Hibiscus Petroleum plans to undertake 1.76 billion ringgit in capital expenditures over the next two years, excluding the need for equity fundraising.
$HIBISCS (5199.MY)$ Kuala Lumpur (12th September): Hibiscus Petroleum Bhd (KL:HIBISCSThe company believes it will not need to raise any equity funding in the next two years, as it believes its operating cash flow, cash balance, and existing financing facilities are sufficient to meet any capital expenditure required for its planned expansion.
The oil and gas exploration and production institutions are expected to spend approximately 0.407 billion US dollars (1.76 billion MYR) in the 2025 fiscal year (0.262 billion US dollars) and the 2026 fiscal year (0.145 billion US dollars).
As of the end of June, Hibiscus' cash and bank balances were 0.6883 billion MYR, with restricted cash and bank balances at 0.27436 billion MYR. Its total borrowings amounted to 0.74906 billion MYR. Net operating cash flow was 0.97865 billion MYR, while net cash flow from investment activities was 0.91393 billion MYR. The financial cost for the 2024 fiscal year was 0.10683 billion MYR.
Its ongoing projects include the South Furious 30 Water Flood Phase 2, which will use water injection pressure to increase production. It is reported that the first batch of oil is expected to arrive soon.
Another ongoing development is the group's Teal West oil field in the United Kingdom, scheduled to come online in 2025. As part of the Anasuria cluster, the project is expected to significantly increase Hibiscus' production capacity in the North Sea.
The capital expenditure guidance also includes the acquisition of TotalEnergies' assets in Brunei, with the acquisition expected to be completed by the end of 2024 and is expected to contribute an additional 7000 to 8000 barrels of oil equivalent per day (boepd) to the group's production, increasing its 2P reserves by 36%.
It also believes that if the Brent average for the year is at least $70 per barrel (/bbl), it should have enough dividend commitment to pay at least 8 sen in dividends for the 2025 fiscal year.
When asked about the impact on capital expenditure and shareholder returns if oil prices remain below $70/bbl, Hibiscus Managing Director Kenneth Pereira said, "If service [costs] also decrease, then oil prices won't remain low."
We work very hard to maintain our EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) profit margin. As part of our capital framework, we prioritize debt repayment, followed by dividend payments, and then capital expenditures.
When oil prices are low, these projects become less straightforward. This means that we will be more selective," Pereira said.
In Peninsular Malaysia, Hibiscus is optimistic about the possible extension of its PM3-CAA production sharing contract (PSC) beyond 2027, management said. The contract should be known by the end of this year. The company is actively exploring new areas in the region, which could add reserves and production capacity.
From here, Hibiscus will have a clearer understanding of additional capital expenditure requirements beyond its existing guidance and proposes to develop its PKNB cluster, which is scheduled to start production in 2028.
The PKNB cluster PSC consists of four discovered gas fields, namely Pertang, Kenarong, Noring, and Bedong, located in the shallow waters off the east coast of Peninsular Malaysia. These fields are situated in the south, with a tie-back to the PM3 CAA PSC.
In addition, Hibiscus is planning to expand PM327, stating that PM327 could be one of the largest exploration blocks in Peninsular Malaysia. The group announced last month that it will hold a 30% stake in the PM327 PSC through a farm-in arrangement with Petronas Carigali Sdn Bhd. The transaction is currently awaiting regulatory approval and fulfillment of precedent conditions.
Overall, the group aims to increase its production from the current approximately 21,000 barrels of oil equivalent per day to 35,000 barrels of oil equivalent per day by 2026.
Like other upstream oil and gas participants, Hibiscus has been increasing dividend payments and share buybacks to reward shareholders as oil prices rebound with post-pandemic demand and geopolitical conflicts.
In the 2024 fiscal year, Fuyong repurchased 19.1 million shares of stocks at a price of 43 million ringgits. This year, it paid a total dividend of 8.5 sen per share, higher than the expected 7.5 sen per share in February.
Nevertheless, its stock price has been declining, in line with broader market concerns about potential global economic downturn.
So far this year, Hibiscus' stock price has fallen by 19.69%. On Thursday, the counter rose by 7 points or 3.55% from the previous day's closing price to 2.04 ringgits, bringing the company's market cap to 1.6 billion ringgits.
The oil and gas exploration and production institutions are expected to spend approximately 0.407 billion US dollars (1.76 billion MYR) in the 2025 fiscal year (0.262 billion US dollars) and the 2026 fiscal year (0.145 billion US dollars).
As of the end of June, Hibiscus' cash and bank balances were 0.6883 billion MYR, with restricted cash and bank balances at 0.27436 billion MYR. Its total borrowings amounted to 0.74906 billion MYR. Net operating cash flow was 0.97865 billion MYR, while net cash flow from investment activities was 0.91393 billion MYR. The financial cost for the 2024 fiscal year was 0.10683 billion MYR.
Its ongoing projects include the South Furious 30 Water Flood Phase 2, which will use water injection pressure to increase production. It is reported that the first batch of oil is expected to arrive soon.
Another ongoing development is the group's Teal West oil field in the United Kingdom, scheduled to come online in 2025. As part of the Anasuria cluster, the project is expected to significantly increase Hibiscus' production capacity in the North Sea.
The capital expenditure guidance also includes the acquisition of TotalEnergies' assets in Brunei, with the acquisition expected to be completed by the end of 2024 and is expected to contribute an additional 7000 to 8000 barrels of oil equivalent per day (boepd) to the group's production, increasing its 2P reserves by 36%.
It also believes that if the Brent average for the year is at least $70 per barrel (/bbl), it should have enough dividend commitment to pay at least 8 sen in dividends for the 2025 fiscal year.
When asked about the impact on capital expenditure and shareholder returns if oil prices remain below $70/bbl, Hibiscus Managing Director Kenneth Pereira said, "If service [costs] also decrease, then oil prices won't remain low."
We work very hard to maintain our EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) profit margin. As part of our capital framework, we prioritize debt repayment, followed by dividend payments, and then capital expenditures.
When oil prices are low, these projects become less straightforward. This means that we will be more selective," Pereira said.
In Peninsular Malaysia, Hibiscus is optimistic about the possible extension of its PM3-CAA production sharing contract (PSC) beyond 2027, management said. The contract should be known by the end of this year. The company is actively exploring new areas in the region, which could add reserves and production capacity.
From here, Hibiscus will have a clearer understanding of additional capital expenditure requirements beyond its existing guidance and proposes to develop its PKNB cluster, which is scheduled to start production in 2028.
The PKNB cluster PSC consists of four discovered gas fields, namely Pertang, Kenarong, Noring, and Bedong, located in the shallow waters off the east coast of Peninsular Malaysia. These fields are situated in the south, with a tie-back to the PM3 CAA PSC.
In addition, Hibiscus is planning to expand PM327, stating that PM327 could be one of the largest exploration blocks in Peninsular Malaysia. The group announced last month that it will hold a 30% stake in the PM327 PSC through a farm-in arrangement with Petronas Carigali Sdn Bhd. The transaction is currently awaiting regulatory approval and fulfillment of precedent conditions.
Overall, the group aims to increase its production from the current approximately 21,000 barrels of oil equivalent per day to 35,000 barrels of oil equivalent per day by 2026.
Like other upstream oil and gas participants, Hibiscus has been increasing dividend payments and share buybacks to reward shareholders as oil prices rebound with post-pandemic demand and geopolitical conflicts.
In the 2024 fiscal year, Fuyong repurchased 19.1 million shares of stocks at a price of 43 million ringgits. This year, it paid a total dividend of 8.5 sen per share, higher than the expected 7.5 sen per share in February.
Nevertheless, its stock price has been declining, in line with broader market concerns about potential global economic downturn.
So far this year, Hibiscus' stock price has fallen by 19.69%. On Thursday, the counter rose by 7 points or 3.55% from the previous day's closing price to 2.04 ringgits, bringing the company's market cap to 1.6 billion ringgits.
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