Hibiscus Petroleum (Hibiscus) reported core net profit of RM41.6m in 1QFY22 as compared to a core net profit of RM14.1m in 1QFY21 on the back of a 69.6% YoY increase in revenue. The improvement was mainly attributed to higher oil prices realised during the period despite lower oil volume and higher OPEX/bbl for both of its key assets. In total, the Group sold 757,062 bbls of crude oil in three offtakes this quarter. Although the results accounted for 16.8% and 19.1% of our and consensus full-year estimates respectively, we deem it in line as we expect better performance for the remaining quarters. Given the favourable oil prices at above USD80/bbl currently and earnings consolidation from Repsol assets from 2HFY22 onwards, we believe the Group’s earnings will improve in the coming quarters. Earnings are expected to grow by >100% YoY. Our Outperform call for Hibiscus is affirmed with an unchanged target price of RM1.05.

• QoQ highlights. The Group reported a 21.1% decline in 1QFY22 core net profit to RM41.6m as revenue fell 2.5% to RM246.7m. The key reason for a weaker QoQ was the malfunction of a critical component at the subsea infrastructure of Anasuria field since May this year which required it to be isolated from the primary production system. This isolation has affected its overall daily production rate, average uptime and OPEX/bbl. The field reported RM12.1m net profit in 1QFY22 (-16% QoQ) with 191,770 bbls oil sold (24.8% lower against last quarter). This was, however, cushioned by a higher oil price of USD76.31/bbl (4QFY21: USD62.67/bbl) and lower OPEX/bbl of USD27.94/bbl (4QFY21: USD38.22/bbl).
  North Sabah field sold 565,292 bbls of oil in two cargoes at realised oil price of USD75/bbl against 608,006 bbls at USD72.07/bbl last quarter. Given the higher oil price, the field recorded a marginal increase in net profit to RM43.2m (+3.8% YoY). The field reported higher OPEX/bbl of USD19.16 (4QFY21: USD15.69/bbl) due to planned maintenance activities performed at South Furious and Barton platform as well as COVID-19 restrictions and tight SOPs imposed which disrupted the services of contractors.

• Better performance ahead. Given the favourable oil prices at above USD80/bbl currently and coupled with the earnings consolidation from Repsol assets from 2HFY22 onwards, we believe the Group will register better performance in the coming quarters. Earnings are expected to grow by >100% YoY. We understand that the progress of Repsol assets acquisition is on track, pending the regulatory approval from Petronas and PetroVietnam which targeted this month, as well as approval by the shareholders at an EGM tentatively in mid-Dec this year.

Source: PublicInvest Research - 11 Nov 2021