KUALA LUMPUR (Sept 12): Hibiscus Petroleum Bhd (KL:HIBISCS) sees no need to undertake any equity fundraising for at least the next two years as it sees its operating cash flow, cash balance and existing financing facilities as enough to fulfil any capital spending required for its planned expansion.
The oil and gas exploration and production outfit is anticipating it would spend about US$407 million (RM1.76 billion) for financial years 2025 (US$262 million) and 2026 (US$145 million).
As at end-June, Hibiscus had cash and bank balance of RM688.03 million, and restricted cash and bank balance of RM274.36 million. Its total borrowing stood at RM749.06 million. Net operating cash flow stood at RM978.65 million against net cash flow for investing activities of RM913.93 million. Finance costs in FY2024 amounted to RM106.83 million.
Among its ongoing projects is the South Furious 30 Water Flood Phase 2, which will use water injection pressure to boost production. First oil is expected soon, according to reports.
Another ongoing development is the group’s Teal West field in the UK that is slated to come online in 2025. Part of the Anasuria Cluster, this project is expected to significantly enhance Hibiscus’ production capacity in the North Sea.
Also included in the capex guidance is its acquisition of TotalEnergies' assets in Brunei, which is expected to be completed by late 2024 and will contribute an additional 7,000 to 8,000 barrels of oil equivalent per day (boepd) to the group's production, increasing its 2P reserves by 36%.
It also believes it should have enough to commit to a dividend payout of at least eight sen per share for FY2025 if Brent averages at least US$70 per barrel (/bbl) throughout the year.
When asked how decisions on capex and shareholder returns would be impacted should oil prices stay below US$70/bbl, Hibiscus managing director Kenneth Pereira said, "oil prices do not stay down without services [cost] also reducing".
“We work very hard towards maintaining our Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins. As our capital framework, we prioritise paying off debt first, then paying some dividends and then go for capex.
"When oil prices are low, the hurdles for these projects are not so straightforward. That means we will be even more selective," Pereira said.
In Peninsular Malaysia, Hibiscus is optimistic on a potential extension of its PM3-CAA production-sharing contract (PSC) beyond 2027, which management said should be known by the end of this year. The company is actively exploring new fields in the area, which could add reserves and production capacity.
From here, Hibiscus will have more clarity on additional capex requirements beyond its existing guidance, with the proposed development of its PKNB Cluster, which will begin production by 2028.
The PKNB Cluster PSC comprises four discovered gas fields, namely Pertang, Kenarong, Noring and Bedong, which are located in shallow waters offshore the east coast of Peninsular Malaysia. The fields are located to the south, and within tie-back distance of the PM3 CAA PSC.
In addition, Hibiscus is planning for the expansion of PM327, which it said can be one of the largest exploration blocks in Peninsular Malaysia. The group announced last month that it is taking up a 30% participating interest in the PM327 PSC through a farm-in arrangement with Petronas Carigali Sdn Bhd. The transaction is currently pending regulatory approvals and fulfilment of conditions precedent.
In total, the group targets to raise its production to 35,000 barrels of oil equivalent per day by 2026, from about 21,000 boepd currently.
Like other oil and gas upstream players, Hibiscus has been raising dividend payouts and share buybacks to reward shareholders as oil prices boom amid post-pandemic demand rebound and geopolitical conflicts.
In total, Hibiscus bought back 19.1 million shares for RM43 million in FY2024. For the year, it is paying a total of 8.5 sen dividend per share, higher than the expected 7.5 sen per share it guided in February.
Still, its share price has been on a downtrend, in line with broader market concerns about a potential global recession.
Year to date, Hibiscus shares have dropped 19.69%. On Thursday, the counter gained seven sen or 3.55% from the previous day's close, to settle at RM2.04, giving the company a market capitalisation of RM1.6 billion.