Hibiscus Petroleum Berhad (HIBISCS) Earnings Call Transcript & Summary

Good afternoon, everyone. This is Hibiscus Petroleum's Fourth Quarter 2024 results meeting. Let me quickly introduce you the rest of my team. To my left is Chee Seong, our VP of Strategic Ventures; to his left, Pascal Hos, the Country Head of Malaysia and Vietnam; C.Y, our CFO; and Deepak, VP of Economics and Business Plan. Our Managing Director, Ken and Head of Corporate Finance Joyce will be joining us later. So we'll go -- dive right into the presentation. All right. Okay. Yes Pascal, can everybody see the slides?

Good afternoon, actually. Good evening, everybody. Thank you for joining us today. We're going to be walking you to quite an exciting quarter, which helped us round off a very strong year. So I'll start off by giving up -- giving you some of the highlights. I'll start off with the financials. So we had a revenue of MYR 738 million for the quarter, which is a 22.3% increase quarter-on-quarter. And closed the year -- fiscal year 2024 with MYR 2.7 billion, which is a 15.8% increment year-on-year. In terms of EBITDA, we generated MYR 302.6 million, which is 0.8% quarter-on-quarter and for the full year, MYR 1.3 billion, which is a 4% increment year-on-year. In terms of PAT, we generated MYR 108.7 million, which is 0.68% quarter-on-quarter improvements. And for the full year, MYR 467.1 million, which is 16.6% year-on-year improvement. We also declared a fourth interim single-tier dividend of MYR 1.5 per share for fiscal year 2024, which brings us up to fully declared MYR 7.5 per share. We also bought back shares of 10.3 million shares since December 2023, which are retained as treasury shares. Okay. Some of the operational highlights. The average production was 20,144 barrels of oil equivalent per day which is a slight decrease quarter-on-quarter, mainly due to some maintenance activities. For full year, the average was 20,833 barrels of oil equivalent per day. In terms of total oil and condensate sold was 1.5 million barrels for the quarter, which is a 30% increment and for the full year, it's [ 5.17 ] million barrels, which is 15.3% increment year-on-year. We gave a guidance of 7.5 million to 7.8 million barrels of oil equivalents, and we actually achieved for the full year of 7.85 million barrels of oil equivalent. So that includes the gas. So for the quarter, we sold 0.6 million barrels of oil equivalents, which is a slight decrease quarter-on-quarter. But for the full year, we had sold 2.69 million barrels of oil equivalent, which is a 17.7% increment year-on-year. Okay. And then some exciting activity in terms of projects. So we announced the proposed acquisition of TotalEnergies EP Brunei, and that maintains a 37.5% stake in Block B MLJ field in Brunei. Traditionally, we were awarded PSC by PETRONAS, which is PKNB Cluster stands for Pertang, Kenarong, Noring and Bedong. These are 4 fields with the gas resource discovered -- gas resources. So Hibiscus hold a 65% interest with PETRONAS Carigali as our partner. And the PSC has a 24-year tenure. Also recently, we signed and announced a farm-in agreement with Petronas Carigali for 30% interest in to PM327. This is a PSC that sits south of PM3 CAA and also contains the PKNB Cluster within the boundaries, but they're carved out. Okay. That's the highlights. I'll hand it over to Deepak to give you some more information on the operational and financial updates.

Thank you, Pascal. So before C.Y take us through takes us through the financial highlights. Let's look at the operational highlights. So this is a summary of our operational performance. Let's start with the production numbers. So this quarter, we bring 20,144 barrels of oil equivalent per day. For the full year, we produced 20,833 barrels of oil equivalent per day. And on the total -- on the right most top right, we are showing that this quarter's total sales volume, which is 2.1 million barrels of oil equivalent. On a financial year for 2024, we delivered and sold 7.8 million barrels of oil equivalent, which is if you look at the oil and gas mix, oil is roughly about 66% and gas is about 34%. And with Brunei, once we integrate the Brunei production numbers, running asset production numbers. Our gas content is expected to increase from 34%, which is our this year's content to close to 50%. In terms of oil, the realized prices, you could see this is very much in line with what we realized in last quarter, which is roughly about $89, $90 per barrel, that was the oil and gas -- oil and condensate realized price and also higher gas price this quarter as well. Worth to note that the -- all of the oil and condensate that we are selling here are sold at the premium to bring. So on average, it's roughly about 6% premium to Brent, that translates to roughly about $4.9 per barrel premium. Now let's look at each of the assets. So North Sabah reduced 4,705 barrels per day. This is pure oil. Slightly lower production numbers because of -- we have commenced the planned maintenance activities. Peninsula more or less, very similar production numbers, 13,527 barrels of oil equivalent per day. This consists of oil, condensate and gas. And Anasuria 1,912 barrels of oil equivalent per day. Unit OpEx -- you would have seen this particular quarter is higher compared to the previous quarter, significantly higher because of -- mostly because of the planned maintenance activities. Especially at the North Sabah and Peninsula have started -- have [ commenced ]. Let's go to the next slide. So now let's look at each of the producing area. We start with the Kinabalu PSC. This quarter, we reached 2,967 barrels per day. Our net OpEx per barrel was higher, USD 38.25 per barrel. It's just oil. And you could see that the net [ is ] lower production and higher net OpEx per barrel, basically due to the higher decline from the Kinabalu-18 well and commencement of the annual plant major maintenance campaign. Which took place during the 26 of June to 5 of July 2024. And in terms of offtake, we sold one-off take in Kinabalu, volume 349,000 barrels at roughly about $84 per barrel. Go to the next slide now. Let's look at PM3 CAA, PSC, which has got oil condensate and gas -- we've produced 10,469, barrels of oil equivalent per day, but it's slightly higher than what we reduced last quarter is also because of the fact that we drilled 1 exploration well, which was Bunga Aster, then success. It was the success well. We converted into production well, and then we started producing since fourth of May 2024 and also sustained production from previously drilled well. So that was the reason for the higher product numbers. Net OpEx/boe increased from depreciating quarter due to the increase in the maintenance and production activities. And in terms of the offtake, we had one-off take of [ 302,000 ] barrels very similar to what we had the previous quarter, for the oil and condensate. Look at the next slide, coming to a North Sabah. So we had slightly lower production, 4,705 barrels per day and higher unit operating cost, net OpEx per barrel of $36, which is also because of the lower volumes, lower due to the commencement of the planned maintenance activities. We sold -- we had 2 cargoes this quarter. We sold 2 cargoes, rougly combined volume of 614,000 barrels, net OpEx barrel also higher because of commencement of the planned maintenance activities at North Sabah. And the team is working very hard on the SF30 Water Flood Phase 2, which intends drilling of 6 water injectors and 5 oil wells, all to be drilled -- expected to be drilled this year. Okay. Let's look at our U.K. producing asset, Anasuria Cluster. So we had little hiccups in Cook Well -- so because of the blocked corrosion inhibitor line. And because of that, the Cook well was shut in during 25 of April to 19 of May. So as a result of it, our production number was lower to 1,912 boe per day. And as a result of it, our unit operating cost was also higher. So net OpEx per boe for this quarter was $32.39, $32 per barrel of oil equivalent. We had one-off take of 188,000 barrels. We sold oil at roughly about $84 per barrel realised price. Let's go to the next slide. These 2 slides are very interesting. Pascal highlighted, we talked about briefly talked about these 2 PSCs. So let's talk about, first, the PKNB PSC, which is Pertang, Kenarong, Noring, Bedong. So these are like discovered field within this PSC, and in terms of location, you could see it's south of PM3 CAA PSC, which we have been producing which is -- this PM3 CAA has been in production since 1999. So it has already been producing last 24, 25 years. And this particular PSC has got 4 reduced asset for a discovered asset or discovered gas asset -- and then -- so this is not an exploration permit. It's not an exploration license. It already has got discovered gas resources. The objective would be to bring it to production. In terms of the time line to bring it to production is calendar year 2028. And it will consist of 3 platforms, and total 16 wells. And then it would be tie-back time to our existing gas processing complex. So it's a -- you could see it's roughly about 35 kilometers from our nearest infrastructure. So the well will be drilled and then the gas will be processed at our PM3 CAA PSC -- PM3 CAA PSC -- PM3 CAA gas [ processing ]. If you look at the tenure of this PSC, this PSC is for 24 years. So it has -- so it will take it produce as based on the discovered gas resource, we believe we will continue to produce upto 2048. So there is a significant amount of the runway this gas PSC gives us. And also, it's an testimony to our operating experience and our operatorship, all the good work which our Malaysia team has put together. So it is the first direct PSC awarded by PETRONAS. And I think this portfolio, we will show you, it adds considerable amount of resources to our -- considerable amount of volumes to our 2C resources for the [indiscernible]. It's roughly about 47 million, 48 million barrels of oil equivalent, it adds to our resources. This one is about the PM327 PSC. Currently, this is in exploration stage, right? So you could see it's the south of PM3 CAA PSC. So this PM3 CAA -- PM327 PSC was awarded to Petronas Carigali and E&P Malaysia Venture Sendirian Berhad, which is also a subsidiary of PETRONAS in 2022. And what we did is we signed a farm-in agreement with Petronas Carigali to have 30% participating interest in this license. This is for 28-year PSC duration. So normally, it will have first 4 years for the exploration phase. Then the second 4 years is for the development phase. And then the third and last phase of 20 years is for the production. So once we make the discovery or commercial discovery in this exploration during this first 4 years of exploration phase, then the objective would be to bring it to production and same concept as time to our existing gas infrastructure at PM3 CCA. So we have -- what we have done is we have updated our reserves and resources numbers. So previously, we had shown you the results as of first January 2024. Now all of these numbers as at 1 July 2024. So what we have done is we started with the January numbers, and then we have subtracted or deducted all of the actual production, actual production of all condensate and gas to give us the numbers as at 1 July 2024. So as of July 2024, our 2P reserves stand at 57.4 million barrels of oil equivalent. And you could see that there is a considerable amount of the 2C resources being added from the PKNB PSC. It's 47 million barrels of oil equivalent. So that makes some total 2C sources of 106 million barrels of oil equivalent. And in these results and resource numbers, the Brunei contribution is not included here. So it's excluding the Brunei numbers. Once we add Brunei numbers, our 2P reserves should go up roughly by 20 million, 22 million barrel of oil equivalent. Okay Now I will hand it over to C.Y.

Hello, good afternoon. So financial highlights. Now there are 2 sections actually produced to the chart that you [indiscernible] that you're looking at. So for which area, revenue, EBITDA and PAT results after tax. We have noted now the full year attainment given its last financial quarter of FY 2024, and also comparison between 4Q of FY '24 versus 3Q. Well, the, the summary of where we have landed at least, just not on a financial year basis is that our core areas other then PAT. We have exceeded last year's numbers -- and that's -- I mean, I'm going to give you more detail on that, including the impairments and the write-offs we talk during further [ financials ]. From a revenue perspective, for the current year, we have attained 7.8 million barrels of oil equivalent production or rather sales, and that has exceeded our initial guidance. Our target for the year was 7.5 million. So we have gone ahead of that. And really, that's the main reason why our revenue has increased by 16% against FY 2023. On a quarter-to-quarter basis, revenue has exceeded last quarter by 22%. And -- for the current quarter, we sold 2.1 million barrels of oil equivalent. And hence, that helped us attain close to [ MYR 715 million worth ] of revenue versus MYR 600 million last quarter. Between the 2 quarters, our realised oil prices both quarters for approximately $90 per barrel, so fairly hard. From an EBITDA perspective, they're trying to continue. But what I would highlight is that, yes, we did take an impairment or write-off last quarter in Q3, if you recall, 2 wells in the SFs exploration campaign. The total cost of debt write-off pretax is about MYR 90 million -- MYR 80 million, sorry, about MYR 80 million and post-tax was closer to about MYR 50 million. So that was in Q3. And in Q4, as part of our annual financial year payment assessment of -- on all our producing assets and development licenses across the group. We found that they were an area in Kinabalu, I mean, just particularly the Kinabalu PSC when you look at the economics and look at all the numbers that we have in hand, we did decide that an impairment was necessary. I mean based on also lower oil prices, this particular financial year compared to last financial year given the oil price trend that went down a bit compared to last year. So we took an impairment for prudence purpose, actually, of about MYR 61 million this quarter. That's pretax, posttax amount of MYR 37 million. So all in all, the total write-off or impairment that we've taken across the group in FY 2024 was close to about MYR 140 million pre-tax and about MYR 19 million post-tax. So even after taking those decisions, ou EBITDA increased about 4% and landed at about MYR 1.32 billion. So I think that demonstrates the resilience of our operators right now, at least the third financial year that we have exceeded the MYR 1 billion mark in terms of EBITDA. Okay. But just to also note, I think it was aided by Deepak. We had, during the quarter, has started in all of our Malaysian PSCs, our planned maintenance activities. So for example, Kinabalu, it started towards the end of June. But by the end of -- I mean by 30 of June, A large part of it has been completed, but there are some remnants that we will be performing -- that we have performed, sorry, in July. PM3, the same thing we did conduct some planned activities. But the actual shut down for -- PM3 just for guidance, the actual shutdown for PM3 will be performed in August 2024. So that's ongoing now. As for North Sabah, the underwater inspection campaign and barge campaign and all these planned activities was performed or work performed from March 2024 to July 2024. Okay? And in U.K., I think if you look at if you look at PR, there was a shutdown in the coke producing well that took place in May, but that has been resolved, so now it's back to normal. And so all these -- all costs related to these activities have been incorporated, obviously, into the EBITDA for the -- for Q4. Well, to PAT, as mentioned earlier, despite all these write-downs and all these adjustments, it impacted the P&L adversely, our PAT went up by 17%. From MYR 400 million last year, financial year to MYR 467 million in FY 2024. For -- if you compare between 4Q and 3Q, well, the PAT, [ it's fairly to say ], both just reaching the MYR 100 million mark. Okay. Then In the next page, you'd be familiar this -- with this view, this is where we compare the margins -- the EBITDA margins that we generate across all our producing oil and gas [indiscernible] Peninsular, North Sabah and Anasurai in the U.K. Against the EBITDA margins are quite -- we are fairly comfortable in short. In this particular quarter at least, we are looking at are close to about 50% to 60%. Now that's despite all the maintenance activities that occurred during the quarter. We have stripped off the impairments because from this view because there are -- we review that to be non -- in a way, nonoperational related. So just to get a better view, we have taken them away when we show this chart. I mean what this also means is that, again, if you look at the chart, we are trending for Peninsular since we acquired the asset in FY 2022, we have trended above or 50 and above in most of our quarters. In North Sabah, in recent times, it has been above 50 -- between 50 to 60. Anasurai as you recall, there was -- if you recall, I think in 2022, it was till end, we had an issue with the riser. But once the fixed debt, you see that the margins have gone back up and now it's holding around 50% to 60%. Move on to the balance sheet highlights. We had another strong -- obviously, quite a strong quarter. So it's not surprising that the total assets have gone up again, to MYR 6.6 billion now as at 30 June, 2024. So the same is true for shareholders' funds. And as said, June 2024, we are accumulated MYR 0.4 billion of value compared to the same stage in -- of last year. So that's about MYR 411 million added to shareholders' funds. The total debt balance really is being determined, we drew down sometime last year to our aid our various capital expenditure and OpEx programs. But that's the only one. But the debt equity ratio is very healthy. It's still at 0.12x, so very low. And our cash is about just above MYR 200 million across the group as of 30, June 2024. [indiscernible]

Okay. Let me walk you through the outlook and investment merits. So just a snapshot of the guidance for fiscal year 2025. So shown that in comparison with fiscal year 2024. So in terms of sales of oil condensate and gas -- we already said we sold 7.85 million barrels of oil equivalent this year for next year, okay? With caveat that we complete the Brunei acquisition by October 2024. The guidance is somewhere between 8.6 million and 8.9 million barrels of oil equivalent, so a significant increase over this year. In terms of CapEx, so the guidance was USD 202 million or actual -- it's actually $158 million. Some of that is due to rephasing. So some of the North Sabah, SF30. CapEx has been pushed out a little bit. The fiscal year 2025 guidance is for USD 262 million. Now keep in mind, that does not include the Brunei acquisition. Okay? This is just pure CapEx for development. Of that two, West carries to USD 88 million and North Sabah, USD 62 million, okay? And in terms of dividends, yes, we said the guidance was at least MYR 7.05 per share. We actually did give out 7.05 per share to date. That's more than 3% dividend yield. We've not given any guidance for fiscal year 2025. So hold on to your hats. That's coming. Okay. On the next slide, we just give you a short overview of the offtakes for the next couple of quarters. Essentially, just look at the total numbers. For the next quarter, Q1 fiscal year 2025, the guidance is somewhere around 1.6 million barrels of oil equivalents, whereas for Q2, we're looking at around 2.5 million barrels of oil equivalent, yes? So you can then estimate what the rest of the numbers are for Q3 and Q4 based on the guidance on the previous page. Okay. So this slide gives you bit of an idea of how we are doing compared to our mission. I don't know how many of you remember our mission, but eventually the mission was to achieve between 35,000 and 50,000 barrels of oil equivalent by 2026 and achieve 100 million barrels of 2P reserves. Now -- we did this using -- essentially, we've taken a three-pronged approach. First is to convert development assets to producing assets. So one of the examples there is, for example, the SF30 Water Flood Phase 2 and Teal West. Enhancements, which is enhancing output and extending the economic life of producing fields. So this is production enhancement activities. Some of it is some nearby infill well drilling and it's through acquisitions. We still -- to fill the gap, we had to make an acquisition. And of course, the Brunei asset is a prime example of that. So we are now becoming quite a significant player, E&P player in this part of the world, in Southeast Asia, yes. 74% of our 2P reserves are located in Southeast Asia at this point, and that's distributed over Vietnam, Malaysia and now Brunei as soon as that transaction completes. So a bit of a guidance in terms of net production to the company, what it means. So if you look at 2024, so we were at 21,000 barrels per day. For 2025, that will increase to approximately 31,000 barrels of oil equivalent per day. So part of that is due to the increased production from North Sabah, the SF30 Water Flood Phase 2. It is increased and Anasuria Cluster from Teal West. And then, of course, the addition of the Brunei production. For 2026, that will increase slightly more or less primarily due to the increased production on the Teal West, okay? So you can see that -- I guess, it's very close to the bottom of our range of 35,000 barrels of oil equivalent per day. In terms of 2P reserves. As of 1 of January, we stood at 60.9 million barrels of oil equivalent. So after the proposed acquisition, that stands at 82.6 million barrels of oil equivalent, okay? So we have a little bit to go, and that's -- we're looking to target that through essentially converting 2C to 2P or potentially another acquisition. Okay. All right. I'll close it off with this slide. Let's talk a little bit about the investment merits, why should people invest in high Hibiscus, okay? First, as we just saw on the previous slide, we -- we've got quite aggressive growth targets, strategies to double our daily production rate by 2026. And we've established a very strong track record of operational excellence. We've shown to be very good at enhancing the efficiencies of current assets, and this has been recognized now by PETRONAS and thus we've received a direct award of a new PSC. In terms of capital, we have a very strong cash balance, we have a very strong cash flow. And our borrowing facilities are there and present to support all our CapEx needs. So we don't have to go to the markets to get more money. We mentioned we returned to an implied dividend yield of 3.3% for fiscal year 2024, and we'll give you guidance fairly soon about what that's going to look like for fiscal year 2025. In terms of valuation, so despite all of our extremely strong performance, we are quite undervalued. We're currently trading at an EV or EBITDA of 1.5x versus a peer average of 3.2x. And if you look at the P/E ratio, we're currently at 3.7x versus a peer average of 5.9x. This is one of the main reasons why we're doing share buybacks because we believe that our value should be significantly higher. That concludes our presentation. So I think we'll hand it back to the floor, and we'll answer any questions that you may have.

Thank you very much, Pascal. Please feel free to either raise your hand or type your question into the chat box and we'll get to them. Unmute your your mic, if you can. Otherwise, you may need to raise your hand first.

Thank you very much, Andrew. Thank you very much for the results. So my question is on the recent change in government in the U.K. Do you see any implication to the tax rate that you are currently receiving? Are you currently in discussion or is there any direction on that matter?

Well, the change or the changes or proposed changes will be tapered at the upcoming autumn budget on the 31 of October. Now -- they have proposed a few areas, increase in rates by 3% extension of EPL by another year. And also in terms of accelerated allowance to be taken off the 29% that we currently enjoy. Now when will it become effective, we do not know, obviously. Now it is -- it does not affect how we have viewed our assets because when we sanctioned Teal West, when FID, Teal West, we had this in mind, we -- this is not something that we do not anticipate because these same items was exactly were in the manifesto of this government when they were -- what they call that during the pre-election campaign. So it was -- it is not something that we do not know of. Teal West, in fact, right now is one of the very few license associated in U.K. that have been given the green light to go ahead by the NSIA, the local regulators. I think they have made a point that perhaps they should be a little bit more stringent in the area. So if you think of it that way, for the oil and gas players in in the North Sea, this is one of the very few including Marigold, actually, that may provide benefits to them or to anyone who view this as a potential upside. Well, Teal West is ongoing and we will continue to -- and the target to achieve, first of all, in the second half of next year is on track, and we will continue to pursue that. And now -- as I said, when were the new measures come in place, to be honest, at this point in time, we do not know exactly yet. But just to be sure, when we sanctioned Teal West, we knew that this was -- these measures were already talked about.

Sorry, C.Y, Just a follow-up question. So the first question would be -- so you don't see it impacting the existing assets in Anasuria for now? And second is, what would be the quantum of the impact to Teal West if all of these measures will take place here versus your previous projection?

So we projected this -- as I said, we have looked into the impact of this particular new proposals when we sanctioned well. For your information, in the recent -- in the ongoing external audit -- I mean, in this financial year. And so our auditors have been also on our backs with regards to this particular new announcement. We have performed our sensitivity test on the carrying value of the U.K. assets. We are [ exploring ] the impact -- we have computed the impact of these particular items. -- and the carrying value that we have in the books at this point in time. Although, of course, it will be wrong to say that there's no impact. There will be some impact but the current value is protected. So there is no shortfall in -- I mean there is no shortfall in the respective carrying value of our U.K. assets, even after incorporating the likely short fall or slightly reduction in the valuation of all these numbers based on existing market conditions. But yes, we have conducted those [ sensitivity tests ].

Yes. So just to add to what C.Y's saying, so we have performed those analyses to understand the potential impact even on the project economics of the Teal West. And of course, on Anasuria as well, of course, the impact is adverse as expected, when you are increasing the tax rate from 75% to 78% and taking out the additional 29% of the additional capital allowance. But if you look at currently, our U.K. asset is very small, right? It's just 10% of our current portfolio. So the impact is not massive. A small impact, very small impact.

Just to note Marigold, the adverse impact, if you like, on Marigold, is very, very minimal because Marigold first oil date is -- 2028, which is post the extension date of the EPL at least even after the proposed changes come into play, Marigold's valuation will not be very greatly affected because of the first oil date, which is going to come in much later.

C.Y, Deepak Just to correct my understanding if I'm wrong, but am I to assume the reason why the carrying value is not affected is because when you first acquired those assets, your assumptions for the acquisition for the purchase price were a lot more stringent, like USD 60 per barrel for the sale of your -- for the sale of the resources and whatnot, is it? Is that the reason why?

Yes, that would be correct for Anasuria. And as you know, for Teal West, I mean we didn't have to pay anything because we got it awarded from the the licensing round in the U.K., but we do carry this impairment analysis. And as of today, first of all, this is not enacted. But once it is enacted assuming, let's say, November, December time frame, we will have to revisit and understand the impact. But broadly, just taking the impact of increasing the tax rate by 3% and taking out the investment allowance of 29%. It has some implications but not huge implication on our U.K. asset.

But we will not go -- basically, it will not affect recurring value to I mean the valuation will not go under the existing carrying [indiscernible] based on our sensitivity analysis, which has been good. I say by our auditors at this stage because that's part of the year-end financial.

Okay. Great. So absolutely no impairment will be made like towards the Anasuria book-value, right? That's what you [indiscernible]. Okay. Great. And then I just want to talk a bit about -- I just want to ask a bit about the looking ahead plans, right, because you announced 2 more assets. I think, obviously, these are good assets now, right, in Malaysia and within the gas new resources. But I was wondering because the the time line to these at least in the next 4 years. So am I to assume that you will be revising your target 2P and 2C resources in the next -- in the medium term because with the Brunei acquisition technically, you've sort of come very, very close to hitting that target, right? Is that what you're looking at right now?

Yes. Yes, that's -- the answer is yes. We will be setting ourselves a new mission pretty soon. We still got to close the gap on the 2P reserves.

All right. Great. And then my last question would be that figure for next year's sale, if you were to take out the Brunei asset, how much are we looking at compared to this year?

In terms of?

The sale of the oil and gas resources, I think you gave the target was 8.6%, right -- 8.6% to somewhere around that, but it includes Brunei right? If you were to strip out Brunei, what would be that figure?

I assume it's roughly the same, Yes. It's -- we expect it to be about [ 7% ] for the full year. Should be around 7.5% or above.

Roughly about 7.4%, 7.5% in that range.

Alvin from PhilipCapital. May I know, if there are any changes in the tax rate for U.K. as it is lower than the past, any reason behind that?

The tax rate in the U.K., I mean, if you look at the effective tax rate. Obviously, the headline tax rate is 75%. But if you were to I mean if you recall, when the EPL was put in place 2 financial years ago, there was a one-off, quite a hefty one-off deferred tax liability that we took, I think, up to MYR 100 -- it exceeded MYR 100 million. So that that deferred tax liability must be reversed progressively over the course of the EPL period. And hence, whilst we suffered a one-off charge, which we explained to everyone at a time, which is noncash in nature, we also now enjoy on the reversal of debt liability on a quarterly basis. That equivalent to about [ MYR 121 million ] every quarter based on production levels. And there is a gain to the -- there's a gain to the P&L actually, that you would be -- that we enjoy. So that would shift the effective tax rate in the U.K. going forward. We are enjoying it now and going forward until such time, we have finished reversing that based on production levels. okay? So that's really the reason for our much lower effective tax rate in the U.K., it is different tax actually. But if you look at our cost -- our tax details in the PR for the current year, we are only paying EPL of about MYR 2-odd million. Last year, we didn't pay any. And this year, we are only paying about [ MYR 2-odd million ]. Next year, we don't believe we are going to pay any as well because there will be a lot of capital allowances that should be available for to us coming from the Teal West campaign okay? So far, since EPI has been enacted about 2 years ago. We have only incurred about MYR 2.4 million worth of EPL charges. Okay. But your question on ETR was the reason. Maybe that could be hope that answers your question, Alvin.

[ Christian Chen ] from EquitiesTracker. since that you noticed the finance cost is MYR 106 million in FY 2024 million, whereas in FY'23, was MYR 77 million, which suggests that suggest that an interest rate that seems relatively high. Could you provide insight into what factors contribute to this high effective interest rate, especially Sunflower that is lower compared to last year. Are there any circumstances that caused the rates to be significantly higher?

Should the P&L -- the breakdown for FY 2024 and for FY-'2023 as well, that will explain that.

First of all, so I can just add that. First of all, this MYR 106 million of finance cost has 2 components. One is the actual interest expense? And then second is the unwinding of discount, which is MYR 52 million. So our -- although it's we call it finance cost of -- finance cost for unwinding of discount as well, but actual finance cost is just the interest expense, which is MYR 54 million. Now let's look at the numbers for 2023. [indiscernible] it's slightly lower, but then we can explain. For 2023, our interest expense was MYR 34.9 million, right? So we made a drawdown. The maximum drawdown was made in May 2023. So for the May 2023.

No, the term loan?

Term loan, yes, loan-wise -- so it was a small, small drawdown was made in November, December 2022 and then just about MYR 20 million and then close to MYR 80 million drawdown was May 2023. So that is why if you look at just for FY 2023, we had smaller amounts on which the interest was to be paid as compared to for FY 2024. So that's the reason why -- although the interest rate has not changed, the outstanding or the outstanding amount of the term loan for the duration of FY 2024 was higher. And because of that, we see higher interest expense.

I think the delta is about 30 -- is slightly above MYR 30 million.

[indiscernible] -- so MYR 20 million.

Between 2023 and 2024 FY.

So there's no change in interest rate?

Yes. No change in interest rate, just the timing of the drawdown. Does that answer your question?

Also, I think there's also a higher unwinding of discount. But again, what Deepak say that it's noncash in nature. But we also recorded high unwinding of discount of this arising from discounting of long-term liabilities.

[ Alisa ] from Fidelity, like saw hand raised, you can unmute your mic and ask your question.

Two questions from me. Firstly, on the CapEx guidance for next year, the USD 262 million include [ PND ] and PM3 CAA PSC CapEx. And then the second question is on capital allocation. How are you thinking about the dividend given that it seems the CapEx is going to increase at least for FY '25 and potentially '26 as well.

Okay. We can go to the slide where we are showing the CapEx. Yes, so this is the breakdown of the CapEx guidance for FY 2025. And also, you could see for FY 2026. So this $262 million, its majority is coming from the Teal West and the SF30 and then some of the appraisal well and exploration well distributed in PM3 CAA. About the PKNB, just the pre-FID cost included here. The PKNB currently is in the development stage. So there's a lot more technical and other tested, commercial workings to be done before the FDP gets approved. So first, the team would be spending a lot of time on doing all the technical studies, working on the FDP, and we expect probably by mid or Second half of 2026, we would get the FDP approval, that would be correct, Pascal.

Correct.

So up to 2026, it's just the pre-FID cost for PKNB, which is not huge. It's about $5 million to $10 million in that.

All internal costs.

It's all internal cost. That has been included here. And then Yes. So it's -- so this cost does not include the development CapEx for PKNB. The development CapEx -- majority of the development CapEx to PKNB would be incurred in 2027 and 2028. That would be the time. And then we are also going to develop it in the phase wise, right? So the Phase 1 will cost, let's say, the 60% to 70% of the total CapEx. And then we would also given the fact that it's the gas asset Eastern Malaysia and it's with a strong partner PETRONAS Carigali, we hope that we would be able to get 60% to close to 50%, 60% of the CapEx to be funded from the bank loan at that point of time. In 2027, 2028. It was the first question. Second question was -- the dividend Yes. Yes. So all of this CapEx, as Pascal mentioned, we are not going to raise any equity to fund the CapEx all of this CapEx and also the Brunei acquisition would be funded from our combination of our cash balance -- current cash balance, and the existing unutilized facility, the debt facilities that we have. So if the crude price is maintained at currently, which is $75, $80 range, I don't see any reason we will reduce the dividend. And you have seen in the last 3 years, since we started paying the dividend, the dividend amount has been increasing every year. So at least, I mean, we don't see any reason why it would reduce. But of course, we will try to maintain the dividend. And as Pascal said, in next probably next 1 or 2 months or 3 months, we will come up with our dividend guidance for FY 2025.

Okay. Alvin has a follow-up question on Kinabalu. He wants to know what is the impairment is it related to CapEx, low oil price for another reason?

All impairment yes, this is due to an activity that we took last year. Essentially, we were trying to recover it well, and we spent quite a bit of money on that. And in the end, the well was not usable. So it's really operational in nature. It was cost incurred that didn't add any barrels -- we may be able to recover well in the future, but it's -- there's no visibility on that at the moment, and we thought it was prudent to take an impairment because of that. I think this is really being prudent.

The other thing is that impairment is a point in time -- and the oil price this year -- on the oil price that [indiscernible] us an external source. And that oil price trend was a little bit -- was lower than the one that we achieved in last financial year. So given at what Pascal's says, a combination of factors as we look at the profile of the field and the gap seems to be a little bit tight or you say the headroom, I think really all of prudence before if you're going to take a call on [indiscernible] of adverse adjustment, why not perhaps we will do in a more prudent manner. And hence, we attached the need for impairment to this particular activity and hence the cost associated with that exercise was sort of a result of the quality. But oil prices will play a part.

So Azim's, I think the question is similar that it's more gas -- what is the new oil price assumption that we use after the impairment of the North Sabah [ 2 ].

It's about [indiscernible] at least $3 lower than range of [indiscernible] I mean because it is a long term. So I think in the nearer years, it was higher in the later years was a little bit more narrow, but if I'm not mistaken, the range is between, say, $2 to $5 over the cost of debt ratio.

Brian from Hong Leong.

Just wondering what's the guidance for your planned maintenance schedule for FY '25 -- and could you quantify the impact on production for FY '25?

You can pretty much follow 2024, except for the shutdown duration -- so for Malaysia, it's roughly the same every year. So there's a planned shutdown for North Sabah, which is only a partial shutdown, there were a full shutdown. And then there is the planned shutdown for Kinabalu and PM3 usually around the same time in the year, okay? The amount of work done doesn't vary that much. For '25, the shutdown for Kinabalu will be slightly longer because we would be doing -- installing a new compressor, which takes a bit longer. But -- so for U.K. Anasuria it will be the major maintenance activity where we shut down the FPSO. This year, it's for 30 days plan. And it's currently -- it is ongoing. Obviously expect to finish it by end of August or first week of September. So it's a 30-day program to the first quarter FY 2025.

Right, right. Okay. Just wondering for your Water Flood Phase 2 and also Teal West, they are still on track to achieve first oil by end of the year for Water Flood Phase 2 and also early 2025 for Teal West, right? It's still on track, right?

Let me answer. So SF30 Water Flood, so the rig is actually on location as we speak. It will start drilling sometime next week. So yes, so SF30 Water Flood Phase 2 is on track to deliver oil in the next -- end of this quarter or next quarter.

How about Teal West?

For Teal West also, we are on track to have the first oil in November, December next year, calendar year 2025.

Okay. Okay. Sure. U.K. side, your U.K. EBITDA actually down quarter-on-quarter, but your PAT was up. Just wondering what happened at the income tax level?

Right. The EBITDA went down because we mentioned in Q1, it went out because the coke producing well was shutting because of some technical issues that we have encountered for about what 2 to 3 weeks. So that reflected -- and the cost to fix that and the downtime and all those have resulted in some adverse impact on the financials. And so up to the PBT level, you're right, the numbers were lower. But up to PAT level, we improved really because in March, the tax environment in the U.K. is very volatile in terms of the [ type ] of CapEx we do during the year. So every quarter, we have to forecast a full year view of the CapEx and the full year view of the taxable income. So when we came to March quarter, we -- and we estimated these variables as well. And we thought that will not be able to be invested as high as we actually ended up with. So for information, we spent a few -- a couple of million or more more U.S. dollars than we thought we would. Our taxable income was also higher because we saw a little bit more barrels at a higher oil price compared to what we anticipated. And so when we close the year, all these upsides, higher CapEx, higher barrels or slightly higher oil price, slightly lower costs, all combined have given us the benefits for us to take in the tax line, which means to reverse some of the over accrual or Q3. Also, there was additional allowances that was -- that were made available to us -- when we finalize our tax come from [ AY ] 2024 -- FY 2023, it was finalized during the current quarter. And upon finalization with our tax consultants in the U.K., we identified that we have over provided a few hundred thousand of taxes when we closed the books last financial year. So when that was confirmed, the availability of capital allowances for this year's taxable income also increased brought forward from last year. So a few factors, 3 factors, actually. So if you combine them together, we found that we have over-provided our tax position up to March 2024, and that was corrected in this quarter.

[indiscernible] from [indiscernible].

So maybe the first question on this PKNB cluster. So I know you haven't done the FDP yet. But just conceptually speaking, -- should we be expecting significant cost synergies with the current PM3 infrastructure and assets that would lead to an upward revision in reserves down the road, like from sharing infrastructure with the existing PMC assets. Like is that -- is this something I should be expecting? Or just because of the distance, how far it is away like it's not on the cards?

Yes. So okay, let me answer that question for you. So -- the whole idea for us supplying for this PSC is indeed because we can utilize the PM3 facilities to route this gas through so we don't need to build a big production hub. So the fields will be developed individually with small structures, a few wells and 3 lay pipelines that lead all the way to PM3. So it has 2 effects. In terms of reserves, it won't make a difference, right? Because I mean, PKNB will have its own reserves. But it has the effect that it will reduce the OpEx for PM3 itself because the facilities will be shared with PKNB. So PKNB will take some of that OpEx going forward. So it helps essentially PM3, it improves the cash flows for PM3 includes the economics of PM3. So that's a twofold effect.

So debt reduction -- Pascal, the reduction in OpEx for PM3 because I think actually in other assets globally, if you're able to reduce the OpEx available for existing field, you can run the existing PFG assets for longer -- so it's fair to assume it should -- once everything is in place, we should probably see some upwards revision to PM3 reserves just based on the pure cost dynamics, right? Lower cost per barrel, you run the fuel for longer, et cetera. That's in the investment [indiscernible].

So keep in mind, there's going to be an upward revision for PM3 as well because we're right now in the middle of the PSC extension discussions, yes. Okay. before anybody asked that question, I'm sure it's coming. So the negotiations have completed. So we essentially have agreed with the partners and with the host governments on the terms. And now this -- essentially, the key principles are -- are being routed through the 2 different governments for approval.

Got it. And then moving on to the U.K. assets. I'm just curious, like, is there -- an NPV can estimate of like the U.K. portfolio. And like I just want to understand the impact of the EPL and tax changes. Like are you able to give any numbers there?

Well, you come to the valuation of the asset, you have to consider whether it is producing or it is actually in development stage. And when you are in -- so of course, we fair value it. We have discounting and all firstly. Secondly, we don't really value a development license in full. We commercially risk it to a large extent because of the inherent uncertainties that would be embedded in such -- in licenses such as that. So when we -- so there is an element of present valuing of the -- we think it will be in the nominal value. And of course, on top of that, we apply a healthy commercial risking into some of these other licenses, which have uncertainty.

Okay. Could you remind me what is the carrying value right now on your books? Or just all your U.K. assets combined?

The carrying value of the U.K. assets, just let me tell you. So the other Anasuria Cluster is about MYR 600 million. Right? And if you -- Teal West at least up to 30th of June, is about 40-odd.

Okay. So MYR 40-odd million. right?

Correct MYR 40-odd million. I mean the rest are very small. Actually, it's just these two. Marigold is close to about -- so Marigold has 2 Combined between license and conventional studies, that would be about -- it's about MYR 330 million.

And when you do this impairment testing, like what is the assumptions of long-term oil price that you're using for these assets?

We have to use the -- an external source. And so this external source is agreed with the auditors. And we have to go back to the same external source every year -- we cannot change the source. And so the -- the debt is updated every quarter. So for, 30 June for instance, the 30 June impairment assessment would have been based on a April oil price deck from the external third party which has been validated by the auditors from day one. So we've been using the same deck every year.

Okay. Got it, yes.

And this goes years, years into the future.

Okay,Got it. So it's more like a market price assumption based on whatever price at time of publishing?

Correct.

And then the discounting embedded in that, right, in the impairment [ deck ]?

It is. Correct. Yes. Okay. So the longer it goes, then your NPV long at a more steeper -- I mean at a steeper rate.

So the minimum is 10%.

Yes.

Okay, good. You've answered [indiscernible] NPV question there.

Azim has a follow-up. Is there a risk of any well write-off impairment of assets recurring in FY 2025?

So based on this impairment assessment, as I mentioned, -- the only one that was at risk or rather the headroom was a little bit lower was actually Kinabalu. The rest were fairly comfortable. And we also performed sensitivity tests in quite a number of areas not like CapEx, OpEx, price, production data. So we have gone -- that is something we do for everything single asset. For Kinabalu, after this recent -- after this impairment that we took in June, the headroom has now -- is now a lot more comfortable. And really, I think the reason why we took the impairment was exactly why we thought a [ little bit ] prudent because based on our latest assessment, the headroom was small. It was still up actually, but it's very small. And we were a little bit worried whether we can sustain that going forward. And so we took an impairment, but we [indiscernible] on the particular activity that Pascal alluded to, hence this amount. But after taking this, we don't see Kinabalu being at risk anymore.

None of the other assets are at risk of....

The other assets are fine. If you read the PR, there is this particular well that we are still testing. The asset is [ booming ] so that is being carried in the books. But the work cannot be completed until next year calendar year Q1. And only after that, we have to bring it back to PETRONAS and then collectively with PETRONAS, we have to then assess whether or not we can use it for whatever we intended to use it for, but the test is ongoing. It's not so straightforward. So that is, as I mentioned, the PR, that we hopefully will come to a hit by sometime Q1 next calendar year. Yes, that's only one [indiscernible]. Yes.

Alvin asks, if the management is going forward into greenfields as opposed to brownfields, based on your proven track record of buying greenfield assets as opposed to discovering new 2C sources. As you [indiscernible] and some existing brownfield assets are expensive to acquire.

Well, if you notice, we now have a full portfolio of assets we've got from exploration all the way to brownfield. And so the PKNB is indeed greenfield developments, to answer your question. But if you look at our acquisition in Brunei, it's not that expensive -- there are still assets to acquire at reasonable prices.

Thanks, Alvin. Anyone else? If you have any questions, feel free to raise your hand or type it in the chat box. Okay. I think, that's it. Thank you very much for joining us today. As always, we have our material. So the slides will be available on our website, along with our corporate business update together with the PR, press release. So feel free to read through those. And as always, if you have any questions, feel free to contact us. Thank you very much.

Thank you.