CFA Society Singapore
SINGAPORE (Sept 19): Rex International Holding is seeking to turn profitable in 2020 when two of its oil wells in Oman and Norway come on stream.
On Sept 17, Rex also received a non-binding indication of interest for its concessions in Norway held under its subsidiary, Lime Petroleum.
Rex aims to start production for its Block 50 Oman oilfield in 2H19, starting with production at 5,000 bpd. Currently, Rex owns a 92.7% direct stake in this oilfield.
The key milestones before the start of production include the independent report on the oilfield; declaration of commerciality (DOC) by the Oman government and exercise of option to buy a 25% stake by the Oman government; and d) appointment of oil producing contractor.
Rex also expects production in the Rolvsness oilfield to commence in 2020, starting with production at 7,000 bpd and this is expected to scale up to 14,000 bpd by end-2020.
Rex owns a 27.0% direct stake in this oilfield, while the well operator, Lundin owns a 50% stake.
On Aug 27, Lundin announced that it has drilled a 2.5km horizontal section in the reservoir.
The drilling results show good reservoir productivity and connection to significant oil volume, with production rate of up to 7,000 bopd, confirming sustainable commercial oil flow. The next step towards commercialisation is to tie the well to the adjacent producing Edvard Grieg platform of Lundin.
Backed by Lundin Petroleum, a renowned O&G player. Lundin Petroleum is a leading Swedish O&G company with a portfolio of exploration and production (E&P) assets in Norway. It has a market cap of more than US$10 billion ($13.7 billion); resource base of around 1 billion boe; and oil production of 86 million bpd recorded in 2017.
According to analysts, Rex could generate $32.7 million in net profit in 2020 if the oilfields deliver as planned.
Rex was in a net cash position of $56.9 million as of 1H18. It could receive $34.5 million from the Oman government in 2019 if they exercise their option for a 25% stake. Management thinks there is a good chance for the Oman government to exercise their option in early-19, after the issuance of the DOC in late-18.
In a Monday unrated report for retail investors, UOB KayHian says assuming Rex is able to generate $32.7 million profit in 2020, it will trade at 3.9 times forward FY20 earnings based on its stock price of 9.9 cents.
Industry peers are trading at an average 6.9 times FY18 earnings; Hibiscus Petroleum and Tethys Oil are currently trading at 7.5 times and 6.4 times FY18 earnings.
As at 10.33am, shares in Rex are down 0.4 cent at 11 cents.