HIBISCUS: BE READY FOR LOWER PRICES
Industry players need to tighten its belt just like three years ago, says chairman
THE oil and gas industry should continue “tightening its belt” like it has done for the past three years, as another downturn is in the pipeline if oil prices drop below US$40 (RM165.35) per barrel again, warns Hibiscus Petroleum Bhd.
Its chairman Zainul Rahim Mohd Zain said against the backdrop of oil price volatility, Hibiscus Petroleum planned to keep its costs low to help sustain profits once prices fall below that level.
“If the oil price collapses to below US$40, then it is crunch time. We have to be careful as we need to be more efficient.
“The industry has to continue to tighten its belt like it did in the past. There is no time to be complacent,” he said after the company’s annual general meeting, here, yesterday.
Zainul said if oil prices started trading at a low of US$60 and below US$50, it could easily hit US$40 per barrel.
The warning comes as the industry is recovering from a downturn that began in 2014. Crude prices fell as much as 75 per cent to below US$30 a barrel that year which led to a severe cutback in spending on oil and gas exploration and development.
Hibiscus Petroleum is also closely watching the Organisation of the Petroleum Exporting Countries’ meeting tomorrow, which could give hope for supply cuts and higher oil price.
Managing director Dr Kenneth Pereira said while the company had achieved high selling crude prices, global oil markets were experiencing volatility.
“The group has seen oil prices at various levels, on some occasions lower and others higher, and we have managed to remain profitable throughout. This is mainly because our average unit production cost for our assets has always been significantly below the average realised oil price.
“The careful cost management to maintain low operational expenditure and the delivery of production enhancement projects are keys towards achieving low unit production costs. This remains an area of focus for the group,” he added.
Pereira said the company would be spending close to RM200 million on Anasuria cluster and North Sabah production-sharing contract for financial year 2019.
As of September 30, its cash balance stood at RM302 million while debt remained zero.