• Hibiscus Petroleum (Hibiscus) has exit from exploration permit VIC/P74 in Gippsland Basin offshore Australia to prioritise its resources towards producing assets in Southeast Asia and the UK.

• No impact to earnings from this development. We remain optimistic that Hibiscus will achieve a 25% core earnings growth in FY23 aided by full year impact from Repsol’s FIPC assets.

• Maintain Hibiscus as a BUY with unchanged DCF-derived TP of RM1.30. At current price level, we believe the market has not fully reflected the value of FIPC to Hibiscus.

VIC/P74 Exploration Permit to be Returned to 3D Oil

Hibiscus Petroleum (Hibiscus) announced that it has received the approval from the Australian National Offshore Petroleum Titles Administrator (NOPTA) to transfer its entire 50% interest in exploration permit VIC/P74 to its associate company, 3D Oil, at zero cost. Recall that Hibiscus has earlier acquired the working interest in the permit from the latter back in 2019/2020. The permit entails exploration works in an area of 1,006 km2 located on the southern side of the Gippsland Basin, offshore Australia. It is also adjacent to Kingfish oilfield which is the largest oilfield ever discovered in Australia with more than 1 bn barrels of oil produced to date.

Prioritising Producing Assets over Exploration

Note that the permit requires the drilling of exploration well within next 3 years. We understand that the company has decided to exit the permit to prioritise its resources towards other producing assets primarily in Southeast Asia and the UK. We expect there will be no impact to its financial as the company has fully written-down this asset in 3QFY22 for RM1.9mn.

No Change in Earnings Forecast

We made no change to our forecast. We expect Hibiscus to deliver a robust core earnings growth of 25% YoY to RM428mn in FY23 underpinned by full year impact of structural volume growth from Repsol’s FIPC assets. To recap, the company targets to deliver 25% YoY growth in oil sales volume to 4.4-4.7mn bbls (FY22: 3.5mn bbls) and double its gas sales to 2.8mn boe in FY23(FY22: 1.3mn boe). Based on the projected lifting schedule presented in its 4QFY22 Corporate Business Update, the company is expected to sell 1mn and 1.8mn bbls oil in 1Q23 and 2Q23 respectively as compared to 1.4mn bbls in 4Q22 (see Chart 1).

Maintain BUY with unchanged TP RM1.30

We maintain Hibiscus as a BUY with unchanged DCF-derived TP of RM1.30. While the stock price exhibit positive correlation to oil price, we believe it has not fully reflect its sales volume growth.

Source: BIMB Securities Research - 4 Oct 2022