Hibiscus long-term earnings visibility intact

PETALING JAYA: BIMB Research says it is upbeat about Hibiscus Petroleum Bhd’s long-term earnings visibility after the oil and gas exploration and production company’s latest contract extension.

Hibiscus recently signed an agreement with Petroliam Nasional Bhd (PETRONAS) and Vietnam Oil and Gas Group for the continuation of a production sharing contract and upstream gas sales agreement for the PM3 field in waters between Malaysia and Vietnam for 20 years commencing Jan 1, 2028.

“This is vital to enable Hibiscus’ plan to develop gas resources in the nearby PKNB

Cluster using existing PM3 infrastructure. Consequently, there will be additional reserves and resources to be unlocked at zero purchase consideration following the contract extension,” the research house said.

The PKNB Cluster comprises four discovered gas fields – Pertang, Kenarong, Noring and Bedong – located in shallow waters off the east coast of Peninsular Malaysia.

BIMB Research said it believes that the extension was granted to enable the establishment of PM3 Hub Master Plan which targets monetising the gas resources within the area for gas-to-power projects in the region.

It said the asset has a considerable gas resources amounting to 47.3 million barrels of oil equivalent (boe) with licence expiry in 2048.

“Besides that, the hub will also include PM327 production sharing contract, which is the largest exploration block off Peninsular Malaysia,” it added.

The research house revised its 2025, 2026 and 2027 earnings forecasts for Hibiscus to RM331mil, RM515mil and RM430mil, respectively, after accounting for an oil-price assumption that was lower by US$5 per barrel.

“However, we expect earnings to remain robust as sales volume is expected to grow at a three-year compound annual growth rate of 9% from 2024 to 2027 to 10.2 million boe from 7.9 million boe mainly driven by higher gas sales from Block B MLJ field in Brunei,” it said.

The research house reiterated its “buy” call on Hibiscus with a lower target price of RM2.72 from RM3.20.

“Despite its strong growth and robust earnings outlook, the stock price trades at merely 2.1 times its 2026 price-earnings which is not justified in our view. Note that the company still generates substantial cash flow at lower oil prices with a cost of around US$30 to US40 per barrel,” the research house said.