Stripping off exceptional items amounting to RM276.2m which includes RM317.3m arising from negative goodwill and impairment of intangible assets of RM44.9m for its Australian assets, Hibiscus Petroleum (Hibiscus) reported core net profit of RM31.3m (-9.3% YoY, 36.6% QoQ) in 3QFY22, on the back of higher revenue of RM297.1m (+37.5% YoY, 4.5% QoQ). For cumulative 9MFY22, the Group reported core net profit of RM122.3m, increasing from RM63.5m in 9MFY21. This quarter marks the first contribution from the newly acquired Repsol assets though recognition was just for ~2 months. The Group sold around 2.1 mbbls of crude oil in nine offtakes within the period. This quarter alone, it sold a total of 471,973 bbls of crude oil at average realised oil price of USD101.62/bbl. The results make up 45.5% of our full-year expectations and 38.2% of consensus. Earnings are expected to be stronger in 4QFY22 nonetheless, with the full consolidation of the Repsol assets’ earnings. As such, no changes are made to our FY22-24 earnings estimates. Our call for Hibiscus is lowered to Neutral given the downside to our unchanged SOTP based TP of RM1.31.

• QoQ highlights. The Group reported core net profit of RM31.3m (-36.6% QoQ) in 3QFY22 despite slightly higher revenue (+4.5% QoQ) of RM297.1m. The higher revenue reflects recognition from the newly acquired assets, amonnting to RM124.8.4m, though offset by lower revenue generated in North Sabah and Anasuria field. Overall, the Group reported core net profit of RM31.3m after excluding one-off entries i.e., i) negative goodwill of RM317.3m, ii) provision for impairment of RM44.9m and iii) unrealised forex gain of RM3.8m. To note, 3QFY22 normalised EBITDA was higher, though normalised net profit was lower due to additional depreciation and amortisation charge from the newly-acquired assets. Only one crude oil offtake was recognised post-acquisition, instead of the customary three crude oil offtakes per quarter however.

• Lower uptime and 1 offtake in North Sabah. The asset sold 300,252 bbls of crude oil in one offtake during the quarter. The oil production was also lower than expected, at 4,695 bbls/day due to unplanned production interruptions in Jan 2022 as well as the commencement of annual planned major maintenance campaign in March 2022. As a result, average uptime achieved was lower at 87%, against 92% in the previous quarter though OPEX/bbl was manageable at USD12.89 (USD13.06/bbl). The field reported RM113.1m revenue and RM48.1m EBITDA in 3QFY22, translating to an EBITDA margin of 42.5% (57.2% in 2QFY22), remaining healthy despite lesser crude oil sold and maintenance works performed during the quarter.

• Rectification works at Anasuria in progress and on track for completion in 3QCY22 (1QFY22). Currently, production is still affected due to the malfunction of a critical component at the subsea infrastructure since May 2021 which requires it to be isolated from the primary production system. This isolation has affected its overall daily production rate, average uptime and OPEX/bbl i.e., currently at 1,702 bbls/day, 68% and USD25.34/bbl respectively. Total oil sold was lower, attributed to an over-lift volume of 90,000 bbls which occurred during Dec 2021.

• Maiden contribution from new assets. This quarter marks the first contribution from the newly-acquired assets though contribution was just ~2 months. The assets reported normalised EBITDA and net profit of RM72.8m and RM17.6m respectively, after excluding negative goodwill of RM317.3m. The assets sold 97,417 bbls of crude oil at an average realized price of USD122.93/bbl and exported 2,553 MMscf gas at a price of USD6.98/Mscf. OPEX/bbl was USD11.93/bbl.

Source: PublicInvest Research - 26 May 2022