Hibiscus - bad news

The bad news that its associate and partners have failed to extract commercial oil in Oman has caused its share price to slump.

In addition, the RVD technology used by REX Intl Holdings Bhd – the partner of Hibiscus in the Oman project – could also be an issue of debate.

To mitigate the negative impact of the news, it also said that the information acquired has assisted all partners in the Oman Block 50 project to identify a second exploration well as the next drilling location. It is anticipated that drilling at this location will commence within the next two weeks from 24 Dec 2013.

Indeed in anticipation that technology could be an issue of concern, its MD said the RVD technology has been tested exhaustively on 41 locations in Norway and has performed successfully on 40 locations.

But detailed analysis of Rex Intl Holding suggests that investors should be mindful of the Rex technology. Rex Technologies has not led to successful well yet. To date (24 Dec 2013), the group is yet to drill a well based on location arrived after using Rex Technologies suite of software. However the technology has had 85% success in predicting drilling results.

Given that this is the first offshore well Rex would be drilling with the use of its Virtual Drilling technology, significant failure to find oil here could dampen investor sentiment.

Hibiscus Pet acquired a 35% stake in Lime for USD55 million as its Qualifying Acquisition in April 2012 due to its portfolio of assets and access to Rex Virtual Drilling Technology.

The block 50 Oman concession is jointly owned by Lime with a 64% stake and Petcoci Holdings holds the remainder of the 36%.