Deep Dive into an Oil Exploration & Production Company

Rex International Holding Limited (“Rex International”) was listed on Singapore Exchange’s Catalist Board on 31st July 2013. Rex International de-risks its portfolio of exploration and development assets using its proprietary liquid hydrocarbon indicator Rex Virtual Drilling technology to identify the location of oil reservoirs in the sub-surface through analysis of seismic data.

Since the Group’s listing, it has achieved four offshore commercial discoveries, one in Oman and three in Norway. The Group also offers Rex Virtual Drilling screening services to other oil exploration companies as an additional tool to increase the success rate of finding oil.

Key Statistics

Source: ShareInvestor WebPro

Past Financial Performance

Source: ShareInvestor WebPro

For FY2021, Rex International’s revenue jumped by more than 200% year-on-year to a high of S$214.16 million. The significant jump in its topline was mainly attributed to:

• The increase in the number of oil liftings from seven in FY2020 to 12 in FY2021.
• The increase in the oil sales price from US$34 per barrel in FY2020 to US$67 per barrel in FY2021.

Meanwhile, Rex International managed to be back in the black, with a profit after tax of S$106.70 million. Apart from higher oil prices, the following factors also helped to boost its bottom line:

• Bargain purchase of US$18.24 million from acquisition of Brage Field.
• Recovery of bad debts previously written-off worth US$1.72 million.
• Unrealised gain in fair value of quoted investments of US$0.60 million due to better performance in the bond and equity markets.

Free Cash Flow

Source: ShareInvestor WebPro

With the substantial improvement in its financial performance, Rex International managed to record a positive free cash flow in FY2021, after a straight 3 years of negative free cash flow.

The turnaround in its free cash flow was mainly due to the higher net cash inflow from its operating activities and a lower capital expenditure in the latest financial year.

Latest Development – Adoption of Dividend Policy

In conjunction with the latest result release, Rex International has announced the adoption of a dividend policy. The objective is to pay a regular cash dividend, aiming at the target level of S$0.02 per ordinary share per annum, on a quarterly basis, starting from the first quarter of 2023.

In proposing any dividend payout, the Board shall consider:

• The level of the Group’s cash and retained earnings.
• The Group’s actual and projected financial performance.
• The Group’s projected levels of capital expenditure and other investment plans, including strategic and opportunistic investments.
• The Group’s working capital requirements and general business and financing conditions.

With this dividend policy in place, Rex International hopes the investment community will view the Group as a stable yield generator with long-term prospects. On top of that, Rex International believes that the Group will be able to generate and maintain a sustainable and fixed level of profits over time.

Technical Analysis for Rex International

Source: ShareInvestor C2 Chart

Based on the weekly chart for Rex International, we can see that it has been on a steady uptrend for the past 1 year. After consolidating in September 2021, its share price continued its breakout and reached a high of S$0.30 with high trading volume. As the price is beyond the upper limit of the Bollinger Band, this resulted in profit taking and subsequently went back in range.

With inflation as a backdrop for 2022, Rex International’s share price continued to march on and hit a high of S$0.435. In addition, the latest Ukraine-Russia conflict has caused prices to shoot through the roof.

Overall, this latest development provided a significant tailwind for Rex International. No doubt, the rising crude oil prices will be a form of catalyst for Rex International’s share price to march on. However, investors will have to take note of any potential profit taking as its share price is trading beyond the upper limit of the Bollinger Band.

Conclusion & Management Outlook

To conclude, Rex International has registered a strong financial performance for FY2021, with both topline and bottom line saw triple digit growth year-on-year. On top of that, the presence of positive free cash flow in FY2021 will allow the Group to have more resources on hand for further investment.

Finally, when comparing Rex International’s average realised oil price of just US$67 per barrel in FY2021 versus current oil price of over US$100 per barrel, this could potentially allow Rex International to record another strong performance in FY2022.

In terms of management outlook, Mr. Dan Broström, Executive Chairman of Rex International, said, “Our 91.65 per cent subsidiary Lime Petroleum AS’s acquisition of a 33.84 per cent in the producing Brage Field for US$42.6 million was completed on 31 December 2021, for which US$18.24 million was booked as a bargain purchase of oil and gas properties by way of accounting treatment.

Production from the Brage Field of estimated 3,440 barrels of oil equivalent per day net to Lime Petroleum will contribute to the Group’s operating revenue and profit from 1 January 2022. Net 2P Reserves of about 7.3 mmboe from the Brage Field will also be added to Lime Petroleum’s current attributable 2C Contingent Resources of 27.7mmboe. Our producing assets in Oman and Norway, coupled with a strong oil price, bode well for an equally strong 2022.”

More than 3,600 investors are on our Telegram, what are you waiting for? Join us now for more first-hand updates, articles, events, promos and happenings. Click here now. See you on the inside.