Is Europe’s energy crisis a silver lining for Reabold (LON: RBD)?

The crude oil market has been in turmoil since the beginning of the Russia-Ukraine conflict. Many European nations are highly dependent on Russian energy exports, and due to the war, they are planning to shift their imports from Russia to other global exporters.

The International Energy Agency (IEA) has warned that winters could be more chilling this year thanks to the ongoing energy crisis in Europe. Russia has started its retaliation against the sanctions by reducing the flow of natural gas from Nord Stream 1.

The entire region is on a buying spree for LNG cargoes to fill up their storages before the onset of winter. At the recently concluded G7 meeting, the member nations agreed to explore the option of putting a price cap on Russian crude, at a level significantly lower than the international price and marginally above the production cost.

If Russia agrees with the capping terms, then prices could remain stable or else could see higher volatility in the coming days.

A UK-based upstream oil and gas investment firm, Reabold Resources PLC (LON:RBD) is positioning itself to leverage the strong oil and gas market. The Company has made a series of acquisition deals to gain maximum exposure to oil and gas assets in the US and the UK.

Setting its investment strategy in action, Reabold has acquired a 42% interest in the US-based and OTC traded Daybreak Oil & Gas. Daybreak is a California-based E&P player holding oil reserves in excess of 1 Mbbl. The Company has currently 20 wells in production.

The acquisition deal was formalised by selling Reabold’s California assets for 42% equity interest in Daybreak. The deal will aid Daybreak, an experienced E&P player, to operate its assets in the USA.

In the second major acquisition deal, Reabold acquired 100% control in the assets of Corallian Energy, in which it had 49.99% interest earlier. Subsequently, Corallian got an acquisition bid that involved its Victory Gas Discovery. As a part of the deal, now Reabolds owns 100% interest in all assets of Corallian except for Victory and will get a significant return from the acquisition deal for its 49.99% stake in Victory through Corallian.

West Newton Project

Reabold Resources operates the West Newton Project in the onshore UK through Rathlin Energy. It is one of the potentially largest onshore hydrocarbon projects in the UK. Reabold controls a 59.5% stake in Rathlin Energy and 16.7% direct interest in the project- taking its total economic interest to ~56%.

The West Newton Project is predominantly a gas project, having 35Mboe of total recoverable hydrocarbon resource with a sales gas component of 203 bcf. The first production is expected in 2025, and the economic modelling shows excellent project financial metrics. The project has an impressive IRR of 87% and NPV of US$448 million.

Well operation in progress at West Newton B-1Z (Image source: Annual Report)

50.8% interest in Romanian oil and gas project

Reabold’s investment portfolio also includes a Parta licence in Romania. The licence is operated by Danube Petroleum, in which RBD has a 50.8% interest. One of the wells drilled on the licence – the IMIC-1 well – saw a significant gas discovery. The project is prospective for oil and gas.

Reabold Asset Portfolio

Bottom line

Amidst growing energy concerns, Reabold is positioned well to leverage the robust oil and gas market. The Company has both oil and gas assets in Tier-1 jurisdictions in the US and Europe. Through its West Newton Project, the Company carries the potential to contribute significantly to energy security of the region.