Insights from BIMB Report
BIMB recently published Market Insight Report on Hibiscus Petroleum with a BUY call. The report shared invaluable insight concerning the business condition as well as material update on North Sabah acquisition from Hibiscus management. Of note is the completion date of North Sabah acquisition is now to be expected by end 2017 or sometime in early 2018.
BIMB also reported that Anasuria FPSO had done a crude offtake in August and was totally offline for a month from mid-Sept 2017
(Source: BIMB Market Insight Report)
What does it impact to the financial results?
Crude oil price is known to be both volatile and cyclical. Price of the crude oil benchmark at approximately the time of a scheduled offtake from the Anasuria FPSO is critical to the quantum of revenue Hibiscus is going to receive from the proceed of the sale.
(Source: Hibiscus Q417 Report)
Anasuria FPSO has storage capacity of 850k bbls, while total quarterly production around 600k bbls, so it should be just one offtake per quarter. It is reasonable to conclude that, with offtake done in August, Hibiscus had miss out the oil price rally in September. Rather than selling the oil near US$57.00~59.00, the realized price was probably nearer to US$51.50 as shown in the chart.
The Anasuria FPSO shutdown from mid-Sept 2017 is probably immaterial to oil sales in 1Q2018 (Hibiscus Financial Year begins on 1 July) but will likely see sizeable reduced oil sales in 2Q2018, only partly compensated by higher volume from the recently reopened Guillemot-P1 and Teal South P1.
1Q2018 Financial Result Forecast
Based on the above information, operating parameter and financial result forecasted for 1Q2018.
* 4Q2017A include one-off RM10.3m forex gain attributable to a revaluation of the provision for decommissioning costs and RM3.9m impairment of receivable.
** Assuming a more normalized tax rate of 35% vs 69% in 4Q2017A.
*** Higher operating costs due to startup costs related to Guillemot-P1 and Teal South P1, Anasuria FPSO's scheduled maintenance & lower production volume due to Anasuria FPSO shutdown.
“The problem of oil is that there is always too much or too little”, Myron Watkins, professor of economics at New York University, wrote 80 years ago. Inelasticity of supply and demand mechanism underpinned the volatility and cyclicality nature of the oil price and ultimately affects the profitability of the industry.
Hibiscus will likely perform better in 1Q2018 compared to preceding quarter, driven mainly by normalized tax rate. However, given the elevated market expectations and particularly having missed out on the September crude oil rally, cautions against earnings disappointment are advised.
This is a simplified sensitivity analysis intended as a guidance for investor to value the share price of Hibiscus. For educational purpose only and is not a recommendation to buy or sell. Far better analysts have been humbled by actual market results compare to their forecasts. The author humbly admits to his inadequacies given the limited data sets to work on and urges readers to treat this forecast with a strong dose of skepticism. Actual released results may make this article a good joke and hopefully a good laugh heals all!!
Created by Lau333 | Nov 22, 2017
Created by Lau333 | Sep 27, 2017
Created by Lau333 | Sep 16, 2017
Created by Lau333 | Sep 15, 2017
Created by Lau333 | Sep 14, 2017