SPONSORED
RESEARCH
OIL & GAS
REABOLD RESOURCES | PRICE | 0.17p | (+118%) 0.47p (+185%) |
VALUATION (UPSIDE) 0.36p |
Being Bold
15 OCTOBER 2021 at 05:50*
Thomas Martin
(+44) 203 430 8435
Thomas.Martin@exanebnpparibas.com
Targeting value add through appraisal, and development planning
Reabold Resources is an investment company focused on upstream oil and gas assets. Projects in this sector have been increasingly starved of capital over recent years, consequently there are opportunities to access appraisal and development projects on attractive terms. Reabold aims to invest in oil and gas discoveries, adding value through the appraisal and development planning stages, monetising the investment prior to heavy development spend.
Victory project the most advanced
Reabold is targeting submission of the development plan for the UK North Sea Victory gas project by year-end. This could pave the way for monetisation of the project next year.
Appraisal program to narrow the range of uncertainty at two key projects
Sometimes appraisal wells do not answer all the questions they are designed to answer, which was the case at two of Reabold's projects (West Newton in the UK, and Parta in Romania). We believe the shares refl ct this lack of clarity, leaving opportunity if they can be addressed by future appraisal activity.
Experienced management team, backed by capable board
Co-CEOs Sachin Oza and Stephen Williams have experience making and managing oil and gas investments at a number of investment institutions. The board includes Repsol's former Head of Global Exploration (Marcos Mozetic) and Peter Dolan, who has founded numerous African focused oil and gas businesses, is an Advisor.
Shares trading at discount to Core NAV; ~170% upside to Discovered Resource NAV
The shares trade at 0.48x our 0.36p/sh Core Producing/Development NAV, which excludes West Newton and Romania. Our discovered resource NAV, including risked potential for West Newton and Romania, stands at 0.47p/sh offering ~170% upside. We set a valuation range of 0.36- 0.47p/sh. Our unrisked NAV is 1.17p/sh, if the assets prove to be at the top end of our range.
Price (14 October 2021) | 0.17p | Performance(1) | 1w | 1m | 3m | 12m | ||||
Market cap (GBPm / EURm) | 15 / 17 | Absolute(%) | (21) | (38) | (61) | (76) | ||||
Free float (GBPm / EURm) | 15 / 17 | Rel. Oil & Gas(%) | (24) | (44) | (66) | (84) | ||||
EV (GBPm / EURm) | -4.7 /-6 | Rel. MSCI Small Cap(%) | (23) | (36) | (62) | (82) | ||||
3m avg volume (GBPm / EURm) | 0.1 / 0.2 | |||||||||
Refinitiv / Bloomberg | RBDR.L / RBD LN | |||||||||
Country / Sub Sector | UK / Exploration & Production | |||||||||
Financials | 12/19 | 12/20 | 12/21e | 12/22e | Valuation metrics(2) | 12/19 | 12/20 | 12/21e | 12/22e | |
EPS, Adjusted (p) | (0.11) | (0.04) | (0.03) | (0.03) | P/E (x) | - | - | - | - | |
EPS - Refinitiv (p) | - | (0.04) | 0.00 | 0.01 | Net yield (%) | - | - | - | - | |
Net dividend (p) | - | - | - | - | FCF yield (%) | (11.9) | (9.3) | (14.1) | (7.9) | |
EV/Sales (x) | - | 4.2 | - | 0.3 | ||||||
Sales (GBP) | 1,452 | 1,035 | 1,216 | 1,177 | EV/EBITDA (x) | - | - | - | - | |
EBITA, Adj. (GBP) | (1,175) | (1,624) | (1,961) | (1,536) | EV/EBITA (x) | 1.8 | - | 2.4 | - | |
Net profit, Adj.(GBP) | (4,110) | (2,489) | (2,871) | (2,535) | EV/CE (x) | - | 0.3 | - | 0.0 | |
ROCE (%) | (13.9) | (12.6) | (14.9) | (9.1) | ||||||
Net Debt/EBITDA, Adj. (x) | - | - | - | - | ||||||
Source: Exane BNPP (estimates), Refinitiv (consensus) | (1) In listing currency, with dividend reinvested (2) Yearly average prices for FY to end-12/19, 12/20 |
SPONSORED RESEARCH: Exane is receiving compensation from Reabold Resources to cover and produce research on the stock.
- Date and time (London Time) on which the investment recommendation was finalised. It may differ from the date and time of broad dissemination on the website. See Appendix (on p53) for Analyst Certification, Important Disclosures and Non-US Research Analyst disclosures.
Prepared solely for James Crothers. Not to be distributed anywhere. Strictly for personal use.
Price at 14 Oct. 21: 0.17p | REABOLD RESOURCES | ||||||||||||||||
Valuation range (p): 0.36 (+118% ) | | 0.47 (+185% ) | ||||||||||||||||
Refinitiv / Bloomberg: RBDR.L / RBD LN | Analyst: Thomas Martin (+44) 203 430 8435 | Exploration & Production | Oil & Gas - United Kingdom | |||||||||||||||
Company Highlights | GBP / EUR | 3.5 | |||||||||||||||
Enterprise value | -4,685 /-5,536 | ||||||||||||||||
Market capitalisation | 14,734 / 17,412 | 2.3 | |||||||||||||||
Free float | 14,734 / 17,412 | 1.8 | |||||||||||||||
3m average volume | 0.1 / 0.2 | 1.3 | |||||||||||||||
Performance (*) | 1m | 3m | 12m | ||||||||||||||
Absolute | (38%) | (61%) | (76%) | 0.8 | |||||||||||||
Rel. Sector | (44%) | (66%) | (84%) | ||||||||||||||
Rel. MSCI Small Cap | (36%) | (62%) | (82%) | ||||||||||||||
12m Hi/Lo : 0.83p -80% / 0.16p +3% | |||||||||||||||||
CAGR | 2016/2021 | 2021/2022 | 0.3 | ||||||||||||||
EPS restated | (1%) | (19%) | 0.2 | ||||||||||||||
CFPS | (12%) | (22%) | Price | Relative to MSCI Small Cap | |||||||||||||
Price (yearly avg from Dec. 15 | to Dec. 20) | 1.6 | 0.8 | 0.7 | 0.7 | 0.9 | 0.6 | 0.2 | 0.2 | ||||||||
PER SHARE DATA (p) | Dec. 15 | Dec. 16 | Dec. 17 | Dec. 18 | Dec. 19 | Dec. 20 | Dec. 21e | Dec. 22e | |||||||||
No of shares year end, basic, (m) | 280.916 | 320.916 | 1 540.416 | 3 821.075 | 6 730.630 | 7 096.982 | 8 929.613 | 10 643.898 | |||||||||
Avg no of shares, diluted, excl. treasury stocks (m) | 251.683 | 320.149 | 655.362 | 2 949.812 | 3 822.854 | 6 850.919 | 8 610.857 | 9 358.184 | |||||||||
EPS reported, Gaap | (0.04) | (0.04) | (0.13) | (0.07) | (0.11) | (0.04) | (0.03) | (0.03) | |||||||||
EPS company definition | (0.04) | (0.04) | (0.13) | (0.07) | (0.11) | (0.04) | (0.03) | (0.03) | |||||||||
EPS restated, fully diluted | (0.04) | (0.04) | (0.14) | (0.07) | (0.11) | (0.04) | (0.03) | (0.03) | |||||||||
% change | NC | 13.1% | (282.7%) | 49.9% | (56.0%) | 66.2% | 8.2% | 18.7% | |||||||||
Book value (BVPS) (a) | 0.2 | 0.2 | 0.4 | 0.5 | 0.6 | 0.5 | 0.5 | 0.4 | |||||||||
Net dividend | |||||||||||||||||
STOCKMARKET RATIOS | Dec. 15 | Dec. 16 | Dec. 17 | Dec. 18 | Dec. 19 | Dec. 20 | Dec. 21e | Dec. 22e | |||||||||
P / E (P/ EPS restated) | NC | NC | NC | NC | NC | NC | NC | NC | |||||||||
P / E relative to MSCI Small Cap | NC | NC | NC | NC | NC | NC | NC | NC | |||||||||
P / CF | NC | NC | NC | NC | NC | NC | NC | NC | |||||||||
FCF yield | (2.9%) | (5.8%) | (7.5%) | (12.4%) | (11.9%) | (9.3%) | (14.1%) | (7.9%) | |||||||||
P / BVPS | 7.01x | 4.80x | 1.93x | 1.44x | 1.48x | 1.07x | 0.34x | 0.40x | |||||||||
Net yield | |||||||||||||||||
Payout | NC | NC | NC | NC | NC | NC | NC | NC | |||||||||
EV / Sales | NS | NS | NS | NS | 4.22x | NS | 0.34x | ||||||||||
EV / Restated EBITDA | NS | NS | NS | NS | NS | NS | NS | NS | |||||||||
EV / Restated EBITA | NS | 0.0x | 5.2x | 2.2x | 1.8x | NS | 2.4x | NS | |||||||||
EV / NOPAT | NS | NS | NS | NS | NS | NS | NS | NS | |||||||||
EV / OpFCF | NS | 0.0x | 13.1x | 1.6x | 0.5x | NS | 2.3x | NS | |||||||||
EV / Capital employed (incl. gross goodw ill) | NS | NS | NS | 0.3x | 0.0x | ||||||||||||
ENTERPRISE VALUE (GBP) | 3,240 | -5 | -4,659 | -4,153 | -2,070 | 4,368 | -4,685 | 403 | |||||||||
Market cap | 3,921 | 2,437 | 4,715 | 21,543 | 33,832 | 40,092 | 14,734 | 17,562 | |||||||||
+ Adjusted net debt | (481) | (340) | (5,307) | (7,112) | (6,717) | (1,139) | (5,942) | (3,682) | |||||||||
+ Other liabilities and commitments | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
+ Revalued minority interests | |||||||||||||||||
- Revalued investments | 200 | 2,103 | 4,067 | 18,584 | 29,186 | 34,586 | 13,477 | 13,477 | |||||||||
P & L HIGHLIGHTS (GBP) | Dec. 15 | Dec. 16 | Dec. 17 | Dec. 18 | Dec. 19 | Dec. 20 | Dec. 21e | Dec. 22e | |||||||||
Sales | 0 | 0 | 0 | 194 | 1,452 | 1,035 | 1,216 | 1,177 | |||||||||
Restated EBITDA (b) | (104) | (115) | (901) | (1,846) | (938) | (1,298) | (1,726) | (1,316) | |||||||||
Depreciation | 0 | 0 | 0 | (32) | (237) | (326) | (235) | (220) | |||||||||
Restated EBITA (b) | (104) | (115) | (901) | (1,878) | (1,175) | (1,624) | (1,961) | (1,536) | |||||||||
Reported operating profit (loss) | (104) | (115) | (1,152) | (1,861) | (1,264) | (1,803) | (1,934) | (1,536) | |||||||||
Net financial income (charges) | 0 | 0 | 0 | 77 | (50) | (26) | 2 | 1 | |||||||||
Affiliates | 0 | 0 | 0 | (165) | (2,952) | (878) | (911) | (1,000) | |||||||||
Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
Tax | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
Minorities | |||||||||||||||||
Net attributable profit reported | (104) | (115) | (1,152) | (1,949) | (4,266) | (2,707) | (2,843) | (2,535) | |||||||||
Net attributable profit restated (c) | (104) | (115) | (901) | (2,033) | (4,110) | (2,489) | (2,871) | (2,535) | |||||||||
CASH FLOW HIGHLIGHTS (GBP) | Dec. 15 | Dec. 16 | Dec. 17 | Dec. 18 | Dec. 19 | Dec. 20 | Dec. 21e | Dec. 22e | |||||||||
EBITDA (reported) | (104) | (115) | (1,152) | (1,829) | (867) | (1,238) | (1,699) | (1,316) | |||||||||
EBITDA adjustment (b) | 0 | 0 | 251 | (17) | (71) | (60) | (27) | 0 | |||||||||
Other items | 0 | 0 | 452 | 1,071 | 472 | 179 | 99 | (60) | |||||||||
Change in WCR | (11) | (26) | 94 | 43 | 250 | (533) | 205 | 0 | |||||||||
Operating cash flow | (115) | (141) | (355) | (732) | (216) | (1,652) | (1,422) | (1,376) | |||||||||
Capex | 0 | 0 | 0 | (1,942) | (3,825) | (2,080) | (656) | (5) | |||||||||
Operating free cash flow (OpFCF) | (115) | (141) | (355) | (2,674) | (4,041) | (3,732) | (2,078) | (1,381) | |||||||||
Net financial items + tax paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
Free cash flow | (115) | (141) | (355) | (2,674) | (4,041) | (3,732) | (2,078) | (1,381) | |||||||||
Net financial investments & acquisitions | 0 | 0 | (494) | (7,059) | (20,995) | (2,048) | 0 | (3,878) | |||||||||
Other | 0 | 0 | 0 | (371) | (232) | 202 | 0 | 0 | |||||||||
Capital increase (decrease) | 200 | 0 | 5,816 | 11,909 | 24,873 | 0 | 6,881 | 3,000 | |||||||||
Dividends paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
Increase (decrease) in net financial debt | (85) | 141 | (4,967) | (1,805) | 395 | 5,578 | (4,803) | 2,259 | |||||||||
Cash flow, group share | (104) | (115) | (449) | (775) | (466) | (1,119) | (1,627) | (1,376) | |||||||||
BALANCE SHEET HIGHLIGHTS (GBP) | Dec. 15 | Dec. 16 | Dec. 17 | Dec. 18 | Dec. 19 | Dec. 20 | Dec. 21e | Dec. 22e | |||||||||
Net operating assets | 0 | 0 | 0 | 4,999 | 8,236 | 12,484 | 12,906 | 16,569 | |||||||||
WCR | (57) | (31) | (24) | 145 | 241 | 449 | 244 | 244 | |||||||||
Restated capital employed, incl. gross goodwill | (57) | (31) | (24) | 5,144 | 8,477 | 12,933 | 13,150 | 16,813 | |||||||||
Shareholders' funds, group share | 624 | 509 | 5,732 | 19,313 | 40,127 | 38,920 | 42,958 | 43,423 | |||||||||
Minorities | 0 | 0 | |||||||||||||||
Provisions/ Other liabilities | 0 | 0 | 101 | 513 | 695 | 502 | 572 | 511 | |||||||||
Net financial debt (cash) | (481) | (340) | (5,307) | (7,112) | (6,717) | (1,139) | (5,942) | (3,682) | |||||||||
FINANCIAL RATIOS (%) | Dec. 15 | Dec. 16 | Dec. 17 | Dec. 18 | Dec. 19 | Dec. 20 | Dec. 21e | Dec. 22e | |||||||||
Sales (% change) | NC | 0.0% | 0.0% | NC | NC | (28.7%) | 17.5% | (3.2%) | |||||||||
Organic sales grow th | |||||||||||||||||
Restated EBITA (% change) | NS | (10.6%) | NC | (108.4%) | 37.4% | (38.2%) | (20.7%) | 21.7% | |||||||||
Restated attributable net profit (% change) | NC | (10.6%) | NC | (125.6%) | (102.2%) | 39.4% | (15.3%) | 11.7% | |||||||||
Personnel costs / Sales | NC | NC | NC | NC | NC | NC | NC | NC | |||||||||
Restated EBITDA margin | NC | NC | NC | NC | (64.6%) | (125.4%) | (142.0%) | (111.8%) | |||||||||
Restated EBITA margin | NC | NC | NC | NC | (80.9%) | (156.9%) | (161.3%) | (130.5%) | |||||||||
Tax rate | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | |||||||||
Net margin | NC | NC | NC | NC | (283.1%) | (240.5%) | (236.1%) | (215.5%) | |||||||||
Capex / Sales | NC | NC | NC | NC | 263.4% | 201.0% | 54.0% | 0.4% | |||||||||
OpFCF / Sales | NC | NC | NC | NC | (278.3%) | (360.6%) | (171.0%) | (117.4%) | |||||||||
WCR / Sales | NC | NC | NC | 74.7% | 16.6% | 43.4% | 20.1% | 20.7% | |||||||||
Capital employed (excl. gdw ./intangibles) / Sales | NC | NC | NC | NC | 319.6% | 484.8% | 430.6% | NC | |||||||||
ROE | (16.7%) | (22.6%) | (15.7%) | (10.5%) | (10.2%) | (6.4%) | (6.7%) | (5.8%) | |||||||||
Gearing | (77%) | (67%) | (93%) | (37%) | (17%) | (3%) | (14%) | (8%) | |||||||||
EBITDA / Financial charges | NC | NC | NC | NC | NC | NC | NC | NC | |||||||||
Adjusted financial debt / EBITDA | NC | NC | NC | NC | NC | NC | NC | NC | |||||||||
ROCE, excl. gdw ./intangibles | NS | NS | NS | NS | (25.3%) | (32.4%) | (37.5%) | (17.3%) | |||||||||
ROCE, incl. gross goodw ill | NS | NS | NS | (36.5%) | (13.9%) | (12.6%) | (14.9%) | (9.1%) | |||||||||
WACC | 10.7% | 11.2% | 10.8% | 11.2% | 11.4% | 11.4% | 10.6% | 10.6% | |||||||||
Latest Model update: | 15 Oct. 21 | ||||||||||||||||
(a) Intangibles: GBP7.92, or 0p per share. | (b) adjusted for capital gains/losses, exceptional restructuring charges, capitalized R&D; EBITA also adjusted for impairments and am. of intangibles from M&A | ||||||||||||||||
(c) after EBITA adjustments and financial result/tax adjustments, (*) In listing currency, w ith div. reinvested |
Exane BNP Paribas Research | Reabold Resources | 15 OCTOBER 2021 | page 2 |
Prepared solely for James Crothers. Not to be distributed anywhere. Strictly for personal use.
Contents
Investment summary ______________________________________ 4
Valuation range of 0.36-0.47p/sh____________________________ 10
Asset overview - Victory, Offshore UK _______________________ 18
Asset overview - West Newton, onshore UK __________________ 25
Asset overview - California, onshore USA ____________________ 40
Asset overview - Parta, onshore Romania ____________________ 45
Management and Board __________________________________ 48
Financial statements _____________________________________ 49
Investment case, valuation and risks _________________________ 52
Company profile and financial highlights ______________________ 56
Exane BNP Paribas Research | Reabold Resources | 15 OCTOBER 2021 | page 3 |
Prepared solely for James Crothers. Not to be distributed anywhere. Strictly for personal use.
Investment summary
Reabold Resources invests in upstream oil and gas assets, aiming to add value through the appraisal and development planning stages, prior to monetisation. Assets towards the lower end of the industry cost curve are targeted, located in areas with existing infrastructure and access to services. Historic drilling will typically have discovered oil and gas; the company does not invest in pure exploration.
Reabold's investment enables near-term activity programs, which can add value to the project. An assessment of potential monetisation options is made at the time of investment, with the intention of avoiding potentially "stranded assets". Reabold does not seek to operate projects, minimising the cost base of the business.
The monetisation phase could involve the partial or complete sale of an asset, the IPO or sale of a business, a farm-out for a development carry, or development of the company's equity interest in a project. The capital exposure to development costs is likely to be a consideration when evaluating the options to sell or farm-out an asset, with projects requiring a higher capital commitment more likely to be disposed of.
The management team of Sachin Oza and Stephen Williams (co-CEOs of Reabold) were appointed in September 2017, coinciding with a change in the investment mandate to focus on the oil and gas sector. An experienced board and advisors, also advise on investment opportunities. The management team has been supported by the addition of a number of institutional investors to the register.
The current portfolio comprises four projects; below we summarise the development stage of each project.
- The Californian assets are in production, providing modest operating cash-flows.
- Development studies are currently underway for the UK North Sea Victory gas development. We see Victory as the most likely candidate for monetisation in the near- term.
- Appraisal work is ongoing at the West Newton oil and gas field onshore in the UK. Drilling results to date indicate large volumes of oil and gas are present (113mmbbls of oil and 50bcf of gas in place), the most significant remaining uncertainty is what proportion of this can be recovered. Technical studies, incorporating data recently gathered through the well testing program, are expected to get underway shortly to inform the design for the next well, with additional drilling and testing required to define the recoverable resource.
- In Romania gas has been encountered in what, from logs, appears to be a good quality reservoir. Limited productivity was, however, observed during a well test and operational activity is currently suspended with technical studies ongoing to determine the most appropriate remedial action.
Figure 1: Portfolio summary, by development status
Development stage | ||||||||
Project | Country | Oil/gas | Exploration Appraisal Development planning Development | Production Abandonment | ||||
California | USA | Oil/gas | X | X | ||||
Victory | UK | Gas | X | |||||
West Newton | UK | Oil/gas | X | |||||
Parta | Romania | Gas | X |
Source: Exane BNP Paribas estimates
Exane BNP Paribas Research | Reabold Resources | 15 OCTOBER 2021 | page 4 |
Prepared solely for James Crothers. Not to be distributed anywhere. Strictly for personal use.
Several institutional investors on the register
Reabold has strong institutional investor representation and Directors own ~2.6% of the outstanding shares.
Figure 2: Major shareholders
Shareholder | No. of shares (m) | % |
Premier Fund Managers Limited | 911.0 | 10.20% |
Ruffer Investment Management | 560.0 | 6.27% |
Chelverton Asset Management Limited | 461.6 | 5.17% |
FIL Limited | 424.3 | 4.75% |
Bank Sarasin AM | 250.0 | 2.80% |
Edale Capital | 230.0 | 2.58% |
Directors | 234.0 | 2.62% |
Canaccord Genuity WM | 222.2 | 2.49% |
ICM Inv Mgmt | 200.0 | 2.24% |
JO Hambro | 185.2 | 2.07% |
Total | 3,678.3 | 41.19% |
Source: Company
Share price underpinned by Core NAV, offering ~100% upside
We calculate a Core NAV for Reabold of 0.36p/sh, offering ~100% upside to the current share price.
Our Core NAV incorporates the value of assets in pr duction and under development; the largest contributor to which is the Victory gas field in the UK North Sea. A development plan for Victory is currently being prepared for submission prior to year- end; we believe Victory could be the first sset in the portfolio to be monetised over the next 12-18 months.
The producing assets in California generate operating cash-flows, but are relatively
modest in crotherscontext of overall potential of the portfolio.
We set the low end of our 0.36-0.47p/sh valuation range in-line with our Core NAV.
Additional upside potential from appraisal assets; our 0.47p/sh
Discovered Resource NAV offers 171% upside
Our Discovered Resource NAV includes value for assets under appraisal, in addition to our Core NAV.
The key incremental contributors to our Discovered Resource NAV are the West Newton (UK) and Parta (Romania) assets. The evaluation of assets under appraisal is typically associated with a greater degree of uncertainty than the evaluation of producing assets. Although the work programs undertaken to date provide some encouragement, Reabold and its partners have yet to demonstrate commercial flowrates from either West Newton or Parta. Both could be material contributors to value, and we calculate a combined un-risked NAV of 0.36p/sh for the two projects (incorporating only our low recovery factor case for West Newton). It is, however, possible commercial flowrates may not be achieved from these projects. Further work is ongoing and planned to reduce the range of uncertainty associated with these assets.
We set the top end of 0.36-0.47p/sh valuation range in-line with our Discovered
Resource NAV.
Exane BNP Paribas Research | Reabold Resources | 15 OCTOBER 2021 | page 5 |
Prepared solely for James Crothers. Not to be distributed anywhere. Strictly for personal use.
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Reabold Resources plc published this content on 22 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 October 2021 10:43:05 UTC.