Hibiscus Petroleum Berhad (HIBISCS) Earnings Call Transcript & Summary

Welcome to Hibiscus Petroleum's financial results webcast. This webcast presents an overview of the results reported as part of our quarterly financial report for the 3-month period ended 30th September 2023 and released earlier today. This webcast is being prepared by Hibiscus Petroleum Berhad or the company solely for general information purposes and shall all times be heard and of you together with the full quarterly report for the same period that has been made available or published by the company on its website. This webcast may contain forward-looking statements, which are based on current expectations, beliefs and projections about future events or matters. By listening to end of viewing the webcast, you agree to the limitations and notifications set out in the disclaimer section of this webcast. Our presentation today is split into 3 parts. One of our presentation presents our key messages and highlights for this quarter. This will be presented by Pascal Hos, CEO of Hibiscus Oil and Gas Malaysia Limited, a wholly owned subsidiary of the group. Part 2 covers the group's quarterly operational and financial updates and will be presented by our Head of Corporate Finance, Joyce Vasudevan; and our Chief Financial Officer, Yip Chee Yeong or CY, guidance on our offtake schedule and gas sales will be presented by Joyce Vasudevan in Part 3. Should you have any queries, you may contact our Investor Relations team headed by Lily Ling, our VP of Corporate Development by the e-mail address provided at the end of this presentation. Now over to Pascal.

Hello. I am Pascal Hos, CEO of Hibiscus Oil & Gas, Malaysia Limited, or HML. And here are our key messages for the current quarter. Continued strong oil and gas prices have positively affected the group from a financial results perspective. In the current quarter, we delivered an EBITDA of MYR 393 million and a PAT of MYR 154.3 million. These metrics represent an increase of 32% of our EBITDA and 14% of our PAT compared against the EBITDA and PAT recorded in the corresponding financial quarter ended 30th September 2022. In the current quarter, we sold approximately 1.4 million barrels of oil and condensate. Gas was also sold. This amounted to 0.6 million barrels of oil equivalent or BOE. The group remains on track to meet its financial year 2024 target to sell approximately 7.5 million to 7.8 million BOE of oil, condensate and gas. In the current quarter, our average net oil, condensate and gas production exceeded 20,000 BOE per day with assets of the Peninsula Hibiscus Group, delivering 66% of this production. In Malaysia and the U.K., there have been important developments on various projects. Beginning at the end of October 2023, we commenced an exploration drilling campaign, which will spend both East and West Malaysia utilizing the PV Drilling 3 jack-up rig. Four exploration targets are being pursued. The drilling program commences within the license area of the North Sabah PSC and then moves to identified opportunities within the PM3 CAA PSC. The targets are near field, close to existing infrastructure and if successful, could be material and brought into production relatively quickly. Until West in the U.K. North Sea, the drilling of the initial production well is planned to commence in the middle of calendar year 2024 and a suitable drilling rig has been actively sought. Installation of facilities related to the subsea tieback may be delayed until the first half of calendar year 2025. And if this is the case, then first oil from the development would be expected in the middle of calendar year 2025. Also in the U.K. North Sea, Anasuria Hibiscus U.K. entered into discussions with Rapid Oil Production Limited to develop license P2451 containing the fine field. FEED production facilities of the Anasuria FPSO, which is located approximately 18 kilometers away. These discussions concluded with Anasuria Hibiscus U.K. and Ping Petrol in UK PLC, each farming in for 42.5% interest in the fine field with Anasuria Hibiscus U.K. appointed operator and rapid oil retaining 15%. The U.K. North Sea transition Authority or NSTA, subsequently approved the new partnership. For the fine development, our plan is to submit a concept select report to the NSTA by the end of calendar year 2023 with a subsequent submission of the field development plan or FTP and environmental statement in calendar year 2024. Turning to the Marigold development. On 15 September 2023, Anasuria Hibiscus U.K. executed a unitization and unit operating agreement or UUOA with our partners, Ithaca Oil & Gas Limited and Caldera Petroleum U.K. Limited to jointly develop the unitized Marigold field. Anasuria Hibiscus U.K. holds 87.5% interest in licensed P198 Block15/13a, which contains the Marigold Westfield, with Caldera Holding remaining 12.5%. Ithaca holds 100% in licensed P2158 Block15/18b, adjacent to the Marigold Westfield and containing the Marigold East field. After detailed technical studies and the relevant commercial negotiations and pursuant to the UUOA that has been executed, Anasuria Hibiscus U.K. hold 61.25%, Caldera holds 8.75% and Ithaca holds 30% in the unitized Marigold field. That is the combination of Marigold West and Marigold East fields. Also pursuant to the UUOA, Anasuria Hibiscus U.K. is the operator of the Unitized Marigold field. And work is progressing to submit the Marigold FDP and environmental statement in early calendar year 2024. Subsequent to the end of the current quarter, that is on 30th October 2023, Anasuria Hibiscus U.K. was offered awards of 3 blocks in the first batch of the 33rd U.K. offshore licensing round by the NSTA. The blocks offered for award are located in Quad 15 area of the Central North Sea, namely, Part Block 15/12. This block is located 8 kilometers from the Marigold field and contains the northern part of the Kildrummy discovery. The southern part of the Kildrummy discovery is already held by Anasuria Hibiscus U.K. under license P2518, which was awarded under the 32nd U.K. North Sea licensing round. Block 15/18a and Part Block 15/19A, these blocks are located 12 kilometers from the Marigold field and contain the Crown discovery. The Kildrummy and Crown discoveries are potential tieback candidates to the common infrastructure provided through the proposed Marigold Unitized development. The current financial performance of the group has allowed us to continue to reward our loyal shareholders. Based on the present favorable market outlook and subject to the matters reflected in our dividend policy, the group is aiming to declare a minimum total dividend per share of MYR 0.075 over the course of financial year 2024. Of this amount, a first interim single-tier dividend of MYR 0.02 has been declared on the 22nd November 2023. That's all from me. Now over to Joyce for the operational updates.

Hello. I am Joyce Vasudevan, Head of Corporate Finance. I will take you through an overview of this quarter's operational highlights. This table shows the operational performance of our North Sabah, Anasuria cluster and Peninsula Hibiscus Group assets for the current quarter ended 30th September 2023. Beginning with the North Sabah asset, the production facilities recorded an average uptime of 83% lower than that delivered for the preceding quarter. Average oil production of 4,611 barrels per day also fell when compared to the preceding quarter, mainly due to the ramping up of planned activities from the planned major maintenance campaign, approximately 549,000 barrels of oil net to see Hibiscus was sold at an average oil price of USD 97 per barrel in the current quarter, higher than the preceding quarter's realized average oil price of almost USD 83 per barrel. Average production OpEx that is gross production OpEx divided by gross oil production stood at USD 24 per barrel. Net OpEx per barrel calculated by taking the some of net production and net development OpEx and dividing it by net oil production was $34 per barrel. Over Anasuria, the average uptime of 89% and average daily oil equivalent production rate achieved of 2,220 barrels of oil equivalent per day was lower than that achieved in the preceding quarter. Production in the current quarter fell, primarily due to a planned outage for the replacement of the mooring chain and winch wire. One crude oil offtake was conducted in Anasuria during the current quarter, from which approximately 203,000 barrels of oil net to Anasuria Hibiscus U.K. was sold at an average realized oil price of USD 97 per barrel. This was higher than the preceding quarter's realized average oil price of $75. A total of 138 million standard cubic feet of gas was also sold. Average production OpEx per BOE achieved in Anasuria cluster for the current quarter of USD 27 was higher than that achieved in the previous quarter. Moving to the Peninsula Hibiscus group assets. On a combined basis, these assets recorded an uptime of 78%, an average net oil and condensate production rate of 5,800 barrels per day. Average gas production rates stood at 7,531 BOE per day. Approximately 659,000 barrels of oil and condensate was sold while the total of about 3,600 million standard cubic feet of gas were also sold. Average production OpEx stood at approximately USD 15 per BOE, while net OpEx was USD 26 per BOE. Amongst the 5 PSCs held by the Peninsula Hibiscus Group, Kinabalu and PM3 CAA assets are the largest overall contributors to its financial performance. Focusing on the Kinabalu asset, average gross oil production in the current quarter was low due to the panel planned major maintenance campaign, which took place from 29 July to 5th August 2023. This also affected its uptime, which came in at 68%. Kinabalu's average net oil production of almost 2,700 barrels per day accounted for approximately 47% of Peninsula Hibiscus Group’s total average net oil and condensate production of almost 5,800 barrels per day. One crude oil offtake was conducted in the current quarter with 288,000 barrels of oil being sold, representing 44% of the Peninsula Hibiscus Group's total oil and condensate sales of 659,000 barrels. At PM3 CAA, uptime average gross oil and condensate production as well as gas production were affected by the annual planned maintenance campaign, which occurred from 16 to 26 August 2023. PM3 CAA's average net oil production of 2,800 barrels per day accounted for approximately 49% of Peninsula Hibiscus Group's total average net oil and condensate production of almost 5,800 barrels per day. Average net gas sales production decreased to 7,500 BOE per day in the current quarter and this volume accounts for all of Peninsula Hibiscus Group's gas production. Approximately 365,000 barrels of oil was sold, representing 55% of the Peninsula Hibiscus Group's total oil and condensate sales of 659,000 barrels while a total of about 3,600 million standard cubic feet of gas was also sold. CY will now go over the financial updates.

Hi I'm CY, the Chief Financial Officer of Hibiscus Petroleum Group. As we have often stated in the past, our group places strong emphasis on careful management of costs and the efficient delivery of production enhancement projects. This approach represents a critical part of our strategy of maintaining a low unit production cost structure within the portfolio of our producing oil and gas assets. Furthermore, we try to face the execution of maintenance activities [indiscernible] to ensure that positive cash flows are consistently delivered. The group operates or jointly operates its main producing assets. This is a key enabler in allowing us to influence the timing of the implementation of operational activities, supporting our ability to manage the facing of expenditure. The chart on the far left on this slide presents the quarterly weighted average realized prices of both oil and condensate, optics and gas sales, unit production costs, earnings before interest, taxes, depreciation and amortization or EBITDA margins over the last 7 quarters for the Peninsular Hibiscus group assets. The next 2 charts showed the quarterly average realized oil prices, unit production costs and EBITDA margins for both North Sabah and the Anasuria cluster over the last 10 quarters. As clearly illustrated in the chart, the Peninsula Hibiscus Group assets, North Sabah and the Anasuria cluster have consistently recorded average unit production costs that are well below the average realized prices achieved in the respective quarters, resulting in continual positive cash flows being generated. Management's focus remains on continuing this trend of overall performance. I would like to highlight that the group's revenue is almost fully transacted in U.S. dollars. While costs are mainly denominated in the local currencies of the jurisdictions in which the operating assets are located, namely the Malaysian ringgit costs incurred in Malaysia and the British pound for activities conducted in the U.K. In addition to that, there are some costs, which are denominated in U.S. dollars. Accordingly, a healthy U.S. dollar bodes well for the group and positively impacts our cash flow and financial performance. I will now take you through a summary of the financial highlights for the current financial quarter ended 30 September 2023. Hibiscus Petroleum Group recorded strong profitability in this quarter. EBITDA attained amounted to MYR 393 million, where the group's PAT was MYR 154.3 million. The resulting EBITDA and PAT margins overall revenue were 52.6% and 20.7% respectively. This performance was achieved on the back of relatively strong sales volume and high oil condensate and gas prices. The group saw 1.4 million barrels of crude oil and 0.6 million barrels of oil equivalent gas. Total revenue generated was MYR 746.6 million. The sale of oil and condensate contributed MYR 634 million to total revenue by the sale of gas added a further MYR 107.3 million. The profit levels attained in the quarter were achieved in a quarter during which planned maintenance activities were conducted and completed in all of the group's producing assets in Malaysia. I will now proceed to highlight the performance of the group's oil and gas producing assets. Firstly, for the Peninsula Hibiscus Group assets. We acquired this asset in January 2022. And since then, they have contributed significantly to our group's financial performance. It was no different this quarter. During the current quarter, this Peninsula Hibiscus Group assets contributed MYR 396.5 million or 53.1% to the group's revenue. MYR 233.6 million or 59.4% to the group's EBITDA and MYR 96.8 million or 62.7% to the group's PAT. I would like to draw your attention to the material production sharing contracts in this asset group, namely the PM3 CAA PSC and the Kinabalu PSC. PM3 CAA reported strong profitability levels during the current quarter. This was largely attributed to the high average realized prices obtained for the sale of both crude oil and gas. The gross profit and gross profit margin attained MYR 160.4 million and 62.5%, respectively. The EBITDA for PM3 CAA in the current quarter was MYR 153.4 million, which resulted in an EBITDA margin of 59.8%. The PM3 CAA PSC sold 365,000 barrels of oil in condensate at an average oil price of USD 91.78 per barrel and 597,000 barrels of oil equivalent gas in the current quarter. The operational performance of PM3 CAA was impacted by activities related to the annual planned major maintenance campaign for calendar year 2023, which took place between 16 August 2023 to 26th August 2023. In addition, production was impacted by a lower gas export rate, which was caused by lower demand from the buyers due to downtime experienced at their receiving facilities. The impact of the above-mentioned areas were partly elevated by the stable oil production trend witnessed from H4 reservoirs through an optimized water injection program and successful well work activities in the PM3 Southern field. In the current quarter, the PM3 CAA PSC attained an uptime of 83% and recorded an average net oil equivalent production rate and OpEx per barrel of oil equivalent of [ 10,338 ] barrels of oil equivalent per day and USD 14.33 respectively. The next notable production sharing contract within the portfolio of the Peninsula Hibiscus Group assets is the Kinabalu PSC. Kinabalu sold 288,000 barrels of crude oil, net to our group at an average oil price of USD 103.16 per barrel, recording a revenue of MYR 137.3 million. The PSC achieved a gross profit of MYR 88.2 million and a relatively high gross profit margin of 64.3% in the current quarter. This high profitability level was mainly due to relatively high average realized oil price achieved. From a cash flow perspective, Kinabalu recorded an EBITDA of MYR 74 million and an EBITDA margin or revenue of 53.9%. Like PM3 CAA, operational performance in the Kinabalu PSC during the current quarter was impacted by the execution of the annual planned major maintenance campaign for calendar year 2023. This campaign took place from 29 July to 5th August 2023 and is the main cause for the relatively high OpEx per barrel in the current quarter of '23 USD 0.41. Moving on to North Sabah. This segment recorded revenue and gross profit of MYR 246.4 million and MYR 142.3 million respectively. This asset sold 549,000 barrels of crude oil net to see Hibiscus at a relatively high selling price at USD 97.03 per barrel. The plan calendar year 2023 major maintenance campaign and a well intervention campaign that commenced in previous quarters continued to impact North Sabah's operations in the current quarter. Both campaigns were completed during the current quarter. The average OpEx per barrel recorded was USD 24.13, while the average net oil production rate was 4,611 barrels per day. Despite the less favorable operational performance, North Sabah was able to maintain a reasonable level of profitability due to the high average realized oil price achieved. The GP and EBITDA margins or revenue were relatively high at 57.8% and 41.6% respectively. From the United Kingdom segment, a net 203,000 barrels of crude oil was sold from the Anasuria cluster at USD 97.24 per barrel, which generated revenue of MYR 92.8 million in the current quarter. In addition, gas sales contributed MYR 5.6 billion to revenue. During the current quarter, the asset achieved high average uptime and average daily oil equivalent production rate of 89% and 2,220 barrels of oil equivalent per day respectively. OpEx per barrel of oil equivalent recorded in the current quarter was USD 27.22. Production in the U.K. was adversely impacted by the short outage associated with planned work to extend the life of the Anasuria cluster asset. The U.K. segment's EBITDA for the current quarter was MYR 66.3 million. The U.K. upstream oil and gas industry is currently subjected to a total tax of 75%, which comprises of ring fenced corporation tax of 30%, supplementary charge of 10%; and energy profit levy or EPL of 35%. It is important to note that we do not expect any significant income taxation liability arising from the EPL regime for the current financial year ending 30th June 2024 as sufficient enhanced allowances would very likely be available from planned capital expenditure to fully offset the estimated income chargeable to EPL. The group's intention remains to face our U.K. capital expenditure program such that we optimize the incentives offered as part of the EPL regime. Lastly, the group remains in a strong liquidity position. The net current asset position recorded as at 30 September 2023 amounted to MYR 705.7 million. I will now hand over back to Joyce, who will go over the offtake schedule.

This slide presents the group's oil and condensate offtakes and gas sales from our producing assets for the financial quarter ending 31 December 2023 and 31st March 2024. In summary, we estimate to sell a total of approximately 1.9 million BOE and 1.8 million BOE of oil condensate and gas respectively, net to the group. For the financial year ending 30 June 2024, the group remains on track to sell a total of between approximately 7.5 million to 7.8 million BOE of oil condensate and gas.

Thank you, Joyce. And that is all we have for this quarter's earnings webcast. We hope that our commentary and slides assist in your better understanding of our quarterly results and activities. Please be sure to refer to the relevant set of quarterly results and our Q1 2024 Corporate Business Update uploaded on our website to obtain a complete understanding of our business performance. Again, should you have any queries, you may contact our investor relations team either e-mail address shown on this slide. Thank you for tuning.