Hibiscus Petroleum (Hibiscus) 3Q23 core PBT declined by 28% QoQ to RM150mn mainly due lower oil sales volume from the North Sabah field. However, this was merely due to the timing of the crude oil offtakes as its crude production level was largely stable at 4.7k bpd. On contrary, its total oil and gas production rose by another 7% to exceed 21k boepd in 3Q23, its highest quarterly production ever achieved. This was partially attributed to first oil achieved from new Bunga Orkid Sidetrack well in northern area of PM3 CAA PSC. Overall, the result was in line with our estimate as it made up 74% of our full year forecast. Maintain our BUY call on Hibiscus with unchanged TP of RM1.30.

• Within expectation. 9MFY23 core PBT of RM544mn was in line with our estimate as it made up 74% of full year forecast.

• Dividend. The company declared a 2 nd interim DPS of 0.75sen which brings YTD DPS of 1.5sen (9M22 DPS: 1sen). This implies a dividend payout ratio of 11% (9M22 payout: 15%). The company expects to pay a total DPS of 2.5sen for FY23 (i.e., another 1sen DPS for final DPS of FY23) which implies a yield of 2.6%.

• QoQ. Core PBT declined by 28% to RM150mn on the back of lower revenue. Oil sales volume declined by 17% to 1.1mn bbls (2Q23: 1.33mn bbls) which more than offset higher gas sales volume that rose by 11% to 731k boe (2Q23: 656k boe). Overall, total oil and gas sales volume slipped by 7.5% to 1.84mn boe from 1.99mn boe whereas realised oil price also decreased by 14% to USD85/bbl (2Q23: USD99/bbls).

• YoY. Core PBT was more than doubled to RM150mn from RM62mn in 3Q22 mainly due to structural volume growth from the acquisition of Repsol’s Malaysian operation. Similarly, cumulative 9M23 core PBT also rose to RM544mn from RM226mn in 9M22.

• Update on development projects. The company has commenced the execution of the South Furious 30 Water Flood Phase 2 at North Sabah field. This project entails the drilling of 6 water injectors and 5 oil infill wells that will be drilled from a newly installed well head platform (WHP), bridge linked to an existing jacket. The drilling is expected to commence from September 2023 and a new water injection facility is expected to be installed in August 2024. Besides that, the company expect to make an FID on Teal West development in the middle of CY2023.

• Exploration result. The company managed to discover gas during the drilling of Bunga Lavatera-1 well in PM3 CAA with an estimated 2P gas reserves of 1.6mn boe and a total capex of USD7mn.

• Outlook. The company target to maintain its sales volume at 1.8mn boe in 4Q23 before raising it to 2.1mn boe in 1Q24.

• Our call. We maintain a BUY call on Hibiscus as with an unchanged DCF-derived TP of RM1.30. Our TP implies 1x FY23F P/B.

Source: BIMB Securities Research - 25 May 2023