Reabold Resources Plc: An E&P Sector Investment Company Doing Things Differently

Summary

• Reabold Resources Plc acquires direct and indirect interests in exploration and producing projects in the E&P sector.
• The company has four distinct project areas spread across the UK, Romania, and California (US).
• It follows the strategy that each of its investment opportunity must have a low drilling risk and a clear exit plan.

Reabold Resources Plc (LON: RBD) is an upstream oil & gas investment company with a prudent investment approach to acquire direct and indirect interests in exploration and producing projects in the exploration and production (E&P) sector.

The company is currently focusing on investment opportunities across the world, and it looks for value creation from each project. Its primary viewpoint is to invest in undervalued, low-risk, near-term upstream oil & gas projects and figure out a clear exit plan prior to investment.

Four projects

The company has four distinct project areas spread across the UK, Romania, and California. In the UK, the company has two investments -- West Newton and Corallian. Reabold California is its US project, while Danube Petroleum is its Romanian project.

West Newton: Reabold has a 56 per cent economic interest in this onshore field. After a successful appraisal campaign, results indicate that this is potentially one of the largest UK conventional onshore oil and gas discoveries for several decades.

Corallian: Reabold holds a 36.9% interest in the private company Corallian, which has a number of UK offshore licences. The most advanced is the Victory gas development project which was recently awarded to Corallian as part of the UK’s offshore licensing round. It also has a deep portfolio of other UK exploration prospects.

Reabold California: In this project based in California, Reabold holds 50 per cent ownership in two producing licence areas. It is a self-funded business, though low oil prices moderated further development drilling. If the oil prices are favourable, additional drilling could be on the cards this year.

Danube Petroleum: Reabold has so far invested £5 million for a 50.8 per cent ownership in this Romanian project area. Danube holds a 100 per cent interest Parta licence in Western Romania, where the IM-1 well announced a gas discovery.

Strategy of doing things differently

Reabold Resources Plc is led by an extensively experienced management team who believe in doing things differently. It was the prudent approach of the management that allowed the company, notwithstanding the significant disruption to operational activities due to Covid-19 pandemic, that has ensured it maintains an exciting forward programme.

The company invests in private operating companies that have a focused interest on specific oil and gas projects. It follows the strategy that each of its investment opportunity must have a low drilling risk and a clear exit plan. The four major criteria of Reabold’s investment are Geology, Economics, Investment Returns and Exit, and any investment is based strictly on meeting these stringent requirements.

The company’s investment is targeted to the projects that are substantially de-risked from a technical standpoint with current regional production and historic discovery wells in the vicinity or on the asset. Then it must meet the next criteria of economics and must deliver extremely attractive returns at current and lower commodity price levels.

Then comes the investment return, and the company before every investment ensures that the project must have validated the potential to deliver high returns. Finally comes the exit criteria, it is most crucial for the company to identify the optimal time to exit a project in order to maximise the return profile.

Road ahead

There is high uncertainty in cash flow for the companies in the energy segment, and they go through a long period of gestation. However, Reabold Resources Plc is approaching breakeven and most importantly, it is a debt-free company, operating purely on its equity investment. Recently, the company has made a conditional offer to acquire an additional 13.2 per cent of Corallian Energy Ltd, which could increase its share in Corallian to 50 per cent from the present 36.87 per cent. It will also strengthen Reabold’s position in the offshore Victory gas discovery as Reabold would be increasing its economic interest in the 100 per cent in Corallian-owned Victory Gas Discovery, which was evaluated to have 157 billion cubic feet of 2C contingent resource with an associated Net Present Value of £146 million.

The company has been following the strategy to re-invest capital gained from its investments into larger projects, and it aims to get hold of assets with limited downside and high upside.

Stocks update

The stock of the company traded higher by 5.52 per cent at GBX 0.77 on 5 May 2021 after moving in a range of GBX 0.36 - 0.87 in the last 52 weeks. The stock of the company has given a massive return of 77.72 per cent in the last one year.

(Source: Refinitiv, Thomson Reuters)