Maybank Investment Bank Berhad’s (Maybank IB) assessment of Hibiscus Petroleum Bhd’s overall ESG score, under the bank’s proprietary ESG scoring methodology, is 42 (out of 100), making its ESG scoring below average.
Hibiscus has good disclosures but most of the group’s quantitative parameters have been showing a decline in scoring and Maybank IB thinks that more can be done in regards to its emissions and wastes.
Maybank IB maintain a BUY call with an unchanged DCF-based TP of MYR2.99 (WACC: 10%).
Low scoring in quantitative parameters
Maybank IB is of the opinion that Hibiscus should take measures to show improvement in the following aspects: i) GHG intensity; ii) total solid and chemical waste generated; iii) NOx emissions; iv) SOx emissions; v) VOC emissions; and vi) percentage of waste recycled.
However, Maybank IB highlighted, in a note today (Mac 13), that Hibiscus has shown decent improvement over the years in: i) lost time injury frequency (LTIF); ii) average number of training days per employee; and iii) composition of female directors on the board.
Good qualitative scoring and targets
Hibiscus follows the Task Force on Climate-Related Financial Disclosures (TCFD) framework for ESG reporting.
There are also ESG policies in place which are formulated by the Risk Committee, the latter being overseen by the BOD.
However, Maybank IB noted the senior management salaries are not linked to fulfilling ESG targets and the company does not as yet appear to have any strategy with regards low carbon/environmentally-friendly products.
Hibiscus targets to be: i) net carbon neutral by 2050; and ii) reduce its Scope 1 and 2 emissions by 50% by 2030, against its FY20 baseline. More production coming from multiple fields in FY25E Hibiscus aims to achieve first oil from: i) its SF30 Water Flood Phase 2 (where the development entails 6 water injectors and 5 infill wells) in 1HFY25 (+1.5k bpd); and ii) its Teal West field in 1HFY26 (+4.5k boepd).
As the oil and gas industry is now in an 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.
Maybank IB maintain BUY.
