No dividends yet: Hibiscus

KUALA LUMPUR: Hibiscus Petroleum Bhd, whose focus for 2017 is to manage cost and enhance production of its assets, does not expect to declare dividends in the near future despite achieving profitability.

For the first quarter ended Sept 30, 2016, net profit grew more than 16-fold to RM80.28 million from RM4.75 million a year ago while revenue soared to RM54.75 million from RM245,000 a year ago.

“The company is still young. This is a capital intensive business, high risk and for the company to move forward, even if we make profit, there’s every likelihood that we will need that money for reinvestment to grow the company. The chances of dividend in the next year or so is very unlikely,” chairman Zainul Rahim Mohd Zain told reporters after its AGM yesterday.

He said the thrust of the company is to achieve a healthy cash flow and keep growing by investing further in its asset namely the Anasuria Cluster in the North Sea.

“We need to pump money in there to enhance production through repair works as well as drilling new wells, if we have to. Then, moving forward in the years 2018 and 2019, depending on the situation, we may need further cash injection to do further development of the field, to keep it going for the next 15 to 20 years,” he added.

The company, which is also taking over four oil fields off Sabah, may need more money once the acquisition is approved by Petroliam Nasional Bhd (Petronas).

Recall that the company is taking over the operatorship and buying a 50% participating interest in the 2011 North Sabah Enhanced Oil Recovery production sharing contract that operates four existing oil fields and pipeline infrastructure for US$25 million (RM111.1 million).

Managing director Dr Kenneth Gerard Pereira said it will focus on cost management, value solutions to enhance production and financing next year.

“It (business plan) is subject to oil prices being a little bit stable for a certain period of time and also subject to us obtaining the necessary financing. The company is debt free. It is very critical for us to put together some financing to support the activities that we would like to undertake,” he said.

Pereira said opex at Anasuria is about US$20 per barrel, which is a very comfortable range if oil price is at US$55 per barrel.

Zainul said the company is comfortable if oil price remains above US$40 per barrel but if oil price dips below US$30 per barrel, it would have to look at options to tighten its belt to remain profitable.

In terms of financing, Pereira said it is not planning any corporate exercises but is looking to leverage its balance sheet which is debt free now.

“If we want to raise money for Anasuria, market sentiment now is a little bit more positive. The asset has been performing well, we have demonstrated to the market that we are a capable operator,” he said.

On its other assets, Pereira said it will not be investing more into the Middle East until the issues surrounding its associate company Lime Petroleum Plc are resolved, while in Australia it is waiting for the right time to develop its assets in the West Seahorse field.

“At current oil prices there is an element of risk. It is economically viable but there is not enough headroom and it doesn’t represent a good allocation of capital for us because of the level of return,” he said, adding that if oil price stays at US$55 per barrel for a while, it may look at the asset again.