Analyst: John Meyer
We have valued RIH’s assets at $1,029mm (S$1.19) using DCF valuation methodology; the un‐ risked valuation is $9,915mm (S$11.50).
With an unrisked valuation >10x the current valuation, we believe that our Target Price of S$1.19 is a fair reflection of the risks within the portfolio. Consequently, we are initiating coverage with a BUY recommendation.
Rex Virtual Drilling
Rex Virtual Drilling (“RVD”) is a proprietary technology that enables the visualisation of hydrocarbons using seismic data. By using a proprietary algorithm, RVD is able to identify differing liquids, and in respect of oil.
In excess of 41 tests have been carried out, with RIH reporting an 85 – 100% success rate at identifying whether the targeted accumulation contains oil, and more importantly, whether it will be a dry hole.
The most recent active test has resulted in a discovery in Oman, which opened up an entirely new basin hitherto believed to be unproductive.
Balanced Portfolio & Active Drilling Programme
Cash Needs Covered
This also excludes the cash positive effects of any revenues that it generates from its appraisal programmes in Trinidad & Tobago, due to start imminently, and Oman, which is scheduled to start in 2015.
Our outlook also excludes any cash flows arising from the development of a successful appraisal programme in Trinidad & Tobago, which in theory could follow swiftly from the appraisal programme given the location of the assets, and in the case the Omani appraisal well, the availability of a suitable rig.
Valuation $1,029mm (S$1.19)
With an active exploration and appraisal programme underway, we believe that there are numerous near term opportunities for the Company to be revaluated.
We initiate coverage with a BUY recommendation and a S$1.19 target price.
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