You are here
Business update lifts Rex International shares by 14.7%
OILFIELD services firm Rex International Holding's shares jumped one cent or 14.7 per cent to 7.8 Singapore cents on Monday after the company questioned the market's valuation of its shares and gave a business strategy update that includes plans to further monetise its assets.
"Recent global economic and political developments have affected oil prices and, consequently, our stock price," Rex executive chairman Dan Broström said in a statement on Monday.
"We have been valued by the market at cash and even below cash, without any value placed on our Oman discovery asset, our Norway assets or our Rex Virtual Drilling technology."
He noted that the recent monetisation of Rex's interests in several assets in Norway was testament to the inherent value of its assets.
The company initiated a share buyback this month as it is confident of its potential prospects in Norway and Oman.
Last week, it bought back a total of 2.3 million shares at S$0.064 apiece in the open market.
Rex said it had a war chest of about US$70.8 million comprising cash, cash equivalents and quoted investments as at June 30, 2019, and zero long-term debt.
The Catalist-listed firm recorded a net profit of US$23.6 million for its second quarter ended June 30 after selling certain assets in Norway.
Rex's 90 per cent-owned subsidiary Lime Petroleum AS announced in June that it had acquired a 30 per cent interest each in two licences in the Norwegian Sea which contain the Shrek prospect. Drilling in the prospect was scheduled to start in the second half of 2019.
Lime Petroleum remains a pre-qualified company and will continue to benefit from the Norwegian tax system with 78 per cent cash refunds of all exploration expenditures annually, said Rex.
"The Norway transaction is a fruition of our business strategy as set out in our initial public offering document; that is, to find oil using our liquid hydrocarbon indicator technology Rex Virtual Drilling, sell oil-in-the-ground and recycle capital," said Rex chief executive Måns Lidgren.
"Although we achieved discoveries in Oman and Norway respectively, this monetisation strategy could not be executed during the oil price rout which started in 2014 until early this year when an opportunity to divest arose."
Rex expects its GA South asset in Oman to start oil production at the end of 2019, which if successful, will generate revenue.
The fiscal policy for exploration and production activities in Oman differs from Norway.
The cost pool spent in the Block 50 licence in Oman can be recouped upon production.
Rex's 92.65 per cent-owned subsidiary Masirah Oil, which holds a 100 per cent interest in the Block 50 licence, has to date more than US$100 million in its cost pool.