Rex International

UOBKayhian on 28 May 2014

FY14F PE (x): 247.5
FY15F PE (x): 10.1
With renewed interest in E&P companies following the surge in RH Petrogas’ share
price, we see a possible re-rating for E&P companies trading at a steep discount to
asset value. With six more exploratory wells to be drilled for the rest of the year, 2014
will be a busy year for Rex with multiple catalysts in sight. Investors can expect cash
flow and profitability to improve as Rex prepares for early well production in Oman and
its Cory Moruga concession. Maintain BUY.
Busy year with potentially multiple catalysts. Rex spudded its first onshore well in its
Cory Moruga concession in Trinidad and Tobago (T&T) in end-April. This is the first of a
five onshore well-drilling programmes planned for T&T in 2014. The results of the drilling
will be announced when all five wells have been drilled. Another two exploratory wells
will be drilled in 4Q14 at RAK Offshore and in Norway. Thus, 2014 will be another
newspacked year for Rex, providing potential multiple price catalysts along the way.
The money is coming in... In addition to the five well-drilling programmes in T&T, Rex
will also be putting an already discovered oil well in the Cory Moruga block (discovered
in early-11 by the previous concession holders) into production later this year, after
using its Rexonics well stimulation technology to optimise production flow. Rex is
projecting oil production from the wells in T&T to top 500 bopd by end-14 and even
more in 2015. With the oil discovery in Oman, Rex is also preparing for early production
by sourcing for equipment and obtaining the necessary approvals from the authorities.
Early well production is expected to commence in 1Q15. Based on a 48-hour flow test
conducted at the start of the year, the well has a light oil flow rate of up to 3,000 stock
tank barrels per day.
Maintain BUY and target price of S$1.27, based on the expected monetary value of
Rex’s exploration assets using forecasts from traditional geologist findings.