HIBISCUS PETROLEUM BERHAD ( HIBISCUS PETROLEUM OR COMPANY ) PROPOSED SETTLEMENT OF AMOUNT OWING TO PING PETROLEUM LIMITED ( PING ) VIA ISSUANCE OF UP TO 4.88% OF THE ISSUED AND PAID-UP SHARE CAPITAL OF HIBISCUS PETROLEUM ( PROPOSED SETTLEMENT ) 1. INTRODUCTION On behalf of the Board of Directors of Hibiscus Petroleum ( Board ), Affin Hwang Investment Bank Berhad ( Affin Hwang IB ) wishes to announce that Hibiscus Petroleum proposes to undertake a settlement of amount owing to Ping via issuance of up to 53,848,537 new ordinary shares of RM0.01 each in the Company ( Settlement Shares ), representing up to 4.88% of the issued and paid-up share capital of the Company in relation to the Introducer Fee (as defined in Section 2.1 of this announcement). An approval was obtained from the shareholders of the Company at its 5 th Annual General Meeting ( AGM ) convened on 11 December 2015 for the Board to allot and issue new ordinary shares of RM0.01 each in the Company ( Shares ) at any time and from time to time and upon such terms and conditions to such persons and for such purposes as the Board may in their discretion deem fit provided that the aggregate number of new Shares to be issued does not exceed 10% of the total issued and paid-up share capital of the Company for the time being, pursuant to Section 132D of the Companies Act, 1965 ( Act ). Such authority shall, unless revoked or varied by an ordinary resolution by the shareholders of the Company in a subsequent general meeting, expire at the next AGM of the Company ( General Mandate ). Accordingly, the Proposed Settlement will be undertaken in accordance with the General Mandate. Further details of the Proposed Settlement are set out in the ensuing sections. 2. PROPOSED SETTLEMENT 2.1 Background of the Introducer Fee On 6 August 2015, Anasuria Hibiscus UK Limited ( Anasuria Hibiscus ), an indirect whollyowned subsidiary of Hibiscus Petroleum, and Ping Petroleum UK Limited, a wholly-owned subsidiary of Ping, entered into conditional sale and purchase agreements with Shell U.K. Limited, Shell EP Offshore Ventures Limited, and Esso Exploration and Production UK Limited (collectively referred to as Vendors ), respectively ( SPAs ), in relation to the acquisition by Anasuria Hibiscus of a 50% interest in the following assets: (a) (b) (c) (d) (e) 100% interest in the Guillemot A Field and the related field facilities; 100% interest in the Teal Field and the related field facilities; 100% interest in the Teal South Field and the related field facilities; 38.65% interest in the Cook Field and the related field facilities; and 100% ownership in the common infrastructure known as the Anasuria Floating Production Storage and Offloading unit and related equipment, for a total cash consideration of United States Dollars ( USD ) 52.5 million (equivalent to RM228.3 million) (collectively known as the Acquisition ). The Acquisition was completed on 10 March 2016 ( Completion ). An introducer fee of USD6.0 million was agreed between Hibiscus Petroleum and Ping to be payable to Ping upon successful completion of the Acquisition as Ping had already achieved the preferred bidder status with the Vendors prior to Hibiscus Petroleum s entry into the transaction ( Introducer Fee ). In August 2015, Hibiscus Petroleum paid USD600,000 on behalf of Ping to the Vendors upon execution of the SPAs. In view of this, USD600,000 was considered as being paid to Ping by Hibiscus Petroleum in August 2015 as part of the Introducer Fee.
Please refer to the circular to shareholders dated 20 January 2016 issued by the Company for further information on the Acquisition and the Introducer Fee. As at the date of Completion, the Introducer Fee of USD5.4 million ( Balance Sum ) is due and owing by Hibiscus Petroleum to Ping. On 11 March 2016, both parties have entered into a variation term sheet ( Variation Term Sheet ) and mutually agreed to the following payment method for the Balance Sum: USD2.7 million shall be settled by Hibiscus Petroleum in the form of Shares calculated based on USD2.7 million divided by the conversion price based on the 5- day volume weighted average price ( VWAP ) of the Shares immediately prior to 14 March 2016 ( 1 st Balance Payment ); and The remaining balance of USD2.7 million of the Balance Sum shall accrue interest monthly at 2% per month compounded from 10 March 2016 and both the USD2.7 million and the accrued interest shall be settled prior to 31 July 2016. Pursuant thereto, up to 53,848,537 Settlement Shares will be allotted and issued at an issue price of RM0.205 per Settlement Share, being the 5-day VWAP of the Shares immediately prior to 14 March 2016 ( Issue Price ) (based on the exchange rate for RM4.0885=USD1 from Bank Negara Malaysia s middle rate as at 5.00 p.m. on 11 March 2016). 2.2 Details of the Proposed Settlement As at 29 February 2016, the issued and paid-up share capital of the Company is RM11,027,904.54 comprising 1,102,790,454 Shares. The Company intends to issue the Settlement Shares pursuant to Section 132D of the Act taking into consideration the aggregate of the Shares issued during the preceding 12 months and the number of new Settlement Shares to be issued does not exceed 10% of the total issued and paid-up share capital of the Company. The Proposed Settlement involves the issuance of up to 53,848,537 Settlement Shares which represents up to 4.88% of the issued and paid-up share capital of the Company to Ping. The Proposed Settlement will be implemented in 2 tranches within 6 months from the date of approval of Bursa Malaysia Securities Berhad ( Bursa Securities ). 2.3 Information on Ping Ping was incorporated in Bermuda under the Companies Act 1981 on 31 July 2012 as a private limited company. Ping is an independent upstream oil and gas company, focusing on shallow water offshore production and development opportunities in South East Asia and the United Kingdom section of the North Sea. Ping is neither: a director or major shareholder of Hibiscus Petroleum ( Interested Person ); nor a person connected with an Interested Person.
2.4 Basis and justification of the Issue Price The Issue Price is determined after taking into consideration: (iii) the prevailing market conditions; the agreed payment method for the Balance Sum in the Variation Term Sheet by Hibiscus Petroleum and Ping; and the 5-day VWAP immediately prior to 14 March 2016, being the date of this announcement. The Issue Price is in accordance with Paragraph 6.04(a) of the Main Market Listing Requirements of Bursa Securities. 2.5 Ranking of the Settlement Shares The Settlement Shares shall, upon allotment and issue, rank equally in all respects with the existing issued and fully paid-up Shares, save and except that they shall not be entitled to any dividends, rights, allotments and/or any other distributions unless the allotment and issuance of the Settlement Shares were made on or prior to the entitlement date of such dividends, rights, allotments and/or other distributions. 2.6 Listing and quotation of the Settlement Shares Applications will be made to Bursa Securities for the listing of and quotation for the Settlement Shares on the Main Market of Bursa Securities within 1 month for the first tranche (of up to 50.26 million Settlement Shares) and 4 months for the second tranche (of up to 3.59 million Settlement Shares) from the date of this announcement. 3. RATIONALE FOR THE PROPOSED SETTLEMENT The Proposed Settlement will enable the Company to settle the 1 st Balance Payment to Ping. After due consideration of the various options available, the Board is of the opinion that the Proposed Settlement is an appropriate method to satisfy the 1 st Balance Payment for the following reasons: (iii) (iv) the Proposed Settlement will enable the Company to further strengthen its shareholder base with Ping emerging as a shareholder holding up to 4.88% of the Shares; the Proposed Settlement also allows Ping to participate in the growth and development of Hibiscus Petroleum and its group of companies ( Group ) together with the Company s existing shareholders; the Proposed Settlement enables the Company to settle the 1 st Balance Payment to Ping without incurring additional debt obligation/interest expenses by the Group; and both Hibiscus and Ping will be working closely together as joint owners and operators of the Anasuria assets and the shareholding by Ping demonstrates the confidence and commitment that both parties have in their business and working relationship.
4. EFECT OF THE PROPOSED SETTLEMENT The effects of the Proposed Settlement on the issued and paid-up 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 shareholding of the Company s substantial shareholders are set out as follows: 4.1 Issued and paid-up share capital The proforma effects of the Proposed Settlement on the issued and paid-up ordinary share capital of the Company are as follows: No. of Shares RM 000 As at 29 February 2016 1,102,790 11,028 To be issued pursuant to the 53,849 538 Proposed Settlement Enlarged issued and paid up share capital 1,156,639 11,566 4.2 NA, NA per Share and gearing Based on the audited consolidated financial statements of Hibiscus Petroleum for the financial period ended ( FPE ) 30 June 2015 and on the assumption that the Proposed Settlement had been effected on 30 June 2015, the proforma effects of the Proposed Settlement on the NA, NA per Share and gearing of the Group are as follows: Audited FPE 30 June 2015 After adjustments for the events before the completion of the Acquisition (3) (I) (II) (III) (IV) After (I) and After (III) and the Proposed completion Settlement of the Acquisition (4) After (II) and the completion of placement of Shares on 21 January 2016 (6) RM 000 RM 000 RM 000 RM 000 RM 000 Share capital 9,278 10,832 10,832 11,028 11,566 Share premium 535,731 594,866 594,866 598,587 609,088 Foreign exchange reserve 38,431 38,431 38,431 38,431 38,431 Other reserves 241 241 241 241 241 Accumulated (71,944) (71,944) (72,974) (5) (72,974) (5) (72,974) (5) losses Shareholders funds/na 511,737 574,426 571,396 575,313 586,352 Number of 927,779 1,083,204 1,083,204 1,102,790 1,156,639 Shares in issue NA per Share 0.55 0.53 0.53 0.52 0.51 (RM) Total borrowings (1) (RM 000) 219 219 77,666 77,666 77,666 Gearing (times) - (2) - (2) 0.14 0.13 0.13
Note: (1) Comprises redeemable convertible preference shares and interest bearing borrowings. (2) Negligible. (3) Adjusted for the private placement of 18.2 milion, 34.8 million, 90.0 million and 12.4 million Shares that were completed on 15 July 2015, 6 August 2015, 7 December 2015 and 21 December 2015 respectively. (4) The proforma effects of the Acquisition was based on the Circular dated 20 January 2016. (5) After deducting estimated expenses of approximately RM1.0 million which include professional fees and other miscellaneous expenses in relation to the Acquisition. After deducting estimated expenses of RM26.6 million consisting of the Introducer Fee and other professional fees. The other professional fees consist of fees incurred in connection with professional advice sought and technical due diligence exercises carried out. The Introducer Fee and other professional fees will be capitalised as intangible assets and plant and machinery as per Malaysian Financial Reporting Standards ( MFRS ) 116 (Property, Plant and Equipment) and MFRS 138 (Intangible Assets) as the costs are directly attributable to the Acquisition. (6) Adjusted for the private placement of 19.6 million Shares that was completed on 21 January 2016. (The rest of the page is intentionally left blank)
4.3 Substantial shareholders shareholding The proforma effects of the Proposed Settlement on the Company s substantial shareholders shareholdings based on the Register of Substantial Shareholders of the Company as at 29 February 2016 are as follows: As at 29 February 2016 After the Proposed Settlement Direct Indirect Direct Indirect (%) Number of (%) Number of (%) Number of Shares Shares Shares Number of Shares Hibiscus Upstream Sdn Bhd 168,573 15.29 - - 168,573 14.57 - - Dr Kenneth Gerard Pereira (1) - - 168,573 15.29 - - 168,573 14.57 Mohd Zulkefli bin Mohd Abdah (2) - - 93,334 8.46 - - 93,334 8.07 Polo Investments Limited 90,000 8.16 - - 90,000 7.78 - - Ping - - - - 53,849 4.66 - - Note: (1) Deemed interested by virtue of his interest in Hibiscus Upstream Sdn Bhd pursuant to Section 6A of the Act. (2) Deemed interested by virtue of his interest in Picadilly Middle East Ltd and Tericon Solutions Ltd pursuant to Section 6A of the Act. (%) (The rest of the page is intentionally left blank)
4.5 Earnings per Share ( EPS ) Save for the dilution in EPS due to the increase in the number of Shares in issue pursuant to the issuance of the Settlement Shares, the Proposed Settlement is not expected to have a material effect on the EPS of the Company for the FPE 30 June 2015. 4.6 Convertible securities As at 29 February 2016, the Company has 2,193,880 redeemable convertible preference shares of RM0.01 each ( RCPS ) outstanding. These RCPS are no longer convertible into Shares but are redeemable at the option of the holders at RM0.10 per RCPS subject to compliance with Section 61 of the Act. 5. APPROVALS REQUIRED The Proposed Settlement is subject to the following approvals being obtained: Bursa Securities for the listing of and quotation for the new Shares to be issued pursuant to the Proposed Settlement on the Main Market of Bursa Securities; and any other relevant authorities/parties, if required. The Company has obtained the approval of its shareholders at its AGM convened on 11 December 2015 for the General Mandate. The Proposed Settlement is not conditional upon any other corporate exercise/scheme of the Company. 6. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the directors and major shareholders of the Company as well as persons connected to them have any interest, direct and/or indirect, in the Proposed Settlement as at the date of this announcement. 7. DIRECTORS STATEMENT After having considered the rationale and effects of the Proposed Settlement, the Board is of the opinion that the Proposed Settlement is in the best interest of the Company. 8. ADVISER Affin Hwang IB has been appointed by the Company as Principal Adviser for the Proposed Settlement. 9. APPLICATION TO THE RELEVANT AUTHORITIES The applications to Bursa Securities in relation to the Proposed Settlement will be made within 1 month for the first tranche and 4 months for the second tranche of the Settlement Shares from the date of this announcement.
10. ESTIMATED TIME FRAME FOR COMPLETION The Board expects the Proposed Settlement to be completed by the 3 rd quarter of 2016. This announcement is dated 14 March 2016.