KUALA LUMPUR: Hibiscus Petroleum Bhd said the oil and gas industry should continue “tightening its belt” like it has done for the past three years, as the market might see another downturn if the oil price drops below US$40 per barrel again.
Chairman Zainul Rahim Mohd Zain said against the backdrop of oil price volatility, Hibiscus Petroleum aims to keep its costs low to help maintain profitability once the oil price hits below that level.
“If the oil price collapses below US$40, then it is crunch time. We have to be extremely careful as we need to be more efficient.
“The industry has to continue tightening its belt like it did in the past. There is no time to be complacent,” he told reporters after the company’s annual general meeting here.
Zainul warns that if the oil price starts trading at low US$60 and below US$50, it could easily hit US$40. Like other industry players and investors, he said, the firm is closely watching the Organisation of the Petroleum Exporting Countries' meeting on December 6, which could give hope for supply cuts and higher oil price.
The warning comes as the industry cautiously recovers from a downturn that began in 2014. At the time, crude oil price fell as much as 75 per cent to below US$30 a barrel at its lowest point. The downturn led to a severe cutback in spending on oil and gas exploration and development.
Managing director Dr Kenneth Pereira said while Hibiscus Petroleum has achieved high prices for crude oil sold, world oil markets are experiencing increased volatility.
“The group has seen oil prices at various levels, on some occasions lower and other times higher, and we have managed to remain profitable throughout. This is primarily because our average unit production cost for our assets have always been significantly below the average realised oil price.
“The careful management of costs to maintain low operational expenditure and the delivery of production enhancement projects are keys toward achieving low unit production costs. This remains an area of focus for the group,” he added.
Pereira said the company will be spending close to RM200 million on Anasuria cluster and North Sabah Production Sharing Contract for financial year 2019.
As at September 30, it has total cash balance of RM302 million and zero debt.