REX: Q&A on US$43-m acquisition of Norwegian oil stake

KEY TAKEAWAYS
• The transaction consideration of US$42.6 million includes deferred tax assets which are recoverable for Lime Petroleum

• Production from the Brage Field of estimated 3,440 barrels of oil equivalent per day (net) will add another leg to the Group's current oil production in Oman of 12,210 of barrels of oil per day (gross)

• Net 2P Reserves of about 7.3 mmboe from the Brage Field will be added to Lime Petroleum's current 2C Contingent Resources of 27.7mmboe

• At the end of Brage Field's production life, Lime Petroleum will pay an effective 1.69% of the total estimated decommissioning costs for the current Brage Field infrastructure

•The effective date of the transaction will be 1 January 2021

a. The effective date is 1 January 2021, which means payment for all production will be received by Lime Petroleum retrospectively, from the effective date up and until completion. This will be offset against the final cash amount to be paid at completion.

b. Brage is today producing around 3,440 barrels of oil per day. This will have a positive impact on Rex's Earnings Per Share upon completion.

c. The whole transaction and bond issue is based on the premise that the Brage acquisition is highly accretive to the Group with a very short repayment time.

d. The transaction allows for Rex to diversify and to have two producing units - Oman and Norway.

e. The intricate Norwegian Petroleum Tax system is beneficial to Lime in the near term as deferred tax assets can also be used to offset against near term profits to reduce tax

f. The Target Assets' unaudited pro forma net profit before tax for FY2020 of approximately US$21 million.

The Target Assets' unaudited pro forma net profits attributable to Repsol were calculated based on actual production figures from the Norwegian Petroleum Directorate website, historical Brent crude oil prices for 2020 (average approximately US$42 per barrel), estimated operating expenses based on information provided by Repsol, and estimated depreciation of assets due to the Target Assets. Any increase in Brent crude oil prices will be positive.

a. The proposed letter of credit relating to the 1.69% of the full decommissioning costs of the current Brage Field infrastructure would come from Lime Petroleum.

b. Lime Petroleum will only be liable for a net after tax of 1.69% of the full decommissioning cost.

c. Decommissioning is scheduled to start earliest in 2030 at the end of the validity of the licence.