Hibiscus Petroleum (Hibiscus) reported core net profit of RM34.5m (+5.7% YoY) in 3QFY21 on the back of higher revenue of RM216.0m (+22.8% QoQ). Three offtakes with oil totaling 874,944 bbls have been sold during the quarter. Performance was supported by higher realised oil prices and lower OPEX/bbl for both of its key assets. Cumulatively, the Group reported core net profit of RM63.5m, down from RM106.4m in 9MFY20. This is attributed to lower top line by 9.1% YTD and margin contraction due to higher OPEX on plant maintenance activities in 1HFY21. The results are above our expectation, meeting 92.6% though below consensus at 62.9% of full-year forecasts respectively. Given the stability in oil price at above USD60/bbl, management is expecting to deliver three more cargoes in 4QFY21, bringing total offtakes in FY21 to 13. We adjust FY21 forecasts higher by 18% though leave FY22/23 unchanged. We upgrade our call to Outperform given the 22% upside potential to our target price of RM0.76.

• QoQ improvement. The Group reported core net profit of RM34.5m (+132.4% QoQ) in 3QFY21 on the back of RM216.0m (+13.5% QoQ) revenue. The improvement is due to higher realised oil price during the quarter with USD54.04/bbl (2Q: USD40.85/bbl) reported for Anasuria. With deliveries of the committed crude oil volumes to Trafigura at fixed price of USD35/bbl completed in 2Q, North Sabah field captured higher oil price of USD60.46/bbl versus USD39.91/bbl in 2Q. This is despite lower total oil sold during the quarter. Three offtakes with oil totaling 874,944 bbls have been sold versus 1,123,163 bbls in 2Q via four offtakes. OPEX/bbl is also lower at USD18.15/bbl in Anasuria while North Sabah was at USD10.92/bbl as earlier maintenance works were completed.

• Offtakes to exceed target. As of 9MFY21, the Group has sold 2.8 mbbls of oil via 10 cargoes (seven in North Sabah and three in Anasuria). Given the favourable oil price, management is expecting to deliver three more cargoes in 4QFY21 with total oil of c. 900,000 bbls. This brings total offtakes in FY21 to 13 with 3.7 mbbls of oil versus initial target of 3.4 mbbls via 12 offtakes. Our projection for FY22/23 onwards remains around 3.4 mbbls with 12 cargoes to be delivered.

• Further opportunities. While Hibiscus is currently bidding to acquire new producing assets, other opportunities could come from its existing assets i.e. Teal West, Eagle Tieback and Marigold. While Marigold may only achieve first oil in late 2023, the Teal West and Eagle discoveries will be a key focus for management as potential tieback candidates to the Anasuria FPSO in the near term. Based on internal estimates, Teal West contains approximately 7.1 mbbls of oil net to Anasuria, with First Oil being targeted in 2023. We have not imputed any potential earnings contribution from these assets pending new developments.

Source: PublicInvest Research - 25 May 2021