Hibiscus Petroleum (Hibiscus) recorded a strong 1QFY24 core net profit of RM156.6m (+37.9% YoY, +27.7% QoQ) on the back of higher crude offtake volume and realised oil price. This is despite higher overall operating expenditure arising from scheduled maintenance, which compressed its EBITDA margin for the quarter to 52.6% (-5.3ppts YoY, -12.2ppts QoQ). Overall, Hibiscus’ core net profit is deemed to have met our and consensus estimates at 31.9% and 35.6% of full year FY24F numbers respectively, as we expect lower offtake volume with moderated realised oil price for the rest of FY24F. We maintain our Trading Buy call and TP of RM3.00 (after share consolidation), benefitting from moderately high Brent crude prices in the range of USD80-90/bbl for 2QFY24. Hibiscus declared an interim dividend of 2.0sen per share and targets to declare a total of 7.5sen per share in FY24F, a 20% increase compared FY23.

• High crude oil offtake volume and realised price. Hibiscus recorded a total of 1,411 Mbbl crude oil offtake volume for 1QFY24, higher by 37.3% QoQ and 40.6% YoY. This is mainly due to two offtakes for the quarter for North Sabah fields instead of one offtake in 1QFY23 and 4QFY24. The volume is as per guided in the 4QFY23 forecast offtake schedule. Hibiscus’ revenue was also lifted by high average realised oil price at USD97/bbl instead of USD82/bbl in 4QFY23, though lower from USD112/bbl in 1QFY23 amid elevated tension from the Russia-Ukraine conflict during the period.

• Scheduled maintenance compressed EBITDA margin. Based on our calculation, the Group’s overall uptime in 1QFY24 only reached about 80% as compared to 90% in 4QFY24 and 86% in 1QFY23. This is mainly due to ramp up of major scheduled maintenance campaign for PM3 CAA, Kinabalu and North Sabah. As a result, its EBITDA compressed by -5.3ppts YoY and -12.2ppts QoQ, with higher operating expenditure per bbl recorded for this quarter.

• North Sabah focus. Hibiscus plans to spend USD154.1m (approximately RM724.3m) of capital expenditure (capex) for the North Sabah asset in CY2023 and CY2024. About RM48.1m has been incurred during the quarter, mainly for SF30 Water Flood Phase 2 project and SF Near Field Exploration Drilling (SF NFED). Exploration activities that were commenced in October 2023, entails the drilling of 3 exploration wells, namely South Furious Ungu, South Furious Ungu ST and South Furious Merah. We expect the capex to be expedited in CY2024 to achieve its additional production of 2,000bbl/d by CY2025.

Source: PublicInvest Research - 23 Nov 2023