To recap, the Sabah government has issued a notice to Hibiscus that working permits for North Sabah and Kinabalu fields would be cancelled on October 1, 2022, as the group has discontinued the payment of sales taxes after taking over the Kinabalu asset from Repsol.
KUCHING (Oct 5): Hibiscus Petroleum Bhd’s shares were up in the early trade after the company resolved its tax issue in Sabah by paying the sales and service tax (SST) amounting to RM85.7 million to the Sabah government.
At 10.11am, the counter gained 9.5 sen to 96.5 sen, with 32.35 million units traded.
To recap, the Sabah government has issued a notice to Hibiscus that working permits for North Sabah and Kinabalu fields would be cancelled on October 1, 2022, as the group has discontinued the payment of sales taxes after taking over the Kinabalu asset from Repsol.
The North Sabah asset, meanwhile, has not been paying the SST to the state.
Earlier on, the group disagreed with the payment of the tax, arguing that it sold its crude oil at the Labuan Crude Oil Terminal (LCOT) facility which is outside the sovereignty and jurisdiction of the state of Sabah, thus, should not be subject to the SST.
Nevertheless, Hibiscus Petroleum in its corporate and business update stated that it has made the appropriate accruals for all liabilities amounting to RM85.7 million.
This is after the state government accepted its proposal to pay the claims imposed on revenues for the sale of crude oil under the North Sabah PSC and the Kinabalu PSC respectively, on September 27 2022.
Maybank Investment Bank Bhd (Maybank IB) saw many positives for Hibiscus Petroleum following this update.
“While the impact to earnings is about minus eight or nine per cent per annum for the group starting from financial 2023 (FY23) onwards, we see many positives from this.
It offers closure on this overhang issue, which has affected sentiment, price performance and disrupted its operations unnecessarily in the past,” it said in its review yesterday.
“Hibiscus remains the best play for a cyclical, strong energy price market. It is fundamentally sound, financially resilient and offers compelling growth with undemanding valuations.”
Maybank IB said securing field development planning (FDP) approval on Marigold would turn its 43.6 million barrels of 2C resources to 2P reserves; lift its group’s 2P reserves by 60 per cent to 115.9 million barrels; and make it a more attractive M&A proposition.
An extension on Repsol’s PSC (beyond 2032) would also be positive in improving Repsol’s NPV and potentially adding a further 30m bbls of 2P reserves to Hibiscus.
Public Investment Bank Bhd (Public IB) also viewed this development positively as well as it removes the lingering uncertainty in its Sabah operations.
“Having this issue resolved, we believe its productivity from the Sabah oilfields will improve given the smooth operations, reflecting in higher uptime,” it said in its own notes. “Settlement of the arrears is not an issue given the group’s cash holding of RM549.4 million.
“Based on our forecasted potential crude oil sales of around 2.1 million barrels from North Sabah and 700 million barrels from its Kinabalu field, the group is expected to pay an estimated amount of about RM44.8 million per year, by assuming circa 300,000 and 350,000 barrels of oil to be sold per offtake for the North Sabah and Kinabalu fields respectively at US$80 per barrel.”