• Hibiscus Petroleum (Hibiscus) was awarded 2 new blocks that are located within close proximity to Marigold field.

• We are positive with this news as additional oil prospects and discovered hydrocarbons that are contained within the blocks will further support the commercial viability of Marigold development project.

• However, no changes is made to our FY24-26F earnings forecast as this project may only contribute to earnings in CY28F onwards.

• Maintain Hibiscus as a BUY with an unchanged DCF-derived TP of RM3.40. We remain optimistic with its growth story underpinned by higher oil price environment.

Awarded 2 New Blocks in Close Proximity to Marigold Field

Hibiscus announced that it has received awards of 2 blocks in Tranche 2 of the 33rd UK Offshore Licensing Round (LR33) by the UK North Sea Transition Authority (NSTA). The said blocks are located in Quad 15 of the Central North Sea, namely (i) Block 15/13c that contains hydrocarbon leads northwest of Marigold field, and (ii) Block 15/18c that contains the Cross prospect. Recall that it was also awarded with 3 blocks during the first batch of LR33 (i.e. part Block 15/12, Block 15/18a and part Block 15/19a) which are also located within close proximity to Marigold field.

De-risking Marigold Field Development

We believe Hibiscus was pursuing these contiguous blocks as part of its effort to reduce the development risk of Marigold field. Notably, there are many stranded oil discoveries, hydrocarbon leads and prospects that are contained within these blocks that will support the commercial viability of ongoing development planning of Marigold field. To recap, the company expects to submit a new field development plan (FDP) to the regulator in early CY24. However, the development phase will only commence after the completion of Teal West development which is the company’s primary focus within the next 2 years.

Earnings Impact

We make no changes to our FY24-26F forecast given that Marigold will only contribute to earnings in CY28. However there is upside risk to our FY26F earnings as we have not yet factor in Teal West development.

Maintain BUY with TP RM3.40

We maintain Hibiscus as a BUY with a DCF-derived TP of RM3.40. Our TP implies 0.9x FY24F P/B and 6x FY24F P/E. We like the company’s proven track record in delivering growth while maintaining prudent financial management.

Source: BIMB Securities Research - 5 Feb 2024