Navigating Shifting Tides: A Deep Dive into Hibiscus Petroleum’s Latest Quarterly Performance

Greetings, fellow investors and energy enthusiasts! Today, we’re unrolling the latest financial report from Hibiscus Petroleum Berhad for its third financial quarter ended 31 March 2025. This report offers a comprehensive look into the company’s operational and financial health, revealing a period marked by strategic expansion, significant non-cash accounting adjustments, and ongoing efforts to optimize asset performance amidst a dynamic global energy landscape.

While the quarter saw a notable increase in the company’s asset base driven by a major acquisition, the headline figures show a shift to a net loss for the quarter. However, a deeper dive into the numbers reveals strong underlying operational cash generation and a commitment to shareholder returns, as evidenced by a higher total dividend declared for the current financial year to date. Let’s break down the key takeaways from this extensive report.

Core Financial Highlights: A Mixed Bag

The third financial quarter ending 31 March 2025 presented a complex picture for Hibiscus Petroleum. While the company continued its strategic growth, certain non-cash items significantly impacted the bottom line for the quarter and the cumulative period. Here’s a comparative look at the key financial metrics:

Individual Quarter Performance (Q3 FY2025 vs Q3 FY2024)

For the quarter ended 31 March 2025, revenue decreased by approximately 5.1% to RM572.8 million from RM603.5 million in the same period last year. Gross profit also saw a sharper decline of about 15.1% to RM374.3 million. More significantly, the company recorded a net loss after taxation of RM116.0 million, a stark contrast to the RM101.8 million profit in the corresponding quarter last year. This shift was largely influenced by a substantial non-cash deferred tax liability charge in the UK segment, which we will delve into later.

Cumulative Performance (9M FY2025 vs 9M FY2024)

Looking at the cumulative nine-month period, revenue declined by nearly 14.0% to RM1.70 billion. Profit Before Taxation (PBT) saw a significant drop of over 43.1% to RM328.3 million, and Profit After Taxation (PAT) plummeted by approximately 88.0% to RM42.9 million. This considerable reduction in cumulative PAT and earnings per share (from 44.61 sen to 5.55 sen) is a direct consequence of the challenging third quarter, particularly the non-cash tax impact.

Segmental Performance: A Closer Look

Hibiscus Petroleum operates across various geographical segments, each contributing uniquely to the overall performance. Here’s how each segment fared:

Peninsular Malaysia

The Peninsular Malaysia segment, primarily driven by PM3 CAA, recorded a healthy gross profit margin of 57.5% for the nine-month period. Operational performance was strong, with sustained oil production and high facilities uptime. However, the third quarter saw no crude oil sales, relying solely on gas sales, which impacted quarterly revenue. A significant development is the extension of the PM3 CAA and Upstream Gas Sales Agreement (UGSA) for an additional 20 years until 2047, which has implications for decommissioning costs and asset values. The company also expanded its footprint with the award of the PKNB PSC and a farm-in agreement for the PM327 PSC, though the latter saw a write-off of exploration costs for the Rosebay-1 well.

Sabah Malaysia

Both North Sabah and Kinabalu contributed to the Sabah Malaysia segment. North Sabah’s production was boosted by new infill wells, achieving a healthy gross profit margin of 62.7% for the nine-month period. However, operational challenges like compressor unavailability and drilling rig delays impacted overall production rates. Kinabalu experienced lower production due to maintenance and well issues, leading to higher operating expenses per barrel. Despite these challenges, the third quarter showed improved operational performance for both assets with lower OPEX per barrel due to reduced activity levels.

United Kingdom

The UK segment faced significant headwinds. The nine-month performance was severely impacted by a 38-day planned offshore turnaround and subsequent technical issues, leading to lower uptime and production rates. This resulted in higher operating expenses per barrel (USD43.10). The third quarter saw an improvement in operational performance, but the segment recorded a substantial net loss after taxation due to a

Brunei

A major highlight of the period was the acquisition of TotalEnergies EP Brunei on 14 October 2024. This strategic move expanded Hibiscus Petroleum’s asset base significantly. For the period from acquisition to 31 March 2025, the Brunei segment contributed RM212.3 million in revenue and RM34.2 million in profit after taxation. Despite a temporary gas export stoppage, the segment demonstrated favourable operational performance with high uptime and low operating expenses per barrel (USD4.92 in the third quarter).

Vietnam

The Vietnam segment’s Block 46 PSC saw its first crude oil offtake since October 2022 during the third quarter, selling 117,889 barrels of crude oil. This contributed RM27.9 million to profit before taxation for the quarter, marking a positive return to crude oil sales for this asset.

Financial Health: Assets, Liabilities, and Cash Flow

The company’s balance sheet reflects its strategic acquisition and ongoing capital expenditure:

Non-current assets surged by nearly 42% to RM6.06 billion, primarily due to the inclusion of identifiable assets and goodwill from the Brunei acquisition, alongside significant capital expenditures across its Malaysian and UK assets. Conversely, current assets decreased by 36% to RM1.49 billion, mainly due to the reversal of the Brunei acquisition deposit and lower trade receivables.

Total liabilities increased by over 36% to RM4.77 billion, reflecting the assumption of Brunei’s liabilities, new borrowings (revolving credit and prepayment facilities), and a substantial increase in provision for decommissioning costs for PM3 CAA due to its contract extension, as well as higher deferred tax liabilities from the UK EPL changes. Consequently, total equity saw a 10.2% decrease, influenced by unrealised foreign exchange differences, share repurchases, and dividend payments.

Cash Flow: A Strong Operational Engine

Despite the profit after tax figures, Hibiscus Petroleum demonstrated robust operational cash generation. Net cash generated from operating activities for the nine-month period was a strong RM1,512.8 million, a significant increase from RM619.7 million in the same period last year. This highlights the underlying strength of the company’s core operations. However, net cash used in investing activities also saw a sharp increase to RM1,348.5 million, largely driven by the Brunei acquisition and extensive capital expenditure programs. Net cash used in financing activities decreased to RM164.2 million, benefiting from revolving credit drawdowns despite share repurchases and dividend payouts.

Risks and Prospects: Navigating the Future

Hibiscus Petroleum’s performance remains subject to a blend of external and internal factors. The company highlights the ongoing influence of Brent crude oil prices, premiums/discounts on cargoes, gas prices (linked to various indices), and foreign exchange rate movements (USD vs RM, GBP vs USD, BND vs USD) on its revenue and costs.

Internally, the focus remains on optimizing asset performance, specifically well production and facilities availability, alongside diligent management of operational expenditure and corporate overheads. The company notes its historical ability to remain profitable through oil price fluctuations by maintaining unit production costs below average realised oil prices.

Key operational projects are underway, with the South Furious 30 Waterflood project in North Sabah on track to boost production by the end of calendar year 2025. However, the first oil date for the Teal West project in the UK is now expected to be delayed to February 2026 due to rig availability issues, an important point for future production forecasts.

The extension of the UK Energy Profits Levy (EPL) regime until March 2030 led to a significant non-cash deferred tax liability charge in the latest quarter. While this impacts reported profit, the company emphasizes that it does