Hibiscus Petroleum (Hibiscus) reported core net profit of RM71.5m in 3QFY23,  flat QoQ against RM70.5m in 2QFY23. This is attributed to the decline in revenue  by 26.6%, resulting from lower oil offtake volume only at 1.1m bbl as compared to  1.3m bbl (-17%). The lower offtake volume is mitigated by higher gas export rate  to 8,128 boe/d (+27% QoQ) and the absence of RM104.0m deferred tax liability (DTL) charge in the immediate preceding quarter. However, on a YoY basis, core  net profit jumped by 128%, driven by the consolidation of Repsol’s assets, with  the deal having been completed in February 2022. Overall, Hibiscus’ 9MFY23  core net profit of RM264m lagged ours and consensus FY23 estimates at 65.0% and 52.1% of full-year numbers respectively. The discrepancy is from lower  average realised price due to higher portion of gas sold, and also higher effective  tax rate from the DTL charge. We expect 4QFY23 will have similar offtake profile,  with significant pick up from new oil well production from 1QFY24 onwards. As  such, we revise our forecast by -4%/+11%/+26% for FY23/FY24/FY25 respectively. We maintain our Neutral call and DCF-based TP of RM1.18 however. Brent crude price has lacked direction despite the voluntary cut from few  OPEC members last month. Hibiscus declared second interim dividend of 0.75sen  per share, bringing total dividend for FY23 to 1.5sen.

• Lifted by gas production. Hibiscus achieved a record-high average  production of 21,214boe/d, up by +1,534boe/day or 12% QoQ (Table 2) due to better performance from PM3 Northern field gas injection, which brings  net gas export rate to +1,747boe/day or +29% QoQ (Table 3). The  performance was also supported by continuous recovery of average uptime from Anasuria to 96% (92% @ 2QFY23 and 68% @ 3QFY22) (Table 4) after the completion of the riser replacement project in September 2022.

• Lower average realised price. Hibiscus reported decline in revenue by  26.6% to RM523.3m on a sequential basis due to the decline in oil offtake  volume from 1.3m to 1.1m. Although it exported higher gas volume for PM3  CAA field, gas price typically sells at significant discount to Brent crude. Overall, 3QFY23 reported lower average realised price at only  USD64.50/boe vs USD76.62/boe in 2QFY23.

• Outlook. Hibiscus’ business fundamentals remain intact with its new well to  produce about gross production level at 3,000bbl/d. The Brent crude oil price has lacked direction however, consolidating between USD70-85/bbl for more  than a month after the surprise voluntary production cut from key OPEC  members. Though the International Energy Agency (IEA) expects global  supply deficit to swell to 1.9-2.0m, global demand remains weighed by the  elevated interest rate environment and recession risk

Source: PublicInvest Research - 25 May 2023