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.

This is an excerpt of the original content. To continue reading it, access the original document here.

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Disclaimer

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.