Hibiscus Petroleum (Hibiscus) posted a stronger 3QFY24 core net profit of RM147.7m, higher by 30.3% QoQ and 66.7% YoY due in part to lower maintenance activities performed in the quarter. This has resulted in better efficiency with lower operating expenditure per barrel (OPEX/bbl) and improvement in EBITDA margin for all three producing assets. Overall, Hibiscus recorded 9MFY24 core net profit of RM417.6, exceeding our and consensus estimates at 79.7% and 95.3% of full-year numbers respectively. However, we maintain our forecast as we anticipate 4QFY24 maintenance activities to be normalised following the deferment in 3QFY24. We maintain our Outperform call with an unchanged TP of RM3.20. Hibiscus declared an interim dividend per share (DPS) of 2.0sen, bringing total DPS to 6.0sen so far, and on track for a total DPS of 7.5sen for FY24F.

• North Sabah leads in operational efficiency. North Sabah recorded net OPEX/bbl of USD20.90, the lowest in the last 8 quarters, which is usually in the range of USD24-USD38/bbl. Excluding RM78.9m write-off from exploration costs, the lower operating cost significantly improved the EBITDA margin to 60% (+15.1ppts QoQ, +18.4ppts YoY). Oil production remains steady at above 5,000bbl/d for two consecutive quarters, sustained by the South Furious 30 field performance.

• Peninsula EBITDA margin touches new high for the quarter. Peninsula recorded EBITDA margin of 65%, higher by 6.5ppts QoQ. The segment managed to lower its OPEX/bbl to USD17.60 from USD26.75 in 2QFY24 (- 34% QoQ) after it re-phased subsurface and maintenance activities towards 4QFY24. However, on a YoY basis, despite the slightly higher OPEX/bbl by 10%, higher realised oil price by 15% lifted segmental margin by 4.3ppts.

• Anasuria back to normal. In 2QFY24, Anasuria was badly impacted by 15 days planned shut down and a one-off health and safety regulator expense. Absence of these two events has increased uptime level from 83% to 93% in 3QFY24 and lowered OPEX/bbl from USD32.97 to USD25.60.

• Update on SF NFED programme, North Sabah. Two out of three wells from South Furious Near Field Exploring Drilling (SF NFED) programme, SF Ungu ST and SF Merah have been concluded though not achieving commercial viability. Thus, the write-off of RM78.9m has been incurred at pre-tax level in 3QFY24. The remaining well, SF Ungu is still undergoing assessment and expects to be completed in CY 2025. An amount of RM46.3m is currently capitalised, and could potentially be written off if the assessment concludes with non-commercial viability for the well. 
  
  Nevertheless, in the near term, SF Water Flood Phase 2 programme is expected to be completed in 3Q/4Q CY24 with the expectation to increase the production by 1,000-1,500 bbl/d to mitigate the reduction of the old producing well.

• Bunga Aster-1 another lifeline for PM3 CAA, Peninsula. Bunga Aster-1 is the second discovery after the discovery of Bunga Lavatera in May 2023. The well is expected to increase oil production by 450bbl/d. As for now the initial gross oil in-place volume for Bunga Aster field is between 21 MMbbl to 84 MMbbl. An appraisal well is planned in CY2025 to confirm the oil accumulation. PM3 CAA PSC is expected to expire by 2027. Thus, the discovery of Bunga Aster-1 and Bunga Lavatera would be strong testament to extend the economic life of PM3 CAA beyond 2027.

Source: PublicInvest Research - 23 May 2024