@tehka, thank you very much for your kind words, happy new years to you.

A happy merry Xmas and Happy new year 2019 to all regardless of opinion.

And hopefully a fruitful investing year 2019 for all.

Stop buying french products. I have stopped for one year. This maybe naive but heck that is the only thing I personally can contribute to the well being of Malaysia.

I am sorry, we have been so stupid, believing in their sanctimonious uttering but not following their action, so just follow their action.

Dr. Pereira said the new PS2-ST is producing net 1,000 bpd and follow on said Anasuria should be producing 4,200 bpd. Press conference after AGM, he said total production for FY2019 will be 2.7 to 3 mb. Hmm, this is conservative.

But the interesting bit (in the BFM interview) is Marigold and Sunshine, the new North Sea acquisition. This will be developed to produce oil around end 2021 at about 10k to 12k bpd. Should Anasuria and North Sabah maintain current production in FY2022, then total daily production will be about 22kbpd. EPS in 2022 would be 30 sens (oil price USD76 Ex to RM 4). At current price, buying for future (2022 - 3 years time), PER would only be about 3.5.

Potentially, price of Hibiscus in 2022 would be about RM 3.50

Have a good week ahead.

Do listen to interview at BFM: https://www.bfm.my/bg-kenneth-pereira-hibiscus-petroleum-what-will-fuel-hibiscus-future-growth

Dericlock thanks for the lead. The only new info is the change in "Other institutional & Corporate Shareholders" that has increased their holding to 42.7% from 40.6% while "Retails Shareholders" has reduced to 37.9% from 40%.

Have a good weekend all.

Welcome to the new Malaysia.

How will the budget affect Hibiscus?

More than that, there must also be minimum contracts for Malay, minimum number of Malays employed and so on .....

No profit as there was a write-off of RM 200+ million in 2016, I think.

@valuelurke, thank you for the summary on oil "types". This is a break from the usual buy / sell comments that is meaningless.

Hibiscus should be a value investment and going forward really have a bright future, especially with the new N Sea buy.

Have a good weekend to all value investors.

Royalty - a contract (PSC) has been signed by Hibiscus with Petronas and the cost sharing are all spelled out clearly. Any changes of royalty quantum between East Malaysian States and the Federal Government is just that between the States and the Federal Government and should not impact the PSC.

This will mean that Federal Government/Petronas will have to forego their 5% Royalty currently included in the PSC as well as percentage of the Petroleum Income Tax and Export duty to add up to the 20% demanded by Sabah & Sarawak.

I am of the opinion that in so far as Hibiscus is concern, the PSC will be the contract and this shall not change in whatever way when the Federal Government finally decide with Sabah / Sarawak.

That is, the extra royalty payment (if any) will not come out of Hibiscus portion.

Do note that Hibiscus is not the only PSC holder in East Malaysia, there are others too, Shell, Nippon Oil etc. There is this (foreign) investors need for stability (that attracted them to Malaysia in the first place) to take care of, else, Malaysia would become a pariah state with all the flip-flop in policies, etc.

This "entitlement" (of 20% royalty) is the curse of natural resources. Be creative and innovative to improve our productivity to increase (state) revenue, this will be sustainable. (Take a moment to think why countries like Japan, Switzerland, Singapore, Hong Kong and many others that are without natural resources are doing so much better?)

Have a nice weekend.

They will argue about whether it is ethical or not or beneficial for the fish etc. and nothing get done for the next 10 years .......

@loonginv, thank you for reading. Have a good week ahead.

@qqq3, thank you for reading. Yes there is a lot of interest in Sapura. From my simple understanding, it own a gas field in Sarawak water (I maybe wrong), and all the others are exploration, that is, no production.

Hibiscus is already producing oil and getting cash for it. Sapura is a dream (exploration), there maybe oil or maybe nothing. Even if they find oil (and in sufficient quantity), to get the oil out will mean another 5 to 7 years down the road. So one is buying a dream. BIG DIFFERENT, DREAM AND CASH.

The remaining part of Sapura business is services to oil (& gas) majors, yes they are winning some contracts but I rather stick to the one that is producing oil, i.e. CASH, NOW (rather than 5 to 7 years later and maybe only).

To some "investors", dream is cool, more sexy even.

Have a good weekend.

@bukithot, from my limited knowledge, the maintenance work will normally not affect the production. Even if it does, it will normally be planned in such a way that there will be minimum disruption to production, i.e. not the whole two quarters there will be no oil production. It does not work like this.

Do not forget, at North Sabah, there are so many wells and platforms and different fields (St Joseph, South Furious, Barton, etc), so maintenance maybe only at St Joseph, say, the other fields are still producing.

And some type of maintenance will, after completion of the maintenance, enhance oil production. But generally, maintenance is to maintain/improve up-time, this is already good. Imagine a bus go into the workshop for quick engine oil change and brake check then back on road carrying paying passengers, up-time. Or major maintenance to lengthen bus to carry more passengers.

Frequency - now, most if not all operators are performing maintenance on need basis rather than time basis. That is, they will monitor the equipment for wear & tear. However it is not so simple as these are offshore (not on land) so it will very much depend on the availability of maintenance resources and some maintenance will be carried out on opportunity basis (of available resources). By and large, frequency maybe a year to a year and a half. For Anasuria, it will be similar subject to the regulation in that jurisdiction.

The implication of maintenance will mean higher cost of production.

Hope this gives a feel to the working of an oil (& gas) production and not confuse you.

Thank you for reading and have a good weekend.

@myongcc5, thank you very much for reading and your kind comment. Have a good weekend.

Just thinking the persons / entities that took up the private placement (at about 0.4/share) of 144+m shares probably unloading the shares for various reason. This maybe the chief reason for the (suppress) movement every time there is good news.

Hibiscus paid RM 254m (US 52m + US 6m introduction fee) for Anasuria Cluster in 2016 and up till June 2018 had earned (gross profit) RM 325m. For North Sabah, paid RM 103m (US 25m - but actually paid US 15m, balance US 5m 2019 & US 5m 2020) and by June 2018 already earned (gross) RM 95m. If this is not value creation, what is?

@eskaylien, the "tax" rate is US$ 0.15 x (US$ Y - US$ 75) per barrel where US$ Y is the annual average oil price in a calendar year. And this is only applicable from 2018 to 2021 only. This rate, US$ 0.15 is considered a windfall payment to the Vendors. The only assumption made was whether this will be applicable to the annual production (of Anasuria) or only those production where the oil price exceeded US$ 75 per barrel.Thank you for reading.

Have a good week ahead.

@BravoTango, I have posted on 2/9/18 (https://klse.i3investor.com/blogs/teoct_blog/172224.jsp)

And @The speculators The speculators, you missed the most important UP - production UP by 2.6 time. That is FY2018 production (sold) is 1.4 mbbl and FY2019, at least 3.6 mbbl will be produced for sale.

Have an excellent week ahead, all.

OrlandoOIL, oh, what a shame. I was looking forward to learning from a Master.

@OrlandoOIL, ok if you say so. Most grateful if you will teach me what goes into the intangible assets and how the recent Anasuria reserve upgrade be accounted for.

Thank you very much.

@OrlandoOIL. The Anasuria Cluster reserve upgrade was dated 1/7/18; thus the new valuation of USD 401 m (2P) will take effect in Q1 '19 compared with previous valuation of USD 208 m (June 2016). Thus the increased value of USD 193 m (RM 772m) and deduct "this" and "that" (being conservative), let say use only RM 540m/shares issued = 0.33

So add to 0.63 (from Q4 '18, this only included the -ve goodwill of North Sabah) gives 0.96 (it should be more I think).

Hope this explained. Really appreciate your query, so we all learn along the way.

The company just announced (@5+pm, check Bursa) that the side-track drilling at Anasuria Cluster is completed. Rig is being de-mob now. Flow test showed 4750 bpd, net to Hibiscus is 2375 bpd. This is extremely good news.

As the announcement mentioned, different choke size will be tried (how wide the tap is open) to ensure smooth flow by the end of this week.

Need to re-look into my (production) estimate now.

Normally a new well will have to treated with care, just like when one find a new lover.

So as the announcement mentioned, different choke size will be tried (how wide the tap is open) to ensure a smooth flow without production dropping off too quickly.

Indeed if add anything north of 500 bpd is extremely positive not to say 2375 bpd. Wow Q1 '19 is going to be very good and FY 2019 too. Need to revise my model.

@stockmanmy, @qqq3, @OrlandoOIL, thank you all for commenting. Yes, the oil (& gas) reserves are intangible assets for obvious reason. Nothing to be fearful about. And like fixed assets (equipment and the likes) are depreciated. For intangible assets it is called amortized. For 2017, the amortization is RM46.5m while 2018 is RM58.2m, that is about RM 41 (USD 10.30) for every barrel sold.

The implied intangible assets "will turn to liabilities", I am not sure how this come about. The non-current liabilities of decommissioning is normal while differed tax is also normal in the cause / course of doing business.

Obviously to be able to buy Hibiscus below 63 sen now would be out of this world. With the Anasuria Cluster reserve upgrade, the book value is already about 90+ sen (rough calculation). So today price of RM 1 gives a price to book of 1.11

Royal Dutch Shell price to book is 1.376 (31/8/18) while Exxon is 1.8. OK, Hibiscus is a very small company, so 1.11 is fair?!?

Mr. Google says that valuation of oil companies uses price to cash flow. Now I had a quick look and concluded that just 2 years of oil production is not long enough for this valuation.

Still at the end of the day, Hibiscus is a young company (don't forget they had blown RM 200+m over exploration and still debt-free), so keeping an eye over the cash producing part of the business (i.e. get the oil out and sell it) is the way forward and that is what I have done to see how efficient this is being carried out.

With the higher revenue, investment can be made to improve productivity as well as to add new production within the current two assets. To buy new production asset (at Anasuria / N Sabah kind of prices) cheap, well the window has closed. Now is to quickly do the maintenance or drilling, etc. while it is still at reasonable cost before everyone wants to do it and fight over the limited resources.

So in financial year 2019, barring any catastrophe, production should be 3.6 million barrels, a 2.6 time more than 2018, EXCELLENT (please tell me which other companies can do this), and the world is willing to pay more for the oil!

Have a good week all.

@up_down, thank you for your comment on EPS derived from EBITD. It actually included depreciation and amortization and I have corrected the table.

Reason why I am just looking at just EBIT is because I wanted to check the performance of the management with regards to activities that produces CASH only.

And taxes was excluded because UK and Malaysia tax on oil & gas companies are very different and I am not a tax expert and how well this is managed by management is not so important as oil production and cost of production.

Also, government will try to tax progressively (that is encourage investment activities) rather than regressive (that is discourage investment) more often than not. Otherwise, why invest (CAPEX) to get more oil out of the ground if the gain is so low (after tax that is). Nonetheless, your tax computation maybe correct or not - this I will leave it to tax expert.

Have a good week ahead.

WHY? What so secretive? This is so old school. The public has a right to know!!

WHY, what so secretive? The public has a RIGHT TO KNOW!

@paperplane, thank you for your support and kind word. I will wait for the final quarter and then I will review my model, this may take a while as I am also looking at other things.

Many thanks for the kind words, all of you. Yes, sharing to understand the risks and the (potential) reward is most gratifying (especially when there is more reward then loss). Indeed, with this sharing, hope that the valuation modelling become a little bit more correct. There is no need to be 100% correct but aim for at least 70 to 75% correct and the reward should follow.

Thank you dericlock on your take on the revaluation. Indeed, the production record would give some indication of the reservoir characteristics. I am a bit slow, getting old. Are you a petroleum engineer?

Just checked Q3 2018, the NTA is RM 0.55 per share - so now (FY 2019) it would be at least (0.55+0.33) RM 0.88 (quick and dirty calculation) giving a price to book of around 1.17. Royal Dutch Shell is about 1.5, Exxon is 1.8, BP is 1.47 - average of the 3 oil majors is 1.59. So Hibiscus is undervalue base on price to book.

Take care all.

The Anasuria reserve update is much like the properties revaluation. Read the report uploaded on Hibiscus web-site this morning. I was thinking that with the side-track at P2 going on, this report will be updated based on additional information coming out from the drill floor, but no. As I do not have the previous report, I cannot get a handle on what has changed that caused the increase reserve to 24.4 million barrel (better reservoir data?). By the way the reported amount 24.4 is net to Hibiscus, i.e. already accounted for their 50% share of the asset. No need to deduct 50% @paperplane.

Definitely, there will be some changes to the balance sheet and therefore the profit/loss. This will only be reflected in the 1Q 2019 financial year as the report is dated 1 Jul 2018. A big jump in the profit in Q1 2019.

I do not think this will in anywhere affect the Q4 2018 result, @dericlock. I have not heard about any mishap in N Sabah. While Anasuria result is normal as confirmed by Dnex quarterly result release earlier as pointed out earlier by a member on this tread.

Yes it is positive and the value of the company is now higher, how high?

As per announcement, the reserve is now worth US401m while it was last estimated to be US208m, i.e. +US193m x 3.9=RM753m. Say, there are some error and omission of 30% (my own guesstimate), the increase is only RM 527m = RM 0.33 per share for financial year 2019. The NTA will increase, price to book dropped, PER will drop further - overall one can conclude that Hibiscus at current price is cheap.

This is just sharing my thoughts and in no way an advice to buy or sell, this you do at your own risk.

Have a happy weekend.

Dericlock - indeed circumstances has changed since 31/mar/2018. Production had increased by about 3x and oil price is much higher compared to 6 months ago. Potential higher oil price is there, so value of the company has changed (higher). Indeed, I am looking at 1.57 by at least Mar 2019. By then there will be at least 2 quarters of (financial year) 2019.

profitgrow - Patient is a virtue in investment. Nevertheless, appreciate your sharing on your thinking of taking profit.

profitgrow - why do you want to sell at 1.04? This does not match your moniker "profitgrow" unless you bought below 60sen. What if it goes to 1.50?

Retail shareholders make up 40.8%. A big group. Trust most of them is here on this forum.

Should be a good week ahead. Happy investing.

Fellow Investors, many thanks for the kind words. @bukithot, yes Hibisbcus owns 50% of Sabah PSC, the other 50% is owned by Petronas Carigali.

Hibiscus can be seen as a hedge against depreciating ringgit (emerging markets currencies). To a certain extend, the share price now has an arbitrage against the ringgit. That is, rightly, the share price should have appreciated as in ringgit term, the revenue would have appreciated by 1.29% (The Edge Financial Daily today). Yes, when ringgit appreciate, revenue (in ringgit terms) will be lower.

@Paperplane, yes the production of Hibiscus will go from about 2,800 bpd to 8,300 bpd give and take. North Sabah alone is already about 5,500 bpd. It not only double, almost triple. Of course, there are many production related issues, compressors not working, leaking valves, spurious instruments, etc etc, so production may come in lower than 8,300 bpd. Hibiscus is now (since 31/3/18) running North Sabah, 50% production (of course less cost oil, royalty, etc) therefore accrued to Hibiscus - see table provided in 3rd quarter of Hibiscus and reproduced in this write up.

@VenFx - yes, this is an area I am not able to get a handle on. That is why in my write-up I only concentrated on (actual/predictable) oil production. Any development / exploration (cost) will definitely affect the bottom line.

Many thanks again and have a happy weekend.

This is most ridiculous! As if all the good things done by Khazanah no longer matters, and it is all down to bra and lingerie.

So childish.

JayC, thank you. Indeed you are right, I overlook this.

Dericlock, thank you.

Good to know that NSabah oil trade at a premium, so estimate is more conservative. Always good to err on the lower side.

BTW, the table on demand and supply has included shale oil (booked under North America).

US shale oil production from jan17 to mar18 increased by 1.1 mbpd. USA is now the largest oil producer at 11 mbpd. Venezuela in the same period reduced by about 0.6 mbpd. The increase in demand is 99.7-98 = 1.7 mbpd. So shale increase 1.1 less 0.6 = 0.5 mbpd is still less than 1.7 mbpd of increase demand. One can argue that the demand is less than 1.7 mbpd. OK even at 1 mbpd, still shale oil cannot cover the increase in demand.

And now at Permian (Texas shale oil acreage), the pipelines have reached full capacity, thus shale oil production at this (most prolific) area will be capped (estimated until end 2019). Other shale areas are limited.

That is why, storage is being used up.

I will try to provide some information on companies in the oil sphere next few weeks.

Have a good weekend.

For the States I meant.

Yes that what I heard too. If so, a 5% royalty is better.

It is not powerless, just for political expediency.

newbie8080, I have already bought to the max that I can afford.

Now sharing with investors (that maybe seeking confirmation of facts) my views and rational in arriving at my decision. Should my view differs, I would like to hear them and appreciate why the counter is not moving as I anticipated. There, of course, are other view points that I may have overlook that may / might alter my rational and thus my decision.

Your comment is very cryptic. Nevertheless, thank you for taking time to read and comment.

Oil is an international business and Malaysian / local factors should not come into play at all, if any. is negligible.

Meantime, money in the pocket is money earned. So Q4 2018 is done, now into 1Q 2019.

Hibiscus is in a sweet spot - it has the product - oil, that the WHOLE WORLD wants and it has just got more of it (since 31 Mar 2018 with North Sabah psc, additional 5,500 bpd). And to top it all, the world is willing to pay more too.

Yes ACD888, together to RM 1.40 (BTW, how you arrive at 1.40)

Happy investing.

The fear that Saudi will flood the market with oil soon is totally misplaced. The fear that EV will flood the market is also totally misplaced.

Saudi spare capacity is "guess" to be 2 mbpd. In reality, nobody knows for sure and the Saudi themselves is very careful to push beyond 11mbpd production. Coming EV and Saudi reservior issues, please read this: http://klse.i3investor.com/blogs/teoct_blog/158175.jsp

In all discussion, the natural depletion was never brought up. There is about 5 to 8% natural depletion per year. So, let say, current (world) production is 95 mbpd - next year, the production from the same oil fields will be (95 less 5%) i.e. 95 - 4.75 = 90.25 mbpd.

Who can provide the extra 4.75 mbpd? New fields or EOR (enhanced oil recovery) projects is now just being approved. All projects take time - 2 years at the very least, offshore project even longer, minimum 4 years.

OK, you say 5% is too, high, even at 3%, it is, 2.85 mbpd. So assuming Saudi has 2 mbpd spare, this is still not enough.

And this is only natural occurrence that is known. How about the unknowns like:

a) Libya civil war and Nigeria delta "war"
b) Venezuela internal strife and collapsing economy
c) Iran sanction
d) Norway oil workers strike
e) Canada Suncor plant outage

and many more .....

a) to c) (especially c)) will knock at least 1 mbpd out of the market.

You say US Shale ... please read http://klse.i3investor.com/blogs/teoct_blog/154857.jsp
And now, the pipeline carrying all this shale oil to the Gulf is up to maximum capacity, and new pipeline(s) will only come on stream in mid to end 2019.

Demand is robust and remain robust and estimated to hit 99 mbpd by end 2018 and 101 mbpd by end 2019.

So taking all the above into consideration, oil price will remain above (Brent) USD 75 and heading towards 85 to 90 by year end and probably USD 95 to 100 next year.

"Lower for Longer" or Lower forever, well, you lower whatever you want. This is history.

Hibiscus is the best proxy to the increasing oil price, short of buying oil itself.

Have a good week ahead.

My forecast is this two years, there will be no new developments / projects.

The government is just (interested in) catching and prosecuting "thefts". Our economy would likely stay stagnant to low growth.

The private sector will be on their own and this will really separate the "rice from the chaff". In addition the private sector (this include companies listed in Bursa) will have to contend with the minimum wages that will be raise from current RM1k to RM1.5k over the coming 5 years. This (wage) increase will couple with rising oil cost and potentially a recession in the coming years (2019?).

Good luck to all of us investing in equities.

However, should reforms be carried out to AG Chamber, EC, MACC and appointment of judges, maybe term-limit, then these will be good for our country despite potential loss in the economy.

Have a good weekend all.

A public listed company is first and foremost to create value for shareholder! PERIOD!

If it is for RAKYAT, then privatize it, as the value is totally different.