Hibiscus Petroleum (Hibiscus) recorded a higher 2QFY24 core net profit of RM113.4m by 15.2% YoY due to the absence of deferred liability incurred in the previous year. On a sequential basis, Hibiscus recorded weaker core net profit by -27.6% QoQ due to lower crude offtake volume and realised oil price. Cumulatively, Hibiscus’ 1HFY24 core net profit of RM269.9m is deemed to have met our estimates at 55.0% though exceeding consensus at 61.5% of full year FY24F numbers respectively. Based on the offtake schedule, we expect 3QFY24 performance to be weaker QoQ due to lower volume. Moving forward however, we expect Hibiscus to record earnings growth on the back of higher production rate after it completed its production enhancement projects in North Sabah. On this note, we raise our forecast FY24F/25F/26F by 6.7%/18.7%/13.5% respectively. We upgrade our recommendation to Outperform from Trading Buy with higher TP of RM3.20 (from RM3.00), after we roll-over our DCF-based valuation. Hibiscus declared an interim dividend per share (DPS) of 2.0sen, bringing total DPS to 4.0sen so far, and on track for a total DPS of 7.5sen for FY24F.

• Performance in Kinabalu and PM3 CAA fields boost production. Hibiscus hit a new production record of 22,192 barrel equivalent per day (boe/d), higher by 3,419 boe/d on a QoQ basis. This is mainly attributed to Kinabalu’s oil production performance increasing by 1,392 bbl/d to 4,096 bbl/d on the back of the completion of two new well drilling programs in August 2023 and October 2023. Management guided that the instant gain on its production is above its initial target and sustainable to maintain the production at above 4,000 bbl/d.
  
  On the PM3 CAA field, the oil production increased by 1,176 boe/d to 10,532 boe/d as it sustained oil production from H4 reservoirs, stable gas lift operations and successful well work activities in PM3 South.
   
• Hiccup from Anasuria. The overall Anasuria production indicator in Table 4 was badly impacted by planned maintenance activities that required the Anasuria FPSO to shut down for 15 days. The net operating expenses per bbl (Net Opex/bbl) is also higher due to one-off health and safety regulatory expenses.
   
• North Sabah production enhancement program is on track. About RM111.6m out of RM724.3m (USD154.1m) of capital expenditure (capex) has been spent for its production enhancement on SF30 Water Flood Phase 2 and South Furious Near Field Exploring Drilling (SF NEED). Currently, 2 out of 3 NFED programme have been completed and pending data revision. The completion of the overall programme by Q4 CY2024 would add 2,000bbl/d to its production capacity for the field.

Source: PublicInvest Research - 21 Feb 2024