HIBISCS: Operations Strengthen Amid Strategic MLJ Focus

Investment bank TA Securities has reiterated a positive outlook on the company, highlighting its strategic positioning of the Maharajalela Jamalulalam (MLJ) Field for sustainable production. The firm maintained its “BUY” recommendation, pointing to proactive operational enhancements and robust cost management as key drivers.

Acquisition and Operational Performance

The acquisition of a 37.5% interest and operatorship in the MLJ Field for USD259.4 million was viewed as fairly priced, at the lower end of comparable transactions since 2018. The MLJ field, a mature gas-condensate asset, currently produces approximately 7,000 barrels of oil equivalent per day (boe/d) with average operating costs, including royalty, estimated at a competitive USD6/boe. Despite a period of softer oil prices and average realised gas prices in 4QFY25 (USD4.53/MMscf, equivalent to USD27.4/boe) which were below acquisition assumptions, the company demonstrated resilient margins, supported by commendably low operating costs of USD7.62/boe in 4QFY25. However, the report noted a slight dip in average uptime to 86% in 4QFY25 from 97% in 3QFY25, alongside a decrease in average net oil equivalent production rate during the same quarter.

Strategic Initiatives for Enhanced Production

The company is actively pursuing three key initiatives to sustain and enhance output from the MLJ Field:

The Low-Pressure Compressor (LPC) Project, with an estimated capital expenditure of USD134 million, is designed to boost production by reducing the Onshore Processing Plant (OPP) inlet pressure, extend field plateau rates, improve off-take reliability to Brunei LNG, and unlock additional reserves. Major milestones have been achieved, with full commissioning anticipated by September 2025.

The Well Intervention Campaign, initially scheduled for August 2025 but accelerated to April 2025, aims to maximise production gains through re-perforation and adding new perforations on existing wells using slickline techniques. Completion is targeted by mid-August 2025, ensuring immediate benefits before and after the LPC commissioning and reflecting a proactive approach to managing mature assets.

The Diving Operation Campaign was successfully completed safely, on schedule, and under budget, resulting in cost savings exceeding 30%. It focused on structural integrity management across the MLJ1 and MLJ2 platforms, which is crucial for safeguarding infrastructure reliability throughout the field’s operational life.

Future Outlook and Key Risks

The MLJ Field is expected to remain a cash-generative contributor to the company’s gas portfolio, rebalancing its production mix to 51% oil and 49% gas, underpinned by long-term off-take agreements and stable index-linked gas pricing. Production rights are secured until 2029, with an option to extend to November 2039.

However, the report identifies key risks, including the reliance on Brunei LNG as a single gas off-taker. Given the facility’s age, unplanned shutdowns could lead to temporary production halts. Additionally, the company’s revenue remains exposed to oil price volatility due to its oil-linked gas pricing model. Despite these challenges, the strategic operational initiatives are expected to ensure the long-term sustainability and profitability of the MLJ asset.