Hibiscus Petroleum Berhad ($HIBISCS)

Welcome to Hibiscus Petroleum Quarter 3 Financial Year 2026 Results Briefing. Thank you for taking the time to join us today, especially to the Hari Raya Haji break coming up next week. I'm Lily Ling, VP of Corporate Development. And joining me today are Dr. Kenneth Pereira, our Managing Director; Chee Yip, our Chief Financial Officer; Dr. Pascal Hos, our Country Head, Malaysia and Vietnam; Joyce Vasudevan, our SVP, Corporate Finance; Deepak Thakur, our SVP, Economics and Business Planning; and from my team, Andrew, [ Jeehan ] and Adam. Earlier today [ Audio Gap ] business update, press release and also dividend declaration. All announcements are available on our website, and the presentation deck for today's briefing can also be found in this team's chat. It's been another solid quarter for the group, supported by continued operational momentum and a stronger oil price environment. With that, I'll now hand over to Pascal to take us through the presentation.

All right. Thanks, Lily. Okay. Good afternoon, everybody. Thank you for joining us on a Friday afternoon. Not the best time to have these briefings, but anyway, let me kick start with a few points to make before we go through the rest of the presentation. I think the first thing, I think that's on everybody's mind, what is the impact of war in Iran and the higher oil prices? We're starting to feel that impact now in the fourth quarter. So for April and May, we've already had offtakes of 890,000 barrels of oil and achieved an average realized oil price of about $120 per barrel. Keep in mind, we have another offtake of 300,000 barrels expecting in June. I'm assuming that's going to be somewhere around the same price [indiscernible]. Overall, we're on track to achieve the fiscal year '26 guidance for oil and gas sales, somewhere between 9 million and 9.4 million barrels of oil equivalent. Second point I want to make is talking about it for a while, which is the low-pressure compressor project in Brunei. This compressor has finally started up successfully on the 8th of April, and we are seeing the effect now as the impact on production is over 1,500 barrels per day as compared to the numbers quoted in Q3 the current quarter. Third point I wanted to make is the Teal West project. As you're all aware, the well was drilled last year, and we're currently working on essentially laying the flow line and tying it into the FPSO -- Anasuria FPSO. That work is underway, and we're expecting to achieve first oil production in the second half of 2026, fairly early in the second half. And we're expecting a production of about 7,000 barrels a day. That is for the average over the next -- over 6 months of the year -- last 6 months of the year. Fourth point, say that we've declared an additional $0.03 of interim dividend, currently puts us at $0.07 per share already declared, that's for fiscal year '26. And if you remember the guidance, we said if the average oil price is above $75 for the year, then we would target $0.10 per share. So it looks like that's where we are heading. So Deepak?

Thank you. Thanks, Pascal, for giving us an overview. So now let's talk about 2 critical projects, which we are in the process of execution in the 2026. Let's start with the LPC project, low-pressure compression project, which we executed on 8th of April 2026. This is a very, I would say, major operational milestone for our Brunei asset team, the successful commencement of LPC project operation, which is already translating into a meaningful uplift of more than 1,500 barrels of oil equivalent per day gas and condensate production, which we have seen in April and May. And it also demonstrating their execution capability of our Brunei team. This project we inherited from Total, and we executed and completed in 2026. And we expect this incremental production of 1,500 barrels of oil equivalent per day to continue for the second half 2026 as well. Okay. Let's go to the next slide then about the Teal West project, as Pascal was talking about it, it has 2 key components, the drilling of well and second part is the connecting the flow line to Anasuria FPSO. So drilling was completed last year. And then this year, the subsea pipeline and connecting to Anasuria FPSO. These are the 3 key activities. Now we are in the last leg of the subsea campaign. So ROV vessels to tie-in and commissioning work are executing -- are expected to be completed by the end of June, and we expect to have the first oil by the end of June or in the first week of July. So we are on track. Expected production numbers from Teal West, you would have seen the new CPR. The results were also announced today. The Teal West 2P reserves have been upgraded to 5.5 million barrels of oil equivalent. And the production -- expected production from Teal West in second half 2026 is about 7,000 barrels of oil per day. So this is the average of oil production -- average oil production that we expect to generate from July to December this year. Okay. CY will take us through the slides.

Good afternoon. This gives a snapshot of the key metrics for the latest quarter 1st March 2026 and also compared to last quarter December. So I think the top -- the headline perhaps right at the bottom is that the PAT is RM 80 million for this quarter, and that brings us to about $170 million year-to-date 9 months. And that's really RM 80 million is about 14% quarter-on-quarter. Now let's go back to the top. Production and sales pretty much similar in terms of volume. Sales dropped by a little bit about 9%. That's really about really timing, but that has been fully compensated by the higher oil prices that we recognized during the quarter by about 12% from USD 68.7 to USD 76.7. Now obviously, this will fall short from certain expectations because of the prices that you may have observed starting from March onwards. And this is -- this was really caused by the fact that a large portion of our offtakes, in fact, up to about 78% of the total offtakes that have been taken were executed prior to March, so in January and February. And that was the main reason why we did not have a higher price. U.K., though fell into that March period and the offtake in U.K. realized up to above $90 for its offtake in March, okay? But -- for gas price, better news, 21% higher quarter-on-quarter. And also to add to that, our OpEx for the -- for Q3 was pretty much, I would say, a clean baseline. Not much activities happened, planned and unplanned activities. And as a result of that, it is fairly low at $16 per barrel of oil equivalent. That's about a significant 27% lower than Q2. And the -- so the combination of this has enabled us to record a higher EBITDA of about $274 million, that's about 12% higher. Now what is very good news really is that for the upcoming quarter or the current quarter that we're in June 2026, we expect to lift 4 crude oil offtakes, so totaling close to about 1.2 million barrels. The -- up to today, we have lifted 3, and that's about 75% at 890,000 barrels. And the good news is the average realized oil prices for the 3 offtakes out of 4, we can confirm that we have realized at about USD 120 per barrel. So that should reflect -- that should then quite directly translate to a stronger quarter for June compared to all the 3 previous quarters during this financial year. The next page, this is a summary of how our cash has moved during these 9 months. So the -- the bar for the second bar, which is the cash flows adjusted -- cash flows actually from operating activities. This is slightly low or slightly low compared to the last time we show you this chart. And that's because of the timing difference of some of the proceeds from revenue from the sale of oil and gas that we have not yet realized as at 31st of March. So purely timing, that is based on what we have in our records, close to about RM 300 million that we have collected in April since the cutoff for the quarter. CapEx, the largest contributor during this 9-month period, as you can expect would -- it came from Teal West in the U.K. That's about RM 300 million that we have incurred. And as Deepak mentioned earlier, we are well on track to realize first oil within the -- by the targeted date. And obviously, you also -- we also highlighted that the total reserve has increased. And so Teal West CapEx, no surprises. We are on track to spend close to within our budget. So other than that, I think 2 other things maybe to highlight on this page should be right at the bottom right-hand corner of the page, gearing ratio of 0.29x and the unutilized facilities has increased from the previous time we spoke to you 3 months ago of about $200 million. Now it's closer to $300 million. And our cash position by the end of June should be better than this, given that the oil prices that we have realized are also strong.

As mentioned by Pascal, dividend in quarter 1, we declared $0.02. Quarter 2, we declared $0.02. Quarter 3, this $0.04 for the 3 quarters. And if you look at our financial year 2026 guidance, we guided for $0.10 per share if oil price is above $75. The average Brent price for the 3 quarters up to 31st March is about $69.50. So we are targeting -- our target for the full year is $0.10 in total. And that debt will be a record high because we look at the right-hand side, we have been -- our dividends have been increasing year-on-year. We have never reduced it flat. So this year will be a record year for dividend. In terms of financial year 2026 guidance, both in terms of sales volume and production, we have -- if you look at 2025, we are increasing from 8.9 million barrels for sales from 2025 to 9 million to 9.4 million in 2026. We will expect to achieve this. And then in terms of production as well, $9 million 2025 to range from 9.1 to 9.5 [indiscernible]. OpEx, we expect to remain flat around $20 to $25. CapEx, $205 million. Bulk of it is [indiscernible] and the balance various programs in [indiscernible] as well as other programs in Malaysia. And if you look at '24 -- so from 2024, 2025 and 2026, our sales have been [Technical Difficulty]

I think this is the last slide, so let me just close it off. I think it's been a little bit of a volatile quarter and -- but it's also been a very busy quarter as we have been trying to button up 2 large projects, the LPC compressor project and the Teal West project. So let me just -- can you go back to Chart 4, please? If we go back to Chart 4, just to give you -- yes, so this is what Deepak was mentioning just now. So all the stuff you see on the left-hand side, the picture, all that was part of a new build for the project. So all of that has been now completed and commissioned and it's working. You can see the schematic on the right-hand side, the graph. So you can see the production has gone up. It's -- we are still in the process it's only been about 5 or 6 weeks. And what we're doing is we're testing various, I would say, settings of the whole setup, trying to find the right combination of wells, how to flow these wells so that we get the best out of the compressor. And so you can see we are definite trend up increasing. And you can see sometimes it's fluctuating a little bit because we are just, I would say, adjusting each of the wells, just trying to find the best technical production kind of setup, I would say, for the whole system. The field is, you can imagine, 80 kilometers away from this compressor. This is onshore and the fields are offshore 80 kilometers away, and we are bringing the oil from unmanned -- we're bringing the gas, sorry, and condensate from unmanned platforms, 80 kilometers away into this whole production setup. And so it takes a little bit of time to get everything I would say, in a very nice sweet spot. So that's what's been going on here. Can we go to Teal West, please? Yes. So Teal West, where we are as an update, we've done all the installation as far as offshore, the large works, all of that done. Where we are now is we are -- what's a process called rock dumping. We're dumping some rocks over the subsea pipeline so that in the future, if a boat drops an anchor or something like that, it doesn't hurt the pipeline or the flow lines. So right now, the rock dumping vessel is doing its work. It's the last real activity. And then we start pre-commissioning and commissioning the well and the production facilities on the Anasuria FPSO. So we expect that will take about a month, and then we will do exactly what we've done to the LPC compressors, start switching on all the systems and there will be a little bit of fluctuation initially. But eventually, what we are hoping to do is get it into a nice steady-state production profile of about 7,000 barrels a day for the next 6 months. So we've been saying from the -- for the longest time, we've been saying that we will try to achieve 35,000 barrels of oil equivalent production rate by the end of the year. The production rates this quarter were just a little bit over what they were last quarter, about 26% up from last quarter, but about 26,000 barrels of oil equivalent. So together with the 1,500 barrels a day we're expecting from increased BOE from Brunei, plus another about 7,000 barrels a day of oil from Anasuria that will be an 8,500 barrels of oil equivalent. I think that's our net production, yes...

There's some incremental production from...

SF30 as well. So we are nicely kind of getting to that commitment we tried to make to people saying 35,000 was our target for the end of the year. We're getting pretty close now. So the [indiscernible] is already getting very close to that number. So I think that is what I want to say about Teal West and LPC, the LPC project. I think it's a 5% dividend yield on a [indiscernible] share price. So I think we're pretty pleased with that. We're trying to keep to the commitment again made on the guidance. And I think as CY mentioned before, we had -- we missed out a little bit on the Q3 oil offtakes. Our oil offtakes were just a little bit before the war started in Iran and then the prices increased. But these things are -- I mean, it eventually catches up. And here we are in end of -- kind of creeping towards the end of May and nearly 900,000 barrels have been sold at $120 per barrel. And hopefully, we get the -- get a little bit of the same type of price performance in June, and then we can always bear in mind that we're getting some good premiums for the oil we are selling, both in PM3 and in [indiscernible] or North Sabah oil. I think the premiums are around $15 to $20 now. It's very, very significant premiums. So even when the Brent futures or dated Brent is showing something like $105, we're getting about $15, $20 more than that. So this $120 price point is coming from those good premiums also. And then just a last word on the strategic investors. Yes, we are still in, I would say, deeper -- much deeper discussions than we were during our last update. And I think the guidance is still the same. Negotiations are still the same. The issue -- I mean, any new issue of shares will be at a, I would say, a good premium, I would say is the right way to say, a good premium to the prevailing market price. So we don't want to kind of have anyone kind of concerned about dilution. So I think -- and it's also the names of the potential strategic investors are extremely, let's say, they are reputable parties, and they will definitely value add at every level, actually at the asset level, at the financial level, at the investor level. I think they will have -- all 3 whom we are talking to would have the same impact actually. So it's going to be a difficult decision at the end, I think if we go ahead like this. So that's just kind of a round up. I think we are happy to take some questions. I think that's about it.

[Operator Instructions] So he's asking, can I ask in advance whether to clarify on the M&A options, especially in the U.K., which is subscale at the moment. So I think you're generally asking about M&A options generally M&A options and especially in the U.K. itself, are we considering any M&A?

Well, I don't know. I mean this is not the right time for us to be buying assets, I don't think. And so we are not thinking of buying or selling anything in the U.K. at this point in time.

Okay. So just 2 housekeeping questions. So I'm looking back at your earlier offtake schedule. So I saw that there was supposed to be 2 offtake for oil in the month of March, but I believe one of it MPCA was made earlier, I mean, based on earlier pricing. May I know why is the case instead of March Brent oil price for...

So when we sell our oil, especially for PM3 and Kinabalu, our offtake here is PETCO, the trading arm of PETRONAS. And they have an option to choose either monthly average for just Brent component, monthly average for the month when the offtake happens or the monthly average of Brent for the previous month. And it just happened. They chose -- the offtake was in March. They chose February and then everything is escalated from 20th of February night. So it's -- sometimes we lose, sometimes they gain. It's a fair thing.

So it depends on -- so they have the liberty of whether they wanted to take the pricing this month or the previous month. Is that correct?

Correct. But they have to decide at the end of the last month. So let's say, if offtake happens on 25th of May, for example, right? So they have to -- for Brent price component, they can choose to have average for the April or average for May. But they have to decide on the last day of April.

I think [ Alvin from Capital ] has a question.

[indiscernible] gas sales to data center or industries in Brunei.

Gas sales to data center or industries or industrial in Pune...

We just wanted to understand the strategic investor angle. You said that now is not a good time to be buying assets. So could you perhaps provide more detail on what the strategic partner would bring to the table at this point in time because given where oil prices are, it doesn't seem that you specifically need to raise capital. So yes.

Yes. So I think these conversations started about a year ago. If you track back to our disclosures, we were looking at strategic investors since a year ago. One of the things we would -- one of the initiatives, I think you would read up on the company is that our objective is to get to -- from the 35,000 barrels a day we have now projected for the end of 2026. The idea is to get to about 70,000 barrels of oil equivalent per day. We -- to kind of have alignment with that target, I think we believe we can probably with what we have, get to about 50,000 barrels a day, 55,000 maybe, our platform, our financing, the kind of stuff we could do with our current capital structure would probably get us to $50,000, maybe $55,000 if these oil prices stay a little bit at these levels for a little bit of time. So to really get to the 70,000 and be of a scale that would make it very meaningful for this part of the world, I think we thought a strategic investor coming in who can support us financially on maybe something bigger, it will allow us to kind of get -- we'll be able to take on things maybe a little bit higher risk profile, bigger acquisitions if we do an acquisition in the coming years or if we want to do a development project like Marigold, which will require significant capital, then having a strategic investor holding a good percentage of our equity would be very helpful. So it's with that in mind actually that we're thinking of a strategic investor, looking at a 5-year plan. It's not something for the next 1 year. So -- and that is also why it's -- we have not done something on a knee-jerk basis. We started with a list of about 15 companies, and it was not us approaching them. We have conducted no kind of process to get to this place. People came to us and said, your share price is undervalued. Can we look at doing something? And we had all manners of all structures, all forms of structures offered to us from privatizations to all kinds of stuff, okay? And over the course of the last 6 to 9 months, we have filtered out what I would call more the opportunities versus the real strategics, and we've got down to 3 of them. And these are long-term players. All of them have been -- at least 2 of them are very exposed to the oil and gas sector. A third one is a financial partner with a big exposure in the oil and gas sector. So they know the industry. They're not faced by the fact that oil prices are high now and will be lower later on. They have been there for many years. So I think these were the type of parties we were looking for. And also, we believe they will enhance our credibility in the international equity markets. They will also help us I would say, try to take on maybe a little bit more larger projects, which will get us to the 70,000. So I think thinking all of those factors that the company is at a certain place. If we are happy to stay at -- you're right, if we are happy to go stay at 50,000, 55,000 barrels a day. And that's not something -- that's not a failure or anything like that. But we think with a little bit more -- with a little bit of a push and if it's the right party at the right price at this time, then we will look at a strategic investor. I think that's our thinking at the moment. And as you can see, we are not rushing into anything. We're kind of really getting to know the parties and doing all the stuff and making sure that we're all comfortable with what we're doing.

Any more questions from anyone? This is also in the briefing deck itself. which you can find on the Teams chat.

So our 2P reserves, all these numbers are as at 1st January 2026. Based on the new CPR, new competent person report for all of the assets, except for Anasuria and Brunei, numbers are 82 million barrels of oil equivalent. And then 2C resources stand at 126 million barrels of oil. Just to show the point that Ken was talking about it, we have organic growth opportunities. So all of those -- if we convert all of those 2 resources or even 70% to 80% of 2C resources to 2P reserves over the next 4 to 5 years, we will be close to 50,000 to 55,000 barrels of oil equivalent per day...

Is also asking you saw from announcement there's a new rig charter from Best on PM3CA.'s a new exploration after studies?

So we're planning to drill 2 exploration wells. But the rig is already on the way to PM3 at the moment. But the first thing the rig is going to do is P&A, so plug and abandon some of the wells that are no longer be used for production. And come August, we'll start drilling the first exploration well in September as well.

Answer your question, [indiscernible] Equity Trackers is asking, can you update on the upcoming schedule of maintenance?

It's always in the same period.

Yes. Just to clarify, this last quarter and the next quarter, Q1 financial year 2027, these are our main maintenance windows.

[ Thye Ting ] from Hong Leong.

Yes. Thye Ting from Hong Leong. Just wanted to ask a follow-up question on the Velesto PM3 CAA. I would like to understand like why did Hibiscus choose Velesto for this campaign. And despite Velesto is using a third-party rig. And just wanted to know like why not Hibiscus hire on -- I mean, not to hire Velesto, but getting the rig itself.

Okay. Any time we have to get a rig, it runs on a competitive tender. So we issue a tender according to PEN rules and guidelines. And then we evaluate all the tenders that -- all the bids that get submitted. And in the end, Velestos bid was both technically the right bid, but they also ended up offering the lowest price.

Second question was why do you go to market to get the drilling rig, -- why don't you have.

No, it's not a good idea to own your own drilling rig as an oil company.

So we are not in that business, right? So our business is whenever we need a drilling rig, we go to the market and choose the best and optimizing...

She was asking why don't we go directly to Shelf Drilling -- yes. No, we -- I think that meeting that is really -- we were bidding with the PETRONAS -- we were contracting with the PETRONAS license contractor who won the tender. What rig they provide is up to them actually as long as it met the technical specs.

I see. So during the bidding process, there's a few of the other competitors also bid for this project, is it?

That's correct. Yes, yes.

Okay.

[indiscernible] asking whether there's any update on carbon tax from regulators?

As much as we do.

Have just a question -- sorry. As now gas prices start to go up on second half of 2026, would gas profit be more?

Yes. Our gas price in Malaysia, currently, it is linked with HSFO up to 2027, and then it will be Brent price. Even the HSFO goes in tandem with the Brent. So when Brent goes up, HSFO goes up. So yes, our gas prices for this quarter, June quarter should be higher. And also in Brunei, when we are selling our gas to Brunei LNG plant, our gas -- the realized gas price is a function of the JCC price, which is effectively it's a Brent price equivalent or goes in tandem with the Brent. And then the prevailing LNG price, JKM prices. So as we have seen before war, LNG prices were roughly about $10 to $11 per MMBtu. As we speak, LNG prices are roughly about $17, $18 per MMBtu. So LNG prices has also gone up. Brent prices -- GCC prices have also gone up. So our realized price in Brunei will also be higher.

Okay. Anything else Alvin before we close? Okay. Now gas and oil and gas percentage is 50-50 as our offtake seems to be less than gas.

Sorry. This is the schedule, right? Gas is continuous...

But at the end of this year, when we have -- when we achieved 35,000 barrels of oil equivalent per day production, our oil contribution will be higher because of -- as you know, the Teal West, when we talk about 7,000 primarily is oil production. So it answers your last question so is there any latest stats.

Anything else?

I'm quite curious about your percentage of the latest stat because it seems like your gas has more offtake than your oil. Your oil like only one -- I mean, based on the schedule, it is lesser than gas if I'm right, right?

[indiscernible]

But then you look at Q1, if you look at the offtakes in Q1, we expect about 1.8 million barrels of oil and about 1.2 million BOE of gas for Q1 FY '27, so July to September.

I see, I see. So gas is still 50% then -- sorry, oil is still 50%, then your gas is still 49. I say so?

No, no. Our oil percentage goes up because of...

Percentage go up. So it's slowly I see because the last time I think is the last 2 years, your target is to let gas achieve 50-50. But with QS coming in, so it will -- the oil will be slightly higher.

I see. So can we expect your 4Q last quarter on the July, August quarter or potentially first Q will we see a bump up again because the QS is contributing from the oil.

You look at Slide 16.

Yes, yes. I saw QS start to contribute since July. So you miss your final quarter, 4Q, you may end up higher than this quarter because of the additional barrels that come from?

June or December when you say 4Q...

Your last quarter...

Which quarter is last -- sorry, is it June or December...

Quarter? June, your upcoming June. Now...

QS will not have an impact on June quarter.

I have to wait until first Q '27.

You have to wait until the September quarter.

I see. I saw calendar year and fiscal year, sorry.

Okay. No worries. I mean...

Anything else, Alvin.

Yes, yes. So to get it clear that oil is 51, then your gas is $49 in terms of percentage.

End of FY 2026, yes. correct.

I see. Because I think your gas prices has been not so great for first half. But once you go to Europe, when Europe starts winter, then it will start to increase. So I was thinking the next quarter, your earnings will be much better because gas prices went up because for the last first half and even second half of 2026, it seems to be your gas is still more offtake for PCA and also for block and also less on oil.

Realized gas price for quarter 4 should be definitely be higher than quarter 3.

Okay. Okay. Understood. So your margin will be much higher for next quarter because you have less OpEx and favorable because oil prices have been easing, but gas prices went up for the last year.

For next quarter, is it June quarter?

Yes, correct.

Costs will go up -- sorry, if you compare to Q3 costs will go up, but the selling prices will be much higher as well.

I see, I see. I see. But it will be -- because I thought your guess will be more much favorable because for the last 3 months, even when prices went up, but actually gas.

That is also true because the Brunei pricing is a bit of -- there's a lag time. So actually, you didn't see that pricing in Brunei yet. In the coming quarter, you will see that. So -- you're also right on the gas price being higher. Also right on the fact that our margin will be much better because our average selling price is almost -- the delta is almost $40 higher than what we have recognized in Q3, just Brent -- just realized price alone. So the incremental cost from more maintenance activities, planned activities will not even go near that sort of increase.

Okay. Understood. Because I was checking the news that JKM Asia spot is now actually inching up slowly, but Brent.

Lag time will play its part in the quarterly numbers. So you should see something in June. Actually...

Yes, I think because gas sales and actually an average of at least 3 months, right? So you will see higher prices...

I think that's a question from Amy -- still...

Part of what we mentioned in the slides that average $120.

Okay. Thank you so much, everyone, for joining the call, and have a good.