Hibiscus Petroleum Bhd’s net profit for the second quarter ended on 31 December 2023 (2QFY24) was weaker by 34% quarter-on-quarter (QoQ) due to realised prices and offtakes, according to Maybank Investment Bank (Maybank IB).
Hibiscus’s 2QFY24 core net profit of RM102.3 million is also lower by 11% year-on-year (YoY), which brought the first half of fiscal year 2024 (1HFY24) core earnings to RM256.6 million.
In its research note today (Feb 21), the research house elaborated that weaker QoQ net profit was due to lower average realised crude oil price of USD90 per barrel compared to USD97 per barrel in the first quarter.
“Besides that, the lower offtake volumes of 1.9 million barrel of oil equivalent (boe) compared to 2 million in the previous quarter,” it added.
Maybank IB said Hibiscus’ 2QFY24 results came in within expectations and as such, it makes no change to our FY24 to FY26E earnings forecasts.
“The results are inline with 1H core earnings at 58% and 59% of ours and consensus full-year forecasts respectively in anticipation of a weaker 2H on lower offtake volumes and marginally lower oil prices.”
It also kept its BUY call but lowered its discounted cash flow (DCF)-based target price of RM2.99, with weighted average cost of capital (WACC) of 10%.
“Our in-house average Brent crude oil average selling price (ASP) assumption stands at USD80 per barrel in 2024E and USD75 per barrel in 2025E,” it said.
The research house said the third quarter to be weaker quarter-on-quarter (QoQ) on lower volumes, as Hibiscus was guided that its takeoff volumes in 3QFY24 will be lower at 1.77 million boe.
“Coupled with likely lower average crude oil price over January to March 2024, with quarter to date (QTD) volume at USD80 per barrel, we expect the group to rake in weaker profits in 3QFY24.
“This will be followed by a recovery in the fourth quarter (4QFY24) – where the group is targeting a total offtake of 2.06 million boe.
“On a full-year basis, we are still looking at an earnings per share (EPS) growth of 7% YoY in FY24E based on an inhouse crude oil price assumption of USD80 per barrel for 2024E.”
Maybank IB also anticipated that more oil production will be coming from multiple fields in FY25E.
“We gather that the group aims to achieve first oil from its SF30 Water Flood Phase 2, where the development entails 6 water injectors and 5 infill wells in the first half of fiscal year 2025 (1HFY25), could produced 1,500 barrel per day (bpd) and its Teal West field is also expected to produce 4,500 barrels of oil equivalent per day (boepd).
“Additionally, as the industry is now in a severely under-invested phase alongside expectations for record-high oil demand in 2024E, Hibiscus will continue to be a clear beneficiary of an elevated crude oil price environment in the medium-term,” it added.
