• Hibiscus Petroleum (Hibiscus) and Ithaca Energy came to terms to jointly develop Marigold and Yeoman fields which are adjacent to each other, as per instruction by the regulator.

• We are positive with this as it will enable the company to resume development project and monetize its asset quickly.

• Maintain Hibiscus as a BUY with unchanged DCF-derived TP of RM1.30. This implies 6x FY24F P/E. We believe the successful development of Marigold field into production would enhance its long-term earnings visibility and provide re-rating catalyst to the stock price.

Merging Adjacent Fields into a Single Development Project

Hibiscus Petroleum (Hibiscus) announced that the company and its partner Caldera Petroleum (Caldera) have entered into a Unitisation and Unit Operating Agreement (UUOA) with Ithaca Energy Limited (Ithaca) to jointly develop the Marigold field. Recall that both Hibiscus and Caldera own the Marigold West field with 87.5% and 12.5% interest respectively whereas Ithaca holds 100% interest in Marigold East (previously known as Yeoman field). Following the UUOA agreement, Hibiscus, Caldera and Ithaca will own 61.25%, 8.75% and 30% interest respectively in the enlarged Marigold field.

Enhancing its Long-term Earnings Visibility

We are positive with this announcement as it would allow the development project to resume, hence enabling Hibiscus to monetise its assets. Recall that previous discussion to co-develop the field fell through as Ithaca disagreed on the proposed deployment of FPSO Voyageur Spirit as the production facility for the enlarged resource base. Hibiscus now expects to submit a fresh field development plan (FDP) to the regulator in early CY2024 whereas first oil are expected in CY2028. Upon approval of Marigold FDP¸ the company’s 2P oil and gas reserves is expected to grow by 44% to 97mn barrel of oil equivalent (MMboe) from 67 MMboe (as at end FY23) which is close to its 2026 target of 100 MMboe. Besides that, the development will also improve its long-term earnings visibility given the expected natural decline in production from existing producing assets.

Maintain BUY with unchanged TP RM1.30

We maintain Hibiscus as a BUY with unchanged DCF-derived TP of RM1.30. Our TP implies 0.9x FY24F P/B and 6x FY24F P/E. Note that we have ascribed the asset to zero value previously due to lack of progress in the development plan. Hence, the successful development of Marigold into production would provide a significant upside to our TP.

Source: BIMB Securities Research - 17 Sept 2023