Equity Capital Markets and Advisory Business, Auctus Advisors

Auctus Advisors

Equity Capital Markets and Advisory Business

Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector. The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy. Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors. Auctus provides Corporate Broking, Equity Research and Investment Banking services.

Equity Bottom-Up

<ul><li>ADX Energy (ADX AU) C; Target price of A$0.060 per share: Good production rate at Anshof.</li><li>Busy months ahead – Commercial production at Anshof-3 has started at a stable rate of 100 bbl/d (80 bbl/d net to ADX).</li><li>Equinor (EQNR NO): 3Q22 results, increased dividend distribution, additional share buyback – Adjusted net earnings over the period were US$6.7 bn with 2,021 mboe/d production.</li></ul>

ADX Energy (ADX AU) C; Target price of A$0.060 per share: Good production rate at Anshof.Busy months ahead – Commercial production at Anshof-3 has started at a stable rate of 100 bbl/d (80 bbl/d net to ADX).Equinor (EQNR NO): 3Q22 results, increased dividend distribution, additional share buyback – Adjusted net earnings over the period were US$6.7 bn with 2,021 mboe/d production.

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>The $19bn EV operation (vs. Repsol's market cap of €19bn) allows Repsol to maintain the majority in a strategic area, crystallizes value (market assigns a higher valuation to the E&amp;P division separately).</li>
<li>The implied valuation by the market is on average $3 billion lower. As usual with a minority stake sale, the market rarely values it at 100%. </li>
<li>I estimate a moderate positive impact (the deal is similar to what was announced in July), value unlocking could theoretically reach €2.5-€3 per share, but I'd take a neutral stance.</li>
</ul>


The $19bn EV operation (vs. Repsol's market cap of €19bn) allows Repsol to maintain the majority in a strategic area, crystallizes value (market assigns a higher valuation to the E&amp;P division separately).
The implied valuation by the market is on average $3 billion lower. As usual with a minority stake sale, the market rarely values it at 100%. 
I estimate a moderate positive impact (the deal is similar to what was announced in July), value unlocking could theoretically reach €2.5-€3 per share, but I'd take a neutral stance.


Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<ul>
<li>
<a href="https://www.smartkarma.com/entities/rex-international-holding" target="_blank" data-smartkarma-citation="entities:17074:1" rel="noopener">Rex International Holding (REXI SP)</a> reported FY21 results in late February which showed a dramatic improvement over FY20 due to rising oil prices and increased production</li>
<li>Accounting wise the picture was muddied by auditor fantasy valuation exercises which understated FY21 results. FY22 to be a "clean" year where positive cash flow impact becomes clearer to market.</li>
<li>Since 08/03/22 Rex trades on the SGX mainboard and remains the best pure-play oil bet in the Singapore market. Current oil prices indicate an FY22 cash flow bonanza.</li>
</ul>



Rex International Holding (REXI SP) reported FY21 results in late February which showed a dramatic improvement over FY20 due to rising oil prices and increased production
Accounting wise the picture was muddied by auditor fantasy valuation exercises which understated FY21 results. FY22 to be a "clean" year where positive cash flow impact becomes clearer to market.
Since 08/03/22 Rex trades on the SGX mainboard and remains the best pure-play oil bet in the Singapore market. Current oil prices indicate an FY22 cash flow bonanza.


Rex: Bargain Purchase and Auditor Fantasy Valuations

<ul>
<li>
<a href="https://www.smartkarma.com/entities/rex-international-holding" target="_blank" data-smartkarma-citation="entities:17074:1" rel="noopener">Rex International Holding (REXI SP)</a> will report results around 25/2/2022; we expect a major 2H21 performance inflection as the Norwegian Brage field cash flow is included from 01/01/2021.</li>
<li>According to a press release on 13/1/22 the company is actively applying to uplist from Catalist to the mainboard. We see no reason why SGX should not grant this application.</li>
<li>Rex's Oman production has disappointed in 4Q21 but cash flow-wise shortfall should be made up by higher oil prices and Brage. Maiden dividend announcement should be forthcoming.</li>
</ul>



Rex International Holding (REXI SP) will report results around 25/2/2022; we expect a major 2H21 performance inflection as the Norwegian Brage field cash flow is included from 01/01/2021.
According to a press release on 13/1/22 the company is actively applying to uplist from Catalist to the mainboard. We see no reason why SGX should not grant this application.
Rex's Oman production has disappointed in 4Q21 but cash flow-wise shortfall should be made up by higher oil prices and Brage. Maiden dividend announcement should be forthcoming.


Preview Rex International FY21 Results: Prime Beneficiary Of Rising Oil Price

Earlier this week <a href="https://www.smartkarma.com/entities/rex-international-holding" target="_blank" data-smartkarma-citation="entities:17074:1" rel="noopener">Rex International Holding (REXI SP)</a><a href="https://links.sgx.com/FileOpen/20210616_RIH_PressRelease_LimeAcquiresProducingBrageField_Final.ashx?App=Announcement&amp;FileID=671402" target="_blank" rel="noopener">announced</a> that its 90% subsidiary Lime Petroleum would be acquiring a minority stake from <a href="https://www.smartkarma.com/entities/repsol-sa" target="_blank" data-smartkarma-citation="entities:21292:1" rel="noopener">Repsol SA (REP SM)</a> in the Norwegian Brage oil field. In contrast to the rest of Rex's Norwegian assets which are mainly exploration targets, the Brage oil field has been producing oil since 1993 and reached its peak production in 1998. Lime paid 42.6 million USD for a 33.84% stake in Brage (please note it has significant amount of deferred tax assets included here). Interestingly, the transaction has been backdated to start 1 January 2021 so accounting wise Rex will book the cash flows associated with Brage in its full year 2021 report. The 1H21 report was already going to show great cash flow production from its Yumna field in Oman. The just announced acquisition in Norway just adds to this for 2H21 once the deal closes in September. Risks to closing of the transaction is the successful placement of a 2.5 year 60M USD bond in Norway (expected interest rate 10%). Norwegian investors are very familiar with oil companies so we expect no issues in placing the debt.
Why was Rex able to buy such an asset from Repsol? The Spanish oil giant is clearly divesting marginal oil investments as earlier this month <a href="https://www.smartkarma.com/entities/hibiscus-petroleum-bhd" target="_blank" data-smartkarma-citation="entities:20775:1" rel="noopener">Hibiscus Petroleum (HIBI MK)</a> announced it bought Repsol's Vietnam and Malaysian assets for 212.5 million USD. We see this as a typical board room decision by Repsol to get rid of marginal fields and the price the assets are acquired for is less important.
Oil = The New Tobacco? While oil companies have been put in a bad light (see recent Shell and Exxon Mobil news) the reality is that oil consumption will be with us for decades to come and cuts in capex by the majors are likely to lead to higher oil prices. For non-ESG obsessed investors the oil industry reminds us of the tobacco industry 20 years ago. ESG agnostic investors could potentially make significant returns in the oil &amp; gas sector just like tobacco investors did between 1998 to 2018.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/213/888/original/image?1624003554" class="editor-image img-responsive" data-smartkarma-image-id="213888"></figure>
Rex remains a great risk/reward story as cash flow from Oman ramps up in 1H21 and cash flow from Norway gets added in 2H21. As highlighted in our previous insight we think Rex currently trades anywhere between 1x to 2x pre-tax cash flows (depending on input variables such as oil price, days production, etc). The 1H21 results in mid-August 2021 should be a wake-up call to investors. Given the age of its principle shareholders Rex remains a prime M&amp;A candidate at some point.

Earlier this week Rex International Holding (REXI SP)announced that its 90% subsidiary Lime Petroleum would be acquiring a minority stake from Repsol SA (REP SM) in the Norwegian Brage oil field. In contrast to the rest of Rex's Norwegian assets which are mainly exploration targets, the Brage oil field has been producing oil since 1993 and reached its peak production in 1998. Lime paid 42.6 million USD for a 33.84% stake in Brage (please note it has significant amount of deferred tax assets included here). Interestingly, the transaction has been backdated to start 1 January 2021 so accounting wise Rex will book the cash flows associated with Brage in its full year 2021 report. The 1H21 report was already going to show great cash flow production from its Yumna field in Oman. The just announced acquisition in Norway just adds to this for 2H21 once the deal closes in September. Risks to closing of the transaction is the successful placement of a 2.5 year 60M USD bond in Norway (expected interest rate 10%). Norwegian investors are very familiar with oil companies so we expect no issues in placing the debt.
Why was Rex able to buy such an asset from Repsol? The Spanish oil giant is clearly divesting marginal oil investments as earlier this month Hibiscus Petroleum (HIBI MK) announced it bought Repsol's Vietnam and Malaysian assets for 212.5 million USD. We see this as a typical board room decision by Repsol to get rid of marginal fields and the price the assets are acquired for is less important.
Oil = The New Tobacco? While oil companies have been put in a bad light (see recent Shell and Exxon Mobil news) the reality is that oil consumption will be with us for decades to come and cuts in capex by the majors are likely to lead to higher oil prices. For non-ESG obsessed investors the oil industry reminds us of the tobacco industry 20 years ago. ESG agnostic investors could potentially make significant returns in the oil &amp; gas sector just like tobacco investors did between 1998 to 2018.

Rex remains a great risk/reward story as cash flow from Oman ramps up in 1H21 and cash flow from Norway gets added in 2H21. As highlighted in our previous insight we think Rex currently trades anywhere between 1x to 2x pre-tax cash flows (depending on input variables such as oil price, days production, etc). The 1H21 results in mid-August 2021 should be a wake-up call to investors. Given the age of its principle shareholders Rex remains a prime M&amp;A candidate at some point. 

Rex: Buying More Producing Assets in Norway, 1H21 Cash Flow Report to Be Transformational

Spain

Repsol S.A., through subsidiaries, explores for and produces crude oil and natural gas, refines petroleum, and transports petroleum products and liquefied petroleum gas (LPG).  The Company retails gasoline and other products through its chain of gasoline filling stations.  Repsol's petroleum reserves are in Spain, Latin America, Asia, North Africa, and the Middle East and United States.

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Repsol SA (REP SM)

Auctus on Friday - 28/10/2022

Equinor (EQNR NO): 3Q22 results, increased dividend distribution, additional share buyback – Adjusted net earnings over the period were US$6.7 bn...

Auctus Advisors

Repsol: Sale of 25% of E&P Division

The $19bn EV operation (vs. Repsol's market cap of €19bn) allows Repsol to maintain the majority in a strategic area, crystallizes value (market...

Jesus Rodriguez Aguilar

Rex: Bargain Purchase and Auditor Fantasy Valuations

Rex reported stellar FY21 results. Accounting fantasy valuations suppressed the true cash flow impact but this noise should disappear in FY22....

Nicolas Van Broekhoven

Preview Rex International FY21 Results: Prime Beneficiary Of Rising Oil Price

Rex will report FY21 results in late February. We expect results to be a major wake-up call to investors as the Norwegian Brage field cash flows...

Nicolas Van Broekhoven

Rex: Buying More Producing Assets in Norway, 1H21 Cash Flow Report to Be Transformational

Rex acquired Norwegian assets from Spanish oil giant Repsol. This adds to its production profile. The 1H21 results report mid-August should be a...

Nicolas Van Broekhoven

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