as follows: No. of Shares ( 000) RM 000 Issued ordinary share capital as at the LPD 1,543,923 (1) 724,647 Remaining number of Shares to be issued assuming the completion of the Proposed Private Placement of Shares 44,305 (2) 31,200 To be issued assuming full exercise of Warrants 317,646 (3) 298,587 Enlarged issued ordinary share capital 1,905,874 1,054,434 Notes: (1) The Act, came into effect from 31 January 2017 and abolished the concept of authorised share capital and par value of share capital. Consequently, the amount standing to the credit of the Company's share premium account of RM660.9 million shall become part of the Company's share capital pursuant to Section 618(2) of the Act. Under the transitional provision in Section 618(3) of the Act, a company may within twenty-four months upon the commencement of the Act, use the amount standing to the credit of its share premium account for purposes as set out in that section. (2) Based on the indicative issue price of RM0.72 per Share and after deducting the remaining estimated expenses of RM700,000 for the Proposed Private Placement of Shares. (3) Based on the indicative exercise price of RM0.94 per Warrant. [The rest of this page has been intentionally left blank] 4

5 5.2 NA and gearing Based on the audited consolidated statement of financial position of Hibiscus Petroleum as at 30 June 2017, the proforma effects of the Proposed Free Warrants Issue on the NA and gearing of the Group are as follows: Audited as at 30 June 2017 (3) After the completed transactions (I) (II) (III) (IV) After (I) and assuming the completion of the Proposed Private Placement of Shares After (II) and the Proposed Free Warrants Issue After (III) and assuming the full exercise of Warrants RM 000 RM 000 RM 000 RM 000 RM 000 Share capital * 675, ,647 (4) 755, ,847 (6) 1,054,434 Foreign exchange reserve 92,465 92,465 92,465 92,465 92,465 Other reserves Accumulated losses (25,807) (25,807) (25,807) (5) (26,607) (26,607) Equity 742, , , ,094 1,120,681 No. of Shares ( 000) 1,443,844 1,543,923 1,588,228 1,588,228 1,905,874 NA per Share (RM) Total borrowings (RM 000) (1) 219 (1) 219 (1) 219 (1) 219 (1) 219 Gearing (times) (2) - (2) - (2) - (2) - (2) - Notes: * The Act, came into effect from 31 January 2017 and abolished the concept of authorised share capital and par value of share capital. Consequently, the amount standing to the credit of the Company's share premium account of RM660.9 million shall become part of the Company's share capital pursuant to Section 618(2) of the Act. Under the transitional provision in Section 618(3) of the Act, a company may within twenty-four months upon the commencement of the Act, use the amount standing to the credit of its share premium account for purposes as set out in that section. (1) Comprises redeemable convertible preference shares. (2) Negligible. (3) Adjusted for the 100,079,000 Shares issued under the Proposed Private Placement of Shares as at the LPD. The actual impact of the proposed acquisition of 50% participating interests under the 2011 North Sabah Enhanced Oil Recovery Production Sharing Contract by SEA Hibiscus Sdn Bhd, an indirect wholly-owned subsidiary of the Company ( Proposed Acquisition ) (which was announced on 12 October 2016 but yet to be completed) to the NA and gearing of the Group may only be ascertained upon finalisation of the net changes to working capital between the effective date of the Proposed Acquisition (as further detailed in the Company s announcement dated 12 October 2016) and the completion date of the Proposed Acquisition. (4) Assuming the remaining 44,305,429 Shares under the Proposed Private Placement of Shares are issued based on the indicative issue price of RM0.72 per Share and after deducting the remaining estimated expenses of RM700,000 for the Proposed Private Placement of Shares. (5) After deducting the estimated expenses of RM800,000 for the Proposed Free Warrants Issue. (6) Assuming the full exercise of Warrants based on the indicative exercise price of RM0.94 per Warrant. 5

6 5.3 Earnings and earnings per Share ( EPS ) The Proposed Free Warrants Issue is not expected to have any material effect on the earnings and EPS of the Group for the financial year ending 30 June However, going forward, the Group s EPS may likely be diluted as a result of the increase in the number of new Shares in issue as and when Warrants are exercised. Nonetheless, the effect of any exercise of Warrants on the Group s EPS would be dependent on, among others, the number of Warrants exercised at any point in time and the returns generated by the Group from the utilisation of proceeds arising from the exercise of Warrants. Although the EPS shall be correspondingly diluted as a result of the increase in number of Shares in issue pursuant to the exercise of Warrants, the Proposed Free Warrants Issue is expected to contribute positively to the Group s consolidated earnings thereafter through the utilisation of proceeds from the exercise of Warrants for the potential expansion and capital expenditure, repayment of borrowings (in future, if any) and future working capital requirements of the Group. 5.4 Convertible securities As at the LPD, the Company has 2,193,880 redeemable convertible preference shares ( RCPS ) outstanding. These RCPS are no longer convertible into Shares but are redeemable at the option of the holders. [The rest of this page has been intentionally left blank] 6

7 5.5 Substantial shareholders shareholdings The potential effects of the Proposed Free Warrants Issue on the shareholdings of the substantial shareholders of Hibiscus Petroleum are set out below: As at the LPD (I) Assuming the completion of the Proposed Private Placement of Shares Direct Indirect Direct Indirect Substantial shareholders No. of Shares % No. of Shares % No. of Shares % No. of Shares % Hibiscus Upstream Sdn Bhd 168,572, ,572, Dr Kenneth Gerard Pereira - - (1) 168,572, (1) 168,572, Polo Investments Limited 138,900, ,900, Mettiz Capital Limited - - (2) 138,900, (2) 138,900, Polo Resources Limited - - (2) 138,900, (2) 138,900, Datuk Michael Tang Vee Mun - - (2) 138,900, (2) 138,900, Mohd Zulkefli bin Mohd Abdah 1,000, (3) 93,334, ,000, (3) 93,334, (II) After (I) and the Proposed Free Warrants Issue (III) After (II) and full exercise of Warrants Direct Indirect Direct Indirect Substantial shareholders No. of Shares % No. of Shares % No. of Shares % No. of Shares % Hibiscus Upstream Sdn Bhd 168,572, ,287, Dr Kenneth Gerard Pereira - - (1) 168,572, (1) 202,287, Polo Investments Limited 138,900, ,680, Mettiz Capital Limited - - (2) 138,900, (2) 166,680, Polo Resources Limited - - (2) 138,900, (2) 166,680, Datuk Michael Tang Vee Mun - - (2) 138,900, (2) 166,680, Mohd Zulkefli bin Mohd Abdah 1,000, (3) 93,334, ,200, (3) 112,000, Notes: (1) Deemed interested by virtue of his interest in Hibiscus Upstream Sdn Bhd pursuant to Section 8 of the Act. (2) Deemed interested by virtue of its/his interest in Polo Investments Limited pursuant to Section 8 of the Act. (3) Deemed interest by virtue of his interest in Picadilly Middle East Ltd and Tericon Solutions Ltd pursuant to Section 8 of the Act 7

8 6. APPROVALS REQUIRED AND CONDITIONALITY The Proposed Free Warrants Issue is subject to the approvals being obtained from the following: (i) Bursa Securities for the following: (a) (b) admission of Warrants to the Official List of Bursa Securities; and listing of and quotation for Warrants as well as the new Shares to be issued upon the exercise of Warrants on the Main Market of Bursa Securities; (ii) (iii) shareholders of Hibiscus Petroleum at an extraordinary general meeting to be convened; and any other relevant authorities / parties, if required. For clarity, the Proposed Free Warrants Issue is not conditional upon any other corporate proposal undertaken by Hibiscus Petroleum. 7. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors, major shareholders and/or persons connected with them have any interest, direct or indirect, in the Proposed Free Warrants Issue save for their respective entitlements as shareholders of the Company under the Proposed Free Warrants Issue, which are also available to all Entitled Shareholders. 8. DIRECTORS' STATEMENT After having considered all aspects of the Proposed Free Warrants Issue, the Board is of the opinion that the Proposed Free Warrants Issue is in the best interests of the Company and its shareholders. 9. ADVISER RHB Investment Bank has been appointed as the Principal Adviser to the Company in relation to the Proposed Free Warrants Issue. 10. APPLICATION TO THE RELEVANT AUTHORITIES Barring any unforeseen circumstances, the application to Bursa Securities in relation to the Proposed Free Warrants Issue is expected to be made within two (2) months from the date of this announcement. 11. ESTIMATED TIMEFRAME FOR COMPLETION Subject to the relevant approvals being obtained and barring any unforeseen circumstances, the Proposed Free Warrants Issue is expected to be completed by the first (1 st ) half of This announcement is dated 8 December

9 APPENDIX I INDICATIVE SALIENT TERMS OF WARRANTS Terms Issue size and manner of issue Details : Up to 317,645,744 Warrants to the Entitled Shareholders, on the basis of one (1) Warrant for every existing five (5) Shares held. Entitled Shareholders will be determined at the relevant entitlement date to be determined later by the Company. All Warrants will be issued in one tranche. Issue price : Warrants will be issued free to the Entitled Shareholders. Form and denomination : Warrants will be issued in registered form and constituted by a deed poll to be executed by the Company ( Deed Poll ). Expiry Date : A date falling three (3) years from the date of issue of Warrants (being third (3 rd ) anniversary), provided that if such date falls on a day which is not a market day, then the preceding market day shall be regarded as the expiry date. Exercise Period : Warrants may be exercised at any time commencing from the date of issue of Warrants and ending at 5.00 p.m. on the Expiry Date. Warrants not exercised during the Exercise Period will thereafter lapse and cease to be valid or have any effect. Exercise rights : Each Warrant shall entitle the holder to subscribe for one (1) new Share at the Exercise Price (subject to adjustments in accordance with the provisions of the Deed Poll) at any time during the Exercise Period. Exercise Price : The exercise price of the Warrants shall be determined and fixed by the Board at a later date after receipt of all relevant approvals. The amount payable in respect of each new Share calculated on an annual step-up basis more particularly set out in the Deed Poll and subject to such adjustments as may be required to be made in accordance with the provisions of the Deed Poll. For the avoidance of doubt, if in any one year, there has been adjustment made to the exercise price, the step-up for the following year shall be applied to such adjusted exercise price. 9

10 APPENDIX I Terms Details Step-up pricing mechanism : The exercise price of Warrant is subject to a fixed annual step-up of RM0.06 per year on each of the anniversary dates of the date of first issuance of the Warrants (each referred to as Anniversary Date ), in the manner as set out below: Year Year 1 Commencing from the date of first issuance up to one (1) Market Day prior to the first Anniversary Date Year 2 Commencing from the date of first issuance up to one (1) Market Day prior to the second Anniversary Date Year 3 Commencing from the date of first issuance up to one (1) Market Day prior to the third Anniversary Date Formula (RM) (Exercise price) (Exercise price immediately preceding the commencement of the first Anniversary Date add RM0.06) (Exercise price immediately preceding the commencement of the second Anniversary Date add RM0.06) Illustrative exercise price RM0.94 RM1.00 RM1.06 Mode of exercise : The holders of Warrants shall pay in cash for the Exercise Price when exercising Warrants for new Shares. Rights of Warrants holders : The holders of Warrants are not entitled to any voting rights or to participate in any distribution and/or offer of further securities in the Company until and unless such Warrants holders exercise their Warrants into new Shares. Modification to the terms of Warrants : Subject to the terms on modification of rights, save for manifest error, any modification, amendment, deletion or addition to the Deed Poll shall require the approval of the holders of Warrants sanctioned by special resolution and may be effected only by the Deed Poll, executed by the Company and expressed to be supplemental thereto and subject to the approval of the relevant authorities, if necessary. A memorandum of every such supplemental deed shall be endorsed on the Deed Poll. 10

11 APPENDIX I Terms Rights in the event of winding up, liquidation, compromise and/or arrangement Details : Where a resolution has been passed for a members voluntary windingup of the Company, or where there is a compromise or arrangement, whether or not for the purpose of or in connection with a scheme for the reconstruction of the Company or the amalgamation of the Company with one (1) or more companies then: (i) (ii) if such winding-up, compromise or arrangement (other than a consolidation, amalgamation or merger in which the Company is the continuing corporation) has been approved by a special resolution of the Warrants holders, or some person designated by them for such purpose by special resolution, the terms of such winding-up, compromise or arrangement shall be binding on all the Warrants holders; and in any other case, every Warrants holder shall be entitled (subject to provisions of the Deed Poll) at any time within six (6) weeks after passing of such resolution for a members voluntary winding up of the Company or six (6) weeks after the granting of the court order approving the compromise or arrangement (other than a consolidation, amalgamation or merger in which the Company is the continuing corporation), by the irrevocable surrender of his Warrants to the Company, by the exercise notice(s) duly completed, together with payment of the relevant exercise price, to elect to be treated as if he had immediately prior to the commencement of such winding up, compromise or arrangement, exercised the exercise rights represented by his Warrants to the extent specified in the exercise notice(s) and had on such date been the holder of the Shares to which he would have become entitled pursuant to such exercise. Subject to the above, if the Company is wound up, all exercise rights which have not been exercised within six (6) weeks of the passing of such resolution shall lapse and Warrants will cease to be valid for any purpose. Adjustments in the Exercise Price and/or number of Warrants : Subject to the provisions of Deed Poll, the Exercise Price and/or number of Warrants held by each Warrant holder may from time to time be adjusted, calculated or determined by the Board in consultation with an approved principal adviser or auditor and certified by the auditor appointed by the Company under certain circumstances in accordance with the provisions of the Deed Poll. Transferability : Warrants shall be transferable in the manner in accordance with Deed Poll, subject always to the provisions of the Securities Industry (Central Depositories) Act, 1991 and the Rules of Bursa Malaysia Depository Sdn Bhd. Board lot : For the purpose of trading on Bursa Securities, one (1) board lot of Warrants shall comprise 100 units of Warrants carrying the rights to subscribe for 100 new Shares at any time during the Exercise Period. 11

12 APPENDIX I Terms Details Listing status : Warrants and the new Shares to be issued arising from the exercise of Warrants shall be listed and quoted on the Main Market of Bursa Securities. An application will be made to Bursa Securities for the admission of the Warrants to the Official List of Bursa Securities and for the listing of and quotation for the Warrants and new Shares arising from the exercise of the Warrants on the Main Market of Bursa Securities. Governing law : Warrants and the Deed Poll shall be governed by the laws of Malaysia. [The rest of this page has been intentionally left blank] 12