14 January 2015

Asia Pacific/Singapore
Equity Research
Oil & Gas Exploration & Production / Energy

RH Petrogas Limited
(RHPG.SI / RHP SP)
Rating
NEUTRAL* [V]
Price (13 Jan 15, S$)
0.38
Target price (S$)
0.40
Upside/downside (%)
3.9
Mkt cap (S$ mn)
283.1 (US$ 212.0)
Enterprise value (US$ mn)
226.68
Number of shares (mn)
735.28
Free float (%)
33.0
52-week price range
0.96 - 0.33
ADTO - 6M (US$ mn)
3.0
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
Target price is for 12 months.
[V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts
Shew Heng Tan
65 6212 3014
shewheng.tan@credit-suisse.com
David Hewitt
65 6212 3064
david.hewitt@credit-suisse.com

Share price performance

Price (LHS)

Rebased Rel (RHS)

2
1.5
1
0.5
0
Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14

200
150
100
50
0

The price relative chart measures performance against the

FTSE STRAITS TIMES IDX which closed at 3333.45 on
13/01/15
On 13/01/15 the spot exchange rate was S$1.34/US$1

Performance Over
Absolute (%)
Relative (%)

1M
8.5
7.3

3M
-23.8
-29.4

12M
-36.4
-43.1

INITIATION

Caught in an ambivalent position

We initiate coverage on RH Petrogas Limited with a NEUTRAL rating and
S$0.40 target price.
Fuyu-1 Block (China) in the spotlight. The value of the stock is dominated by
the Chinese block, Fuyu-1, which is under development. Fuyu-1 sits in the same
basin as China's largest onshore oil field, Da Qing. In October 2014, the
company obtained final approval from NDRC to produce an estimated 7.2 mm
bbl (21%), which leaves 26.9 mm bbl (79%) of oil awaiting the next phase of
approval from CNPC and NDRC.
Yet to decide on licence extensions for Basin and Island PSCs (Indonesia).
Basin and Island PSCs are two producing blocks in Indonesia. Much value
resides in undeveloped resources, which risk being eroded upon licence expiry
in 2020. There is a six-well development drilling campaign scheduled in the
Basin PSC in 2015 to maintain revenue on cost recovery basis. Feasibility
studies are ongoing for the Koi and TBC fields in Island PSC. The window for
development is limited unless there are licence extensions for the PSCs.
Triple building blocks to valuation. The three keys to growing NAV in the next
24 months are: (1) commercial production from Fuyu-1, (2) finalisation of
development plans for Island PSC and (3) final approval for Phase 2
development of Fuyu-1. Mr Francis Chang, an industry veteran with over 35
years of experience, was appointed CEO in January 2014. It will be interesting
to see how he will bring the company forward, with the possibility of minor
acquisitions to boost its portfolio.
Key risks. RH Petrogas' performance as operator will likely influence how soon
ODP for the next phase of development at Fuyu-1 will come forth. The company
is operator and it is their first block moving from development to production.
Financial and valuation metrics
Year
Revenue (US$ mn)
EBITDAX (US$ mn)
EBIT (US$ mn)
Net profit (US$ mn)
EPS (CS adj.) (US$)
Change from previous EPS (%)
Consensus EPS (US$)
EPS growth (%)
P/E (x)
Dividend yield (%)
EV/EBITDAX (x)
P/B (x)
ROE (%)
Net debt/equity (%)

12/13A
86.4
24.3
-30.9
-37.1
-0.06
n.a.
n.a.
n.m.
-5.0
0
8.5
1.2
-20.7
net cash

12/14E
73.7
20.5
9.0
1.3
0.00
-0.01
n.m.
156.9
0
11.1
1.3
0.8
9.1

12/15E
76.1
16.6
4.6
-0.7
-0.00
n.m
0.01
n.m.
-288.1
0
15.4
1.3
-0.5
27.9

12/16E
87.3
24.2
11.5
2.9
0.00
0.02
n.m.
72.9
0
10.8
1.3
1.8
30.5

Source: Company data, Thomson Reuters, Credit Suisse estimates

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do

business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS

BEYOND INFORMATION
Client-Driven Solutions, Insights, and Access

14 January 2015

Focus Charts
Figure 1: RH Petrogas: Working interest production
profile
8.0

Figure 2: Phase 1 drilling campaign and gross production

at Yong Ping oil field, Fuyu-1 Block
10,000

m boe/d

b/d

wells

9,000

7.0

300

8,000

6.0

6,000

4.0

5,000

300

250

7,000

5.0

300

250
200
150

4,000

3.0

100

3,000

2.0

2,000

1.0

100

43

1,000

50

15

2010A

2012A

2014

2016

2018

Basin & Island PSC

2020

2014

2022

350

Fuyu 1 Block

2015

2016

2017

2018

2019

Wells drilled per year (RHS)

2020

2021

2022

Gross production

Source: Company data, Credit Suisse estimates

Source: Company data, Credit Suisse estimates

Figure 3: 24-month catalyst map

Figure 4: Corresponding upside to NAV value based on

24-month catalysts

1H15

2H15

1H16

2H16

70.0

Sanctioned Projects
Fuyu 1 - Yong Ping

Scts/share

+16.2

62

60.0

First prodn

50.0

Fuyu 1 - Later Phase

ODP approv al

40.0

40

+3.3

+0.8

Fuyu 1-prod

Koi-submit
POD

+2.5

30.0

Assets under appraisal

20.0

Koi

10.0

FEED & submit POD

0.0

TBC

Base NAV

FEED & submit POD

Source: Credit Suisse estimates

TBC-submit Fuyu 1-ODP Possible NAV

POD
2nd Phase

Source: Credit Suisse estimates

Figure 5: RH PetrogasStock price movement to key corporate events

1.10
1.00

S$/share
27 Apr 2009:
Purchased Fuyu 1 Block
(Exploration, China)
3 Dec 2009:
Purchased West Belida PSC
(Exploration, Indonesia)

0.90

Disposal of
electronics business
to focus solely on
E&P

0.80 Capital raising &

Chinese
Ministry's
0.70 verification of
resources at
Fuyu 1 Block

Capital raising &

Exploration drilling
at Island and Basin
PSCs

20 Sep 2010:
Purchased Basin & Island PSCs
from Pearl

0.60

11 Dec 2012:
Seismic option on Block M-1
(Ceased, Myanmar)

6 Sep 2010:
Purchased Basin & Island PSCs
from Lundin
(Producing, Indonesia)

0.50
0.40
0.30
Apr-09

Rumoured
takeover offer

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

16 Oct 2014:
ODP approval
for Fuyu 1 Block
from NDRC

6 Dec 2012:
Entered into SK331 PSC
(Exploration, Malaysia)
Dec-11

Apr-12

Aug-12

Dec-12

Apr-13

Aug-13

Dec-13

Apr-14

Aug-14

Dec-14

Source: Bloomberg, Company data up to 13 Jan 2015

RH Petrogas Limited
(RHPG.SI / RHP SP)

14 January 2015

Investment Summary
Caught in an ambivalent position
We initiate coverage on RH Petrogas with a NEUTRAL rating and a S$0.40 target price.
The company's portfolio comprises of five assetstwo producing assets in Indonesia, one
asset under development in China and two exploration assets in Indonesia and Malaysia.
The current and upcoming production is predominantly that of oil. RH Petrogas transited to
the oil and gas sector on the Singapore Stock Exchange (SGX) in 2009/10 and benefitted
from investors' euphoria over the sector, which was booming with increasing oil price post
global financial crisis. However, the crude price environment has changed.

Initiate coverage on RH
Petrogas with a NEUTRAL
rating and S$0.40 target price

Fuyu-1 Block (China) in the spotlight

The value in the stock is largely built on the premise of obtaining a final approval from the
National Development and Reform Commission (NDRC) for the overall development plan
(ODP) on Fuyu-1 Block. Two-third of the total asset value resides in this Block. In October
2014, the company obtained the final approval to produce an estimated 7.2 mm bbl of oil (21%
of 2C contingency resources in the Fuyu-1 Block), which leaves 26.9 mm bbl (79%) of oil
awaiting for the next phase of approval from CNPC and NDRC. The development is low capital
intensive as it requires drilling shallow wells (200300 m). However, the operating cost is
higher as it requires US$10/bbl more to apply the huff and puff technique to bring up heavy oil.

Value in Fuyu-1 Block is

only partially realised until
final ODP approval for
Phase 2 is obtained

Yet to decide on licence extensions for Basin and

Island PSCs in Indonesia
Basin and Island PSCs are RH Petrogas' two producing blocks in Indonesia. Much of the
value resides in undeveloped resources in the block, which risk being eroded upon licence
expiry in 2020. It is unlikely that the operator of Basin PSC will invest further after a sixwell development drilling campaign in 2015. Island PSC still holds 21.9 mm boe of 2C
contingency resources and has more favourable fiscal terms than Basin PSC. The
operators of Island PSC are making feasibility studies for developments in Koi and TBC
fields. The window for development could be limited unless there is licence extension.

Undertaking feasibility studies

on Koi and TBC fields in
Island PSC, however window
for development is limited
unless there is licence
extension

Triple building blocks to valuation

The key building blocks to growing Net Asset Value (NAV) in the next 24 months are (1)
commercial production from the Fuyu-1 Block, (2) finalisation of development plans in
Island PSC and (3) obtaining approval on ODP for the next phase of development in Fuyu1 Block from CNPC and NDRC. Mr Francis Chang, an industry veteran with over 35 years
of experience was appointed as CEO in January 2014. We believe that the company is
looking out for minor acquisition opportunities to boost its portfolio ahead of the 2020
expiry of Basin and Island PSCs. Southeast Asia will most likely remain RH Petrogas'
main area of focus going forward. The Chinese block is likely a one-off opportunity for RH
Petrogas as conventional onshore licences in China have been harder to come by.

The main catalyst to

valuation is obtaining final
approval for Phase 2 of
Fuyu-1 block

Financials: Adapting to a new crude price environment

The company had previously operated in a US$100/bbl crude environment. With uncertain
crude price going in 2015, the company's earnings and operating cash flows will likely be
hit by lower crude prices.

Investment risks
The company is operator of Fuyu-1 and it is their first block moving from development to
production. The Chinese authorities and partner CNPC, will likely be monitoring the
company's abilities and their performance may influence how soon ODP approval for
Phase 2 will come forth.

RH Petrogas' performance as
operator will likely influence
how soon ODP for Phase 2 at
Fuyu-1 will come forth

RH Petrogas Limited
(RHPG.SI / RHP SP)

14 January 2015

RH Petrogas Limited RHPG.SI / RHP SP

Price (13 Jan 15): S$0.38, Rating:: NEUTRAL [V], Target Price: S$0.40, Analyst: David Hewitt
Target price scenario
Scenario
Upside
Central Case
Downside
Income statement (US$ mn)
Sales revenue
Cost of goods sold
SG&A
Other operating exp./(inc.)
EBITDAX
Exploration expense
EBITDA
Depreciation & amortisation
EBIT
Net interest expense/(inc.)
Associates/JV
Forex losses (gains)
Non-operating inc./(exp.)
Recurring PBT
Exceptionals/extraordinaries
Taxes
Profit after tax
Other after tax income
Minority interests
Preferred dividends
Reported net profit
Analyst adjustments
Net profit (Credit Suisse)
Cash flow (US$ mn)
EBIT
Net interest
Tax paid
Working capital
Other cash & non-cash items
Operating cash flow
Capex
Free cash flow to the firm
Disposals of fixed assets
Acquisitions
Divestments
Associate investments
Other investment/(outflows)
Investing cash flow
Equity raised
Dividends paid
Net borrowings
Other financing cash flow
Financing cash flow
Total cash flow
Adjustments
Net change in cash
Balance sheet (US$ mn)
Cash & cash equivalents
Current receivables
Inventories
Other current assets
Current assets
Property, plant & equip.
Investments
Intangibles
Other non-current assets
Total assets
Accounts payable
Short-term debt
Current provisions
Other current liabilities
Current liabilities
Long-term debt
Non-current provisions
Other non-current liab.
Total liabilities
Shareholders' equity
Minority interests
Total liabilities & equity

Key earnings drivers

TP
0.40

%Up/Dwn Assumptions
3.90
12/13A
86.4
58.7
6.1
(2.7)
24.3
44.2
(19.9)
11.0
(30.9)
3.3

(34.2)
(28.8)
2.9
(65.9)

(65.9)
28.8
(37.1)
12/13A
(59.6)
2.5
5.3
(14.7)
78.6
12.1
(48.0)
(35.9)

(50.0)
56.1

4.9
1.5
62.6
24.7
0.01
24.7
12/13A
52.4
34.8
1.0
0.62
88.8
1.6

111.1
133.0
334.5
64.1
13.7
2.2
0.26
80.2
33.5
42.3
1.3
157.3
177.2

334.5

12/14E
73.7
55.2
6.0
(8.0)
20.5

20.5
11.5
9.0
2.9

6.0
(20.5)
4.7
(19.1)

(19.1)
20.5
1.3
12/14E
(11.5)
1.8
4.7
(12.2)
12.7
(4.4)
(21.2)
(25.6)

2.8

(19.7)
0.5

(10.2)
0.2
(9.4)
(33.6)
0.01
(33.6)
12/14E
18.9
24.2
2.0
0.50
45.6
1.5

90.6
145.1
283.0
42.4
13.7
2.0
0.15
58.2
19.8
43.0
1.3
122.4
158.6
2.0
283.0

12/15E
76.1
58.6
8.0
(7.1)
16.6

16.6
12.0
4.6
5.3

(0.7)

0.1
(0.7)

(0.7)

(0.7)
12/15E
4.6
4.2
0.1
1.7
1.3
11.9
(39.9)
(28.0)

(41.8)

36.3

36.3
6.4
0.01
6.4
12/15E
25.3
25.0
2.1
0.50
52.9
2.0

90.6
175.5
321.1
44.9
13.7
2.0
0.15
60.8
56.2
43.0
1.3
161.2
157.9
2.0
321.1

12/16E
87.3
62.9
8.0
(7.9)
24.2

24.2
12.8
11.5
5.7

5.8

2.9
2.9

2.9

2.9
12/16E
11.5
4.6
2.9
(0.7)
(4.4)
13.9
(17.1)
(3.2)

(19.0)

6.3

6.3
1.3
0.01
1.3
12/16E
26.6
28.7
2.4
0.50
58.2
2.5

90.6
182.3
333.7
48.3

2.0
0.15
50.4
76.2
43.0
1.3
170.9
160.8
2.0
333.7

Per share data

Shares (wtd avg.) (mn)
EPS (Credit Suisse)
(US$)(US$)
DPS
BVPS (US$)
Operating CFPS (US$)
Key ratios and
valuation
Growth(%)
Sales revenue
EBIT
Net profit
EPS
Margins (%)
EBITDAX
EBITDA
EBIT
Pre-tax profit
Net profit
Valuation metrics (x)
P/E
P/B
Dividend yield (%)
P/CF
EV/sales
EV/EBITDAX
EV/EBITDA
EV/EBIT
ROE analysis (%)
ROE
ROIC
Asset turnover (x)
Interest burden (x)
Tax burden (x)
Financial leverage (x)
Credit ratios
Net debt/equity (%)
Net debt/EBITDA (x)
Interest cover (x)

12/13A

12/13A
639.7
(0.06)

0.24
0.02
12/13A

12/14E

12/14E
733.8
0.00

0.22
(0.01)
12/14E

12/15E

12/15E
734.8
(0.00)

0.21
0.02
12/15E

12/16E

12/16E
735.8
0.00

0.22
0.02
12/16E

0.0
(268)
(708)
(592)

(14.7)
129
104
103

3.2
(49)
(155)
(154)

14.7
149
496
495

28.1
(23.1)
(35.7)
(39.6)
(43.0)

27.8
27.8
12.2
8.2
1.8

21.8
21.8
6.1
(0.9)
(1.0)

27.8
27.8
13.1
6.7
3.3

(5)
1.19

15.2
2.39
8.5
(10.4)
(6.7)

157
1.33

(47.9)
3.08
11.1
11.1
25.2

(288)
1.34

17.8
3.37
15.4
15.4
55.7

73
1.32

15.2
3.00
10.8
10.8
22.8

(20.7)
(17.6)
0.26
1.11
1.05
1.89

0.8
6.9
0.26
0.67
1.33
1.76

(0.5)
2.7
0.24
(0.15)
1.10
2.01

1.8
2.8
0.26
0.51
0.50
2.05

(3.0)
0.26
(9.3)

9.1
0.71
3.1

27.9
2.68
0.9

30.5
2.05
2.0

Source: Company data, Thomson Reuters, Credit Suisse estimates

12MF P/E multiple
120
100
80
60
40
20
0
Jan-11

Sep-11

May-12

Jan-13

Sep-13

May-14

Dec-14

May-14

Dec-14

12MF P/B multiple

3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jan-11

Sep-11

May-12

Jan-13

Sep-13

Source: IBES

RH Petrogas Limited
(RHPG.SI / RHP SP)

14 January 2015

Caught in an ambivalent position

Early entrant to the Singapore oil and gas market. RH Petrogas has been an oil and
gas player on the Singapore Stock Exchange (SGX) for five years. The company
transformed itself at the doldrums of the electronics cycle to foray into the exploration and
production (E&P) of oil in 2009, a time when crude price was recovering from the bottom,
post the global financial crisis. The company went on an acquisition spree in 2009/10 to
purchase four assets, which still form the backbone of the company today. In 2012, RH
Petrogas added a fifth asset when it entered into a PSC with Petronas Carigali in Malaysia.

RH Petrogas transited into

the E&P sector in 2009/10
at a time when oil price was
recovering from GFC

Figure 6: RH Petrogas' asset acquisition history

Assets
Fuy u 1 PSC
West Belida PSC
Basin & Island PSCs
SK331 PSC

Country

Completion

Purchase Stake

Price

Operator

Song Liao Basin, China

17-Aug-09

49%

S$110mn

RH Petrogas

Ex ploration

Onshore

9-Jan-38

South Sumatra, Indonesia

14-Jun-10

94%

S$0.4mn

RH Petrogas

Ex ploration

Onshore

4-May -39

West Papua, Indonesia

29-Dec-10

Producing

14.3mm bbl

Saraw ak, Malay sia

6-Dec-12

Ex ploration

60% - Basin PSC

33.2% - Island PSC
80%

US$73.83mn
na

PetroChina - Basin PSC

PetroChina & Pertamina - Island PSC
RH Petrogas

Status at purchase 2P Reserves

PSC expiry

Onshore/ 15-Oct-20 for Basin PSC

Offshore 22-Apr-20 for Island PSC
Onshore

5-Dec-40

Source: Company data, Credit Suisse estimates

Influential board and experienced management. The company's primary focus area for
growth and expansion is conventional oil and gas in Southeast Asia (SEA) and China. The
assets of the company reflect the wide influence of the Executive Chairman, Tan Sri Datuk
Sir Tiong Hiew King, in the region. Mr Tiong owns a conglomerate in Malaysia covering
timber, oil palm plantations, oil and gas, media and publishing, mining, fishery and
manufacturing businesses. The SEA-Chinese co-operation is apparent in PSCs in West
Papua where RH Petrogas is in partnership with CNPC/PetroChina together with local
partner, Pertamina. The current CEO, Mr Francis Chang, was promoted to the role in
January 2014. He joined the company in 2010 as Vice President of Exploration and
Production (E&P). Mr Chang has over 35 years of global E&P experience with North
American companies such as Anadarko, Burlington Resources and Amoco. Prior to joining
RH Petrogas, he spent the last seven years in China.

The company is helmed by

an influential Chairman and
a very experienced CEO

Conventional Southeast Asian/Chinese oil play. Even though the company's first oil
block is in China, future licences in conventional oil and gas blocks will be difficult to obtain
given that local Chinese oil and gas players have grown bigger with access to funds for
development. However, RH Petrogas is well situated within the Southeast Asian focus, an
area with rich hydrocarbon resources. Southeast Asia holds 72.4 bn bbl of recoverable oil
and 26.7 tcm of gas resources according to IEA. With robust economic growth as a region,
oil consumption has grown 52% from 3.6 mmb/d to 5.5 mmb/d and gas consumption has
grown 92% from 7.5 bcf/d to 14.4 bcf/d from 2000 to 2013. Crude production has not kept
pace with demand resulting in the region being a net importer of crude oil. Government
policies are supportive in growing the oil and gas sector to meet increasing domestic
demand. Investment in the region is robust with increased capital expenditure of more
than two times from US$9.5 bn to US$24.8 bn from 200513.

While the Fuyu-1 Block

appears to be a one-off in
China, SEA remains a land of
opportunity for the company

RH Petrogas Limited
(RHPG.SI / RHP SP)

14 January 2015

Figure 7: Southeast Asiademand and supply of oil

6

Figure 8: Southeast Asiacapital expenditure

25

mm b/d

US$bn

23

21

3
2

19

17

15

(1)

13

(2)

11

Widening demand-supply gap

(3)
(4)
00

01

02

03

Oil production

04

05

06

07

Oil consumption

08

09

10

11

12

13

Demand-supply gap

Source: BP Statistical Review of World Energy 2014

7
2005

2006

2007

2008

2009

Figure 9: RH Petrogas' daily production against peers

8,000

2011

2012

2013 2014E

Source: Woodmac

E&P stock premium is eroded as more players jump on the bandwagon. There are
more upstream companies in the oil and gas sector listed on SGX today than in 2010
when RH Petrogas entered the sector. In 2H2013, three new companiesLinc Energy,
KrisEnergy and Rex (upstream technology) were newly listed on SGX. Listed companies
such as Ramba Energy and Giken Sakata, which own other core businesses are also
trying to transit into the E&P business. Therefore, investors now have more investment
options. Coupled with an uncertain oil price environment, the sieve will get finer as
investors shed their initial euphoria on the sector to seek out companies which can offer
growth, strong financial position and hold quality assets.

9,000

2010

More players have joined

the E&P game on SGX
since 2013

Figure 10: RH Petrogas' reserves/resources against peers

boe/d

2P Reserves

7,403

166.3

Linc

7,000

Kris

6,000
5,000

4,350

4,000

3,910
-

32.3

RHP

19.1

2C Resources

3,000
2,000

Kris

1,000

RHP

Kris

RHP
Liquids

Source: Company data as at Sep 2014

Gas

Linc

182.8
62.7
-

50

mm boe
100

Liquids

150

200

Gas

Source: Company data as at Oct 2014. Linc Energy does not publish
2C contingency resources

RH Petrogas Limited
(RHPG.SI / RHP SP)

14 January 2015

Fuyu-1 Block (China) in the spotlight

The dragon arrived as smaller than anticipated. The Fuyu-1 PSC was the first asset and
bedrock of RH Petrogras' portfolio. The stock sat on excitement over the Fuyu-1 Block as it
resides in the same basin as China's largest onshore oil field, Da Qing, in the Song Liao Basin.
It is an onshore conventional low-capital intensive oil project. The company received a final
approval for its ODP on the Yong Ping oil field in the block to commence the first phase of
development to produce an estimated gross of 14.6 mm bbl (7.2 mm bbl net) of oil in October
2014. The approval includes the drilling of 1,008 development wells over five years. It takes an
average of seven days to drill each well. There remains 55 mm bbl (26.9 mm bbl net) of 2C
contingency resources in the block, which require a subsequent ODP approval. This is the first
block going into production where RH Petrogas acts as a project operator.

Final regulatory approval

only covers c.20%
resources in Fuyu-1,
requiring a second approval
for the remaining resources

CNPC is a ready buyer of crude in the Fuyu-1 Block. RH Petrogas has entered into an
oil sales agreement with CNPC. CNPC has established oil and gas operation facilities in
the Song Liao Basin. The oil quality is heavy with a density of 18.5 API. We estimate
sales price to be at a 15% discount to Brent. The oil will be trucked to CNPC processing
facilities, which are 5 km away, for processing and blending with lighter oil. Production at
the Yong Ping oil field is expected to commence in 2Q2015 with peak production to be
achieved by 2019. RH Petrogas will be applying the huff and puff technique to flow the oil
out of the field, and hence we added US$10/bbl into the operating cost.

Production at Fuyu-1 is
expected in 2Q2015 and
CNPC is a ready buyer of
the crude

Low-capital investment in the Fuyu-1 Block. RH Petrogas has invested close to US$30
mn in the exploration and appraisal phase. Development capex associated with drilling
1,008 wells and related facilities is estimated to be about US$58 mn from 2014 to 2019
(US$50,000 per well) as these are shallow wells ranging from 200300 m in depth. RH
Petrogas completed 15 wells by the end of 2014. The production profile is estimated on a
gross 10 b/d production per well, with declines starting to set in from 2020.

Fuyu-1 Block has low capital

requirement with an
estimated development
budget of US$58 mn

Figure 11: Fuyu 1 block is situated in Northeast China,

Figure 12: Phase 1 drilling campaign and gross

Song Liao Basin

production at Yong Ping oil field, Fuyu-1 Block

10,000

b/d

wells

9,000

300

8,000

300

300

250

7,000

350

250

6,000

200

5,000
150

4,000
100

3,000
2,000
1,000

100

43

50

15

2014

2015

2016

2017

2018

Wells drilled per year (RHS)

Source: Company Presentation

2019

2020

2021

2022

Gross production

Source: Company guidance, Credit Suisse estimates

Second ODP approval needed to fully realise value in Fuyu-1 Block. As a first time
operator, the company's back-end loaded drilling campaign is very sensible for it to iron
out operational issues. Chinese authorities and partner CNPC, together, will likely be
monitoring the company's abilities and performance. The company believes that ODP
approval for phase 2 could be forthcoming in the next two to three years. New drilling is
most likely required in phase 2 of development. Besides oil, the company is also doing
exploration work to ascertain deep gas potential in the block.

ODP approval for Phase 2

in Fuyu-1 is estimated to be
in two to three years

RH Petrogas Limited
(RHPG.SI / RHP SP)

14 January 2015

Yet to decide on licence extensions

for Basin and Island PSCs in
Indonesia
Yet to decide on licence extension in Basin and Island PSCs (Indonesia). The Basin
and Island PSCs are bread and butter assets for RH Petrogas. Since their acquisition in
2010, they have provided the company with production and cash flows to support
exploration and appraisal activities. Even though there is exploration upside in these two
blocks, their PSC expiry in 2020 puts a limit on their full realisation. The company has
achieved a 50% exploration drilling success rate for the two PSCs in the last four years,
writing off c.$30 mn in 2013 associated with unsuccessful exploration. We understand that
PSC extension is under consideration.

Basin and Island PSCs

expire in 2020, and licence
extension is under
consideration

Six-well development drilling campaign in Basin PSC in 2015. There are plans to drill
six development wells in Basin PSC in 2015. These are pending regulatory approval,
which are expected to come by early 2015. Four wells are targeted at the North Klalin field
and two wells at the Southeast Walio field. The gross capex expected for the development
campaign is US$50 mn (US$30 mn net). The development of these fields do not add to
valuation as we understand from the company that their reserves have already been
booked. However, they will help the company in maintaining the production and
commercialisation of reserves. This investment also ensures the cost recovery portion of
revenue from the Basin PSC until expiry. There is no plan to invest further in the Basin
PSC after its development drilling campaign in 2015 unless there is licence extension.

Developing drilling in Basin

PSC in 2015 to maintain
production and revenue

Significant resources in Island PSC, a licence extension could justify further

developmental investment. The company plans to re-activate the offshore TBA field,
which ceased production in 2010. The TBA field has gross c.2 mm bbl (0.66 mm bbl net)
of remaining reserves. Production is targeted for 1Q2015 when an FPSO is secured and
brought to location. Further development could be expected in Island PSC as the reserves
are running low at less than 1.5 mm boe and a significant 2C resources of 21.9 mm boe
remaining. Fiscal terms at Island PSC are also more favourable than Basin PSC. The two
targets for future development are the Koi and TBC fields. Preliminary front end
engineering design ('pre-FEED') study commenced in 2014 to evaluate the development
design and concept of the Koi field. Koi holds a gross 12 mm bbl (4 mm bbl net) of oil. The
TBC gas and condensate field is another potential candidate for future development. A
new CNG plant is being considered to process the gas feed. TBC is estimated to have
gross 182 bcf (60 bcf net) of gas and 6 mm bbl (2 mm bbl net) of condensate.

The company is conducting

feasibility studies on Koi and
TBC fields for future
development

Figure 13: Development plans for Basin and Island PSCs

Block

Operator

Basin PSC

PetroChina

Island PSC

PetroChina & Pertamina

Fields

Development Plan

North Klalin
Southeast Walio
TBA

Time frame 2P Reserves (net)

4 development wells
2 development wells
Secure FPSO

2015
2015
2015

Koi

Pre-FEED study

2014/2015

TBC

Feasibility study on feeding gas to CNG plant

2015/2016

Booked
Booked
Booked
4mm bbl
Not booked
70bcfe
Not booked

Source: Company data, Credit Suisse estimates

Slight increase in gas sales in Indonesian PSCs. While oil is predominantly the focus of
Basin and Island PSCs, the company has been making efforts to commercialise their gas
production. Sales are expected to increase from 5 mmcf/d to 8 mmcf/d starting January
2015 and to 10 mmcf/d in years after. Gas prices are locked in for two years at $4/mcf.

Efforts are made to

commercialise gas
production at Basin and
Island PSCs

RH Petrogas Limited
(RHPG.SI / RHP SP)

14 January 2015

Figure 14: RH Petrogas: Working interest production profile

8.0

m boe/d

7.0
6.0
5.0
4.0
3.0
2.0
1.0
-

2010A

2011A

2012A

2013A

2014

2015

2016

Basin & Island PSC

2017

2018

2019

2020

2021

2022

Fuyu 1 Block

Source: Company data, Credit Suisse estimates

Plan for one exploration well in SK331 PSC (Malaysia). RH Petrogas (80% stake) entered
into the SK331 PSC in Sarawak Malaysia with Petronas in December 2012. Preliminary study
indicated that the prospective resources could be gas prone. If true, there is an opportunity for
it to become a feedstock source to the Bintulu LNG production facilities, which are located
within SK331. Seismic acquisition was completed in November 2014. The company targets to
process and interpret seismic data, and drill one exploration well in 2015 budgeted at gross
US$25 mn (US$ 10.2mn net). The farm out of 39.2% stake of SK 331 to Tumbuh Tiasa was
completed in September 2014 for US$2.79 mn, leaving the company with a 40.8% stake. The
company is optimistic about this block based on exploration work to date.

Preliminary studies indicate

that prospective resources
in SK331 are gas prone

Figure 15: Bintulu LNG facility, operated by Malaysia LNG (Petronas) is located within
SK331 PSC

Bintulu

SK331

Source: Company presentation

RH Petrogas Limited
(RHPG.SI / RHP SP)

14 January 2015

Passive exploration strategy in West Belida (Indonesia). RH Petrogas purchased West

Belida PSC from Orchard Energy in June 2010. The company wrote off US$7.2 mn of
unsuccessful exploration expense associated with Gitar-1 well in the block. The West
Belida exploration licence is expiring in May 2015. The company is conducting passive
seismic programme and will be making a decision on whether to extend the exploration
licence based on the result by 1Q2015.

A decision on whether to
extend exploration licence in
West Belida is expected by
1Q2015

RH Petrogas Limited
(RHPG.SI / RHP SP)

10

14 January 2015

Triple building blocks to valuation

Risked valuation suggests target price of S$0.40/share. The net asset value of the
stock is S$0.84 on an un-risked basis. On a risked adjusted basis, we arrive at
S$0.40/share. Fuyu-1 Block dominates two-third of the total asset valuation of RH
Petrogas. To arrive at our valuation:

We differentiate between Phase 1 and 2 of Fuyu-1 Block. We allocated 70% risking

factor to Phase 1's estimated volume on the basis that this is the company's first
operatorship on a developing/producing block, a lack of production history and expert
view on the block presently (the reserve auditor's report will only be ready in 1Q2015).
We will fully derisk the value in the block when commercial production commences.

We used un-risked valuation in Phase 1 on a per boe basis as a proxy for Phase 2 in
Fuyu-1 block. We allocated a risk factor of 50% to Phase 2 to indicate that these are
volumes awaiting governmental approval. We understand from the company that
subsequent ODP approval process should be swifter than the first approval.

The valuation of 2P reserves in Basin and Island PSCs have been fully derisked. Until
development plans for Koi and TBC are confirmed, they are risked at 30% as 2C
resources. The value in Basin and Island PSCs will be eroded at the end of the expiry
of the PSCs if there is no extension.

Fuyu-1 Block holds two-third

of total asset valuation of
the company

Figure 16: RH Petrogas: Sum-of-the-parts table

Assets

Country

WI
(%)

Unrisked

Reserves / Unrisked

Risk

Risked

Valuation

Resources Valuation

factor

Valuation

US$mn

US$'m

Unrisked

Risked

Valuation Valuation

mm boe

US$/boe

SGct/sh

SGct/sh

22.8

8.6

2.6

100%

22.8

4.1

4.1

7.9

1.3

5.9

100%

7.9

1.4

1.4

30.7

10.0

30.7

5.5

5.5

Producing
Kepala Burung (Basin) PSC

Indonesia

60%

Salaw ati Kepala Burung (Island) PSC Indonesia 33.2%

Total

In development
Fuy u 1 Block - Phase I

China

49%

60.6

7.2

8.4

70%

42.4

10.8

7.6

Fuy u 1 Block - Later Phase

China

49%

226.6

26.9

8.4

50%

113.3

40.5

20.2

287.2

34.1

155.7

51.3

27.8

Total

Under appraisal
Kepala Burung (Basin) PSC

36.1

13.7

2.6

30%

10.8

6.5

1.9

Salaw ati Kepala Burung (Island) PSC Indonesia 33.2%

Indonesia

130.2

21.9

5.9

30%

39.0

23.3

7.0

Total

166.3

35.6

49.9

29.7

8.9

484.2

79.7

236.3

86.5

42.2

Total asset value

Cash / (Net debt)

Net asset value (NAV)

60%

(15.1)

469.0

(15.1)

221.2

(2.7)

83.8

(2.7)

39.5

Source: Credit Suisse estimates

Fuyu-1 Block is the main catalyst. The charts below show the catalyst map for the stock
and corresponding upside to NAV. The next catalyst for RH Petrogas will be the
commercial production in Phase 1 Fuyu-1 Block in spring 2015. We believe that ODP
approval for Phase 2 in Fuyu-1 Block is only likely to come when commercial production
stabilises in two to three years. The next catalysts for RHP's assets are development plans
for Koi and TBC in Island PSCs. We view Koi development to be more probable given that
pre-FEED study has commenced and the volumes associated are smaller. The TBC
development plan is more likely upon a licence extension on Island PSC.

Final ODP approval for

Phase 2 Fuyu-1 is the main
catalyst for the stock

RH Petrogas Limited
(RHPG.SI / RHP SP)

11

14 January 2015

Figure 17: 24-month catalyst map

1H15
2H15
Sanctioned Projects

Figure 18: Corresponding upside to NAV

1H16

2H16

70.0

Scts/share

+16.2

62

60.0

Fuyu 1 - Yong Ping

First prodn
50.0

Fuyu 1 - Later Phase

ODP approv al

40

40.0

Assets under appraisal

Koi

+0.8

+3.3

+2.5

30.0

FEED & submit POD

TBC

20.0

FEED & submit POD

10.0
0.0
Base NAV Fuyu 1-prod Koi-submit TBC-submit Fuyu 1-ODP Possible NAV
POD
POD
2nd Phase

Source: Credit Suisse estimates

Source: Credit Suisse estimates

Figure 19: NAV sensitivity to crude price changes

Crude Assumptions US$/bbl
Risked NAV
Scts/share
Unrisked NAV
Scts/share

95
48
100

85
42
89

CS assumptions
40
83

75
35
76

65
28
61

55
18
42

45
0.2
8.9

Source: Credit Suisse estimates. CS' crude assumptions are US$75.3/bbl in 2015, US$80/bbl in 2016-19
and US$85/bbl long-term.

Ammunition in a soft-crude environment is quality assets. The stock price of RH

Petrogas had previously moved with corporate events, mostly driven by market euphoria
around the oil and gas business and Chinese oil consumption. The bullish investor
sentiments worked in a high oil price environment. However, with low oil prices, investors
will be more selective, looking for companies with strong asset base and execution. While
the company is growing its production at the Fuyu-1 Block, it will also need other assets to
replace production, which may cease at Basin and Island PSCs if their licences are not
extended. We believe that the company will be looking out for possible minor acquisitions
in the market place to boost its portfolio. The Chinese block is a likely one-off opportunity
for RH Petrogas as conventional onshore licences in China have been harder to come by.
Southeast Asia will most likely remain RH Petrogas' main area of focus.

Minor acquisition in the future

is possible as the company
looks to boost its portfolio

RH Petrogas Limited
(RHPG.SI / RHP SP)

12

14 January 2015

Figure 20: RH Petrogas stock price movement to key corporate events

1.10 S$/share
27 Apr 2009:
Purchased Fuyu 1 Block
(Exploration, China)
1.00
3 Dec 2009:
Purchased West Belida PSC
(Exploration, Indonesia)

0.90
0.80 Capital raising &
Chinese
Ministry's
0.70 verification of
resources at
Fuyu 1 Block
0.60

Disposal of
electronics business
to focus solely on
E&P

Capital raising &

Exploration drilling
at Island and Basin
PSCs

20 Sep 2010:
Purchased Basin & Island PSCs
from Pearl

11 Dec 2012:
Seismic option on Block M-1
(Ceased, Myanmar)

6 Sep 2010:
Purchased Basin & Island PSCs
from Lundin
(Producing, Indonesia)

0.50
0.40
0.30
Apr-09

Rumoured
takeover offer

Aug-09 Dec-09

Apr-10

Aug-10 Dec-10

Apr-11

Aug-11 Dec-11

6 Dec 2012:
Entered into SK331 PSC
(Exploration, Malaysia)
Apr-12

Aug-12 Dec-12

Apr-13

Aug-13 Dec-13

16 Oct 2014:
ODP approval
for Fuyu 1 Block
from NDRC

Apr-14

Aug-14 Dec-14

Source: Bloomberg, Company data, Credit Suisse estimates up to 13 Jan 2015

Figure 21: EV/2P multiple of E&Ps with SEA assetsRH Petrogas is trading above global median

Source: Company data, Bloomberg, Credit Suisse estimates as on 13 Jan 2015

RH Petrogas Limited
(RHPG.SI / RHP SP)

13

14 January 2015

Figure 22: EV/(2P+2C) multiple of E&Ps with SEA assetsRHP gas trading below global median

Source: Company data, Credit Suisse estimates, Credit Suisse estimates as on 13 Jan 2015

Figure 23: PSC assumptions for field valuations

Basin
Realised prices:
Discount to Brent
3%
Volume
2P reserves
Govt levies:
First tranche petroleum
20%
VAT
Royalty
Special oil levy
Cost oil cap
100% of net revenue
Profit oil - govt share
70%
Profit gas - govt share
46%
DMO price
15% of Brent
DMO quantity
25% *profit oil-contractor share*prodn
Income tax
44%

Island

Fuyu-1

3%
2P reserves

15%
2P reserves

20%
100% of net revenue
60%
42%
US$0.20/bbl
25% *profit oil-contractor share*prodn
48%

5%
0-12.5%
0-40%
65% of gross revenue
51%
25%

Source: Credit Suisse estimates

RH Petrogas Limited
(RHPG.SI / RHP SP)

14

14 January 2015

Financials: Adapting to a new crude

environment
New crude environment for RH Petrogas. The company previously operated in a
US$100/bbl crude environment. For a young E&P, it has maintained a healthy earnings
track record except for a goodwill and exploration write-off in 2013. Figure 24 is an
earnings sensitivity table on the company in a less certain oil price environment. Though
earnings risk is going negative, EBITDA breaks even at about US$47/bbl.
Figure 24: RH Petrogas' earnings sensitivity table
Crude Assumptions
2015 EPS
2016 EPS
2017 EPS

US$/bbl
UScts
UScts
UScts

95
0.8
0.9
1.6

85
0.4
0.6
1.1

CS assumptions
(0.1)
0.4
0.9

75
(0.1)
0.2
0.6

65
(0.7)
(0.1)
0.1

55
(1.4)
(0.5)
(0.4)

45
(2.9)
(1.3)
(1.2)

Source: Credit Suisse estimates. CS' crude assumptions are US$75.3/bbl in 2015, US$80/bbl in 2016-19
and US$85/bbl long-term

Figure 25: RH Petrogas' EBITDA sensitivity table

Crude Assumptions
2015 EBITDA
2016 EBITDA
2017 EBITDA

US$/bbl
US$'m
US$'m
US$'m

95
24.8
32.0
43.7

85
20.7
26.8
36.5

CS assumptions
16.6
24.2
32.9

75
16.5
21.7
29.3

65
12.4
16.5
22.1

55
8.3
11.3
14.8

45
(2.0)
(1.0)
2.3

Source: Credit Suisse estimates. CS' crude assumptions are US$75.3/bbl in 2015, US$80/bbl in 2016-19
and US$85/bbl long-term

Capex will taper off post 2015 as Fuyu-1 block is low cost. RH Petrogas' capital
expenditure should reach a peak of c.US$40 mn in 2015 and ease off in the years after
based on their existing portfolio. The bulk of 2015 capex will be US$20 mn net to RH
Petrogas on the six-well development programme in the Basin PSC. At the moment, the
company does not have plans to invest further in the block. An estimated US$6 mn will be
spent on its 40-well drilling plan in the Fuyu-1 Block in 2015. RH Petrogas' back-end
loaded drilling programme in Fuyu-1 is sensible as it gives them time to test out any
teething issues on their first operatorship and gives ample time to raise development
funding, if necessary. Exploration related expenses will mostly be focused on SK331 PSC
in Sarawak estimated at US$10.2 mn for drilling one well in 2015.

Capital spending slows down

after 2015, based on current
plan, until new development
projects are injected

Figure 26: RH Petrogas' capital expenditure requirements based on existing portfolio

60
US$m
50

40

30

20

10

2010A

2011A

2012A

2013A

2014

2015

2016

2017

2018

2019

Source: Company data, Credit Suisse estimates

RH Petrogas Limited
(RHPG.SI / RHP SP)

15

14 January 2015

Internal funding may be able to sustain the status quo capex plan. RH Petrogas ended
3Q2014 with cash in hand of US$29 mn. In October 2013, RH Petrogas raised equity funding
of S$70.3 mn net (priced at S$0.63/share) for exploration, development and production
expenditure at Basin and Island PSCs and S$41.6 mn net (priced at S$0.80/share) in
September 2009 for acquisition of Kingworld Resources and E&A capital expenses at the
Fuyu-1 Block. RH Petrogas' 2015 capital expenditure plan is estimated at US$42 mn mainly for
a six-well development drilling programme in Basin PSC, Fuyu-1 development and SK331
exploration. If there are plans to develop Koi and TBC in Island PSC and also make
acquisitions to augment its current portfolio, RH Petrogas will need to raise more capital.
Figure 27: Leverage ratios of RH Petrogas vs peers
80%
70%

67%

65%

60%
50%
38%

40%
30%

25%
19%

20%
10%

3%

0%

Net Debt / (Net Debt + Equity)

Total Debt / (Total Debt + Equity)

Linc

Kris

RHP

Source: Company data

RH Petrogas Limited
(RHPG.SI / RHP SP)

16

14 January 2015

Investment Risks
Crude and gas price risk
As RH Petrogas' production is predominantly oil, the uncertainty in oil price will impact its
near-term earnings. In the past five years, the company has operated in a US$100/bbl oil
environment. Going forward, there will be less certainty on oil prices.
Executive/development risk
RH Petrogas is the operator of the Fuyu-1 Block. It is first time that the company is playing the
role of an operator in a block moving from development to production. This block accounts for
about two-third of the total asset value of the company, and hence the Fuyu-1 Block is critical
to the success of the company. As the company moves into the development phase at the
Fuyu-1 block, the CEO's over 35 years of E&P experience (of which seven years were spent in
China) are brought to the fore on making Fuyu-1 a success.
Regulatory and political risk
While China is a land of opportunities from a resource and consumption perspective, any
evolving regime is still capricious. There remains commercialisation uncertainty in 2C
contingency resources in the Fuyu-1 block until the company receives a final ODP
approval for Phase 2 development.
PSC expiry
Basin and Island PSCs have been the sole contributors to the production and revenues of the
company. With their PSC expiration approaching in 2020, RH Petrogas needs to grow new
sources of production and revenues. With the significant 2C contingency resources residing in
these two PSCs, valuation associated with these are at a risk of being eroded over time.
Exploration risk
All E&P companies are subject to exploration risk. RH Petrogas had written off
unsuccessful exploration expenses of over US$30 mn in 2013 in the Basin and Island
PSCs. We believe that the company will be cautious with exploration expenditure in
SK331 Malaysia and West Belida in Indonesia where they hold operatorship.
Organic vs Inorganic growth
RH Petrogas has had a stable portfolio in the last five years. There were two announced
attempts at growing its assets, the SK331 PSC in Malaysia and Block M-1 in Myanmar, which
the company decided not to farm into. The selection for assets for future growth and how the
newly appointed CEO will chart the future course of the company will be interesting to see.

RH Petrogas Limited
(RHPG.SI / RHP SP)

17

RH Petrogas Limited

(RHPG.SI / RHP SP)

Figure 28: Valuation summary of companies with SEA assets

Companies

Tickers

Price

Market Cap

Net Debt

EBITDA

Debt
/
Capit
al

EV /
EBITDA
(Y=0)

EV /
EBITDA
(Y+1)

PE
(Y=0)

PE
(Y+1)

PB
(Y=0)

PB
(Y+1)

Price-to
Sales
(Y=0)

Price-to
Sales
(Y+1)

(US$'mn)

(US$'mn)

(US$'mn)

(x)

(x)

(x)

(x)

(x)

(x)

(x)

(x)

(x)

Enterpris
e Value
13-Jan-15

(LC)

(US$'mn)

Singapore
KrisEnergy

KRIS SP Equity

0.65

507

654

(129)

28

20

32.8

28.9

na

28.4

1.1

1.2

3.8

5.8

Linc Energy

LNC SP Equity

0.64

281

682

290

(4)

52

na

6.1

na

na

0.7

0.7

2.2

1.2

RH Petrogas

RHP SP Equity
RMBA SP
Equity

0.39

212

222

(5)

(16)

21

na

14.2

na

32.1

1.3

na

2.4

2.1

Ramba Energy

0.31

88

126

(8)

13

na

na

na

na

1.5

na

1.5

na

Interra Resources

ITRR SP Equity

0.16

55

51

(10)

27

3.3

na

na

na

0.7

na

0.9

na

Benakat Integra
PT Energi Mega
Persada

BIPI IJ Equity

118

342

981

662

138

60

na

na

na

na

0.7

na

1.3

na

ENRG IJ Equity

110

390

883

578

462

45

1.8

na

na

na

0.4

na

0.5

na

PT Medco Energi

MEDC IJ Equity

3,195

845

1,500

383

349

50

4.8

4.7

36.3

12.1

0.8

0.9

1.0

1.1

AWE

AWE AU Equity

1.24

533

499

(34)

124

5.9

4.7

155.0

1,240.0

0.7

0.7

2.0

2.3

Carnarvon Petroleum

CVN AU Equity

0.14

113

97

(16)

na

10.1

35.0

na

1.5

1.0

6.0

7.1

Cue Energy

CUE AU Equity

0.09

49

15

(33)

4.3

1.0

8.5

7.1

0.5

na

1.7

1.4

Horizon Oil

HZN AU Equity

0.13

138

245

106

71

46

na

2.9

5.9

7.6

0.6

0.6

0.9

1.0

Lion Energy

LIO AU Equity

0.15

12

(5)

(1)

na

na

na

na

1.1

na

1.3

na

Nido Petroleum

NDO AU Equity

0.03

47

31

(21)

10

1.7

1.2

na

na

0.5

0.5

0.7

0.8

Otto Energy

OEL AU Equity

0.10

90

82

(8)

17

5.1

4.5

4.1

7.0

1.0

na

1.5

1.1

Tap Oil

TAP AU Equity

0.38

76

89

(36)

(36)

na

na

na

3.0

0.6

0.6

3.6

2.6

PTTEP TB
Equity

108

13,006

13,704

1,666

4,905

26

3.7

2.6

7.4

8.5

1.0

1.0

1.7

1.7

Premier Oil

PMO LN Equity

137

1,058

2,736

1,440

911

47

4.9

2.7

3.7

7.9

0.5

0.5

0.7

0.7

SOCO

SIA LN Equity

254

1,278

994

(210)

471

5.0

2.5

8.5

12.5

1.1

0.3

2.4

2.7

Bengal Energy

BNG CN Equity

0.21

11

16

16

4.2

na

na

na

0.3

na

0.8

na

Niko Resources

NKO CN Equity

0.25

20

253

316

(129)

62

na

na

na

na

0.1

na

0.1

na

Pan Orient

POE CN Equity

1.73

82

70

(35)

17

5.8

na

na

na

0.4

na

3.5

na

Indonesia

Australia

Thailand
PTTEP
International

Canada

18

14 January 2015

Source: Bloomberg, Credit Suisse estimates as at 13 Jan 2015

14 January 2015

Company Financial Statements

Figure 29: RH PetrogasIncome Statement
Year end 31 Dec (US$'000)
2011A
2012A
Revenue
89,424
86,376
Cost of sales
(56,810)
(54,179)
Gross profit
32,614
32,197

2013A
86,393
(58,720)
27,673

2014
74,439
(55,239)
19,200

2015
76,087
(58,565)
17,522

2016
87,295
(62,904)
24,391

Administrative expenses
Other expenses
Other income
Finance costs
Profit (Loss) before tax
Income tax
Profit / (Loss)

(5,329)
(7,293)
599
(1,776)

(5,319)
(8,487)
39
(2,222)

(6,114)
(82,595)
1,442
(3,340)

(6,000)
(24,000)
51
(2,944)

(8,000)
(5,000)
100
(5,291)

(8,000)
(5,000)
100
(5,670)

18,815
(15,883)
2,932

16,208
(10,105)
6,103

(62,934)
(2,949)
(65,883)

(13,693)
(4,700)
(18,393)

(669)
(67)
(736)

5,821
(2,911)
2,911

Source: Company data, Credit Suisse estimates

RH Petrogas Limited
(RHPG.SI / RHP SP)

19

14 January 2015

Figure 30: RH PetrogasBalance Sheet

Year end 31 Dec (US$'000)
2011A
2012A

Current Assets
Cash & ST deposits
Inventories
Trade & other receivables
Derivatives
Others
Total current assets

2013A

2014

2015

2016

23,623
5,043
5,535
945
35,146

28,615
6,494
8,816
17
539
44,481

52,448
953
34,821
1
621
88,844

19,367
2,039
24,473
500
46,379

26,026
2,085
25,015
500
53,625

27,293
2,392
28,700
500
58,885

Non-current Assets
Oil & gas properties
Exploration & evaluation assets
Other PPE
Goodwill
Total non-current assets

64,636
53,449
1,187
139,872
259,144

67,657
66,571
911
139,872
275,011

73,455
59,519
1,593
111,115
245,682

86,013
59,124
1,543
90,641
237,321

106,412
69,124
2,043
90,641
268,220

108,222
74,124
2,543
90,641
275,530

Total assets

294,290

319,492

334,526

283,700

321,846

334,415

1,387
2,425
49,152
3,194
56,158

5,280
2,798
49,403
488
57,969

13,680
2,190
64,079
257
80,206

13,680
2,000
42,375
150
58,205

13,680
2,000
44,927
150
60,757

2,000
48,255
150
50,405

Non-current liabilities
Loans & borrowings
Provisions
Deferred tax liabilities
Others
Total non-current liabilities

78,628
3,046
37,619
9,011
128,304

37,006
2,371
39,817
1,301
80,495

33,526
4,197
38,066
1,301
77,090

19,846
5,000
38,000
1,301
64,147

56,166
5,000
38,000
1,301
100,467

76,166
5,000
38,000
1,301
120,467

Total liabilities
Net assets

184,462
109,828

138,464
181,028

157,296
177,230

122,352
161,348

161,224
160,622

170,872
163,543

Equity
Share capital
Reserves
Non-controlling interest
Total equity

138,201
(28,373)
109,828

199,640
(18,612)
181,028

257,650
(80,420)
177,230

258,160
(98,803)
1,991
161,348

258,160
(99,529)
1,991
160,622

258,160
(96,608)
1,991
163,543

Current liabilities
Loans & borrowings
Income tax payable
Trade & other payables
Derivatives
Total current liabilities

Source: Company data, Credit Suisse estimates

RH Petrogas Limited
(RHPG.SI / RHP SP)

20

14 January 2015

Figure 31: RH PetrogasCash Flow Statement

Year end 31 Dec (US$'000)
Operating Activities
Pretax profit/(loss)
Allowance for doubtful trade receivables
Allowance for inventory obsolescence
Allowance for doubtful debt
Amortisation of upfront fee paid for loans granted
Depletion & amortisation of oil & gas properties
Depreciation of other plant & equipment
Realisation of foreign ccy tx on dissolution of subsidiaries
Interest on bank loans
Interest income from bank deposits
Impairment loss on goodwill
Loss on disposal of other plant & equipment
Net FV (gain)/loss on derivatives
Share-based payments
Unwinding of discount on decommissioning provisions
Unsuccessful exploration & evaluation expenditure
Cancellation fee/write off of upfront fees paid on bank loans refinancing
Others
OCF before changes in WC
Changes in working capital:
Decrease/(increase) in inventories
Increase in trade and other receivables
Increase in trade and other payables
CF from operations
Income tax paid
Interest paid
Interest received
Net CF from operating activities

2011A

2012A

2013A

2014

2015

2016

18,815
469
264
12,975
434
1,472
(9)
13
112
758
304
35,607

16,208
333
456
220
10,389
437
1,811
(19)
53
1,078
559
411
1,502
789
34,227

(62,934)
4,356
393
10,531
422
4,557
2,563
(30)
28,757
86
965
777
44,213
34,656

(13,693)
(100)
11,048
450
1,844
(12)
20,474
5
100
120
1,100
1,266
(7,571)
15,031

(669)
(100)
11,516
500
4,191
(16)
120
1,100
(2,220)
14,423

5,821
(100)
12,273
500
4,570
(16)
120
1,100
(2,220)
22,048

2,280
20,477
(15,590)
42,774
(10,621)
(1,472)
9
30,690

(1,905)
(3,570)
(242)
28,510
(7,539)
(1,811)
19
19,179

1,193
(26,465)
10,585
19,969
(5,302)
(2,563)
30
12,134

(1,086)
10,348
(21,704)
2,589
(4,700)
(1,844)
12
(3,944)

(45)
(542)
2,551
16,387
(67)
(4,191)
16
12,145

(307)
(3,685)
3,328
21,384
(2,911)
(4,570)
16
13,920

Investing activities
Additions to oil and gas properties
Additions to exploration and evaluation assets
Cash call contributions for asset retirement obligations
Proceeds from disposal of subsidiary
Purchase of other plant and equipment
Net CF used in investing activities

(12,849)
(15,495)
(656)
(60)
(29,060)

(10,810)
(17,169)
(1,087)
(174)
(29,240)

(19,407)
(28,578)
(911)
(1,083)
(49,979)

(13,211)
(8,000)
(900)
2,786
(400)
(19,725)

(29,916)
(10,000)
(900)
(1,000)
(41,816)

(12,082)
(5,000)
(900)
(1,000)
(18,982)

Financing activities
Increase in charge over project accounts
Net (decrease)/increase in amounts due to related parties
Decrease on short-term deposit pledged
Proceeds from loans and borrowings
Loan from non-controlling interest
Proceeds from issuance of new shares
Proceeds from exercise of employee share options
Purchase of crude oil commodity options
Repayment of loans and borrowings
Repayment of advances from a corporate shareholder
Share issuance expenses
Upfront fee paid for loans granted
Net cash from financing activities

(100)
(10,000)
31,099
(4,000)
16,999

(1,767)
874
44,486
(28,700)
(93)
(645)
14,155

884
10,900
58,199
940
(300)
(5,980)
(2,093)
62,550

3,503
510
292
(48)
(13,680)
(9,423)

50,000
(13,680)
36,320

20,000
(13,680)
6,320

18,629
(661)
2,897
20,865

4,094
5
20,865
24,964

24,705
12
24,964
49,681

(33,091)
10
49,681
16,600

6,649
10
16,600
23,259

1,258
10
23,259
24,526

Net increase in cash & cash equivalents

Effect of exchange rate changes
Beginning
End

Source: Company data, Credit Suisse estimates

RH Petrogas Limited
(RHPG.SI / RHP SP)

21

14 January 2015

Appendix 1: Management profiles

Executive Chairman: Mr Tan Sri Datuk Sir Tiong Hiew King
Mr Tiong was appointed to the company as Executive Chairman and Executive Director
since March 2008. He is the executive Chairman of the Rimbunan Hijau Group (RH
Group), which is a large Malaysian conglomerate covering timber, oil palm plantations, oil
and gas, media and publishing, mining, fishery and manufacturing businesses. He is also
the Chairman of Media Chinese International Limited, a publicly listed media company in
both Hong Kong and Malaysia, which publishes five Chinese language newspapers. Mr
Tiong was conferred the Knight Commander of the Most Excellent Order of the British
Empire by Queen Elizabeth II in June 2009 and awarded the 'Malaysian Business
Leadership Award 2010The Lifetime Achievement award' in recognition of his
entrepreneurship success.
Executive Director: Mr Dato Tiong Ik King
Mr Tiong was the Executive Chairman of the company since March 2005 and was redesignated as Executive Director in March 2008. He is the younger brother of the
Executive Chairman. He is also an Executive Director of Media Chinese International. He
was trained as a physician with degrees from the National University of Singapore and UK
Royal College of Physicians.
Group CEO: Mr Francis Chang Cheng-Hsing
Mr Chang was appointed as the Group CEO of RH Petrogas on 1 January 2014. He had
joined RH Petrogas as Vice President of Exploration and Production in 2010. He has more
than 35 years of experience in the oil and gas industry, with US-based major and
independent oil companies such as Texas American Resources, Kerr McGee/Anadarko
Petroleum, Burlington Resources and Amoco working on assets in five continents. Before
joining RH Petrogas, he served as Vice President for International Operations at GNT
International and Chief Geophysicist for Anadarko Petroleum based in Beijing, China for
seven years. He was trained in geology from the National Taiwan University and attended
graduate school in Geophysics at Harvard University.

RH Petrogas Limited
(RHPG.SI / RHP SP)

22

14 January 2015

Companies Mentioned (Price as of 13-Jan-2015)

China National Petroleum Corporation (Unlisted)
Giken Sakata (GISK.SI, S$0.25)
KrisEnergy Ltd (KRIS.SI, S$0.645)
Linc Energy Ltd (LINC.SI, S$0.64)
Pertamina (Unlisted)
PetroChina (0857.HK, HK$8.79)
RH Petrogas Limited (RHPG.SI, S$0.38[V])

Disclosure Appendix
Important Global Disclosures
David Hewitt and Shew Heng Tan, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed
in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation
was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's
total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts stock rating are defined as follows:

Outperform (O) : The stocks total return is expected to outperform the relevant benchmark*over the next 12 months.
Neutral (N) : The stocks total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stocks total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stocks total return relative to the analyst's coverage universe which
consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and
Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stocks total
return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the
most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings
are based on a stocks total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian
ratings were based on (1) a stocks absolute total return potential to its current share price and (2) the relative attractiv eness of a stocks total return potential within
an analysts coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and
a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +1015% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stocks total return
relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,
including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other
circumstances.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts sector weightings are distinct from analysts stock ratings and are based on the analysts expectations for the fundamentals and/or
valuation of the sector* relative to the groups historic fundamentals and/or valuation:
Overweight : The analysts expectation for the sectors fundamentals and/or valuation is favorable over the next 12 months.
Market Weight : The analysts expectation for the sectors fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analysts expectation for the sectors fundamentals and/or valuation is cautious over the next 12 months.
*An analysts coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cov er multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating

Versus universe (%)

Of which banking clients (%)

Outperform/Buy*
46%
(53% banking clients)
Neutral/Hold*
38%
(50% banking clients)
Underperform/Sell*
14%
(43% banking clients)
Restricted
2%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely
correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to
definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.

RH Petrogas Limited
(RHPG.SI / RHP SP)

23

14 January 2015

Credit Suisses policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the
market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer
to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-andanalytics/disclaimer/managing_conflicts_disclaimer.html
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot
be used, by any taxpayer for the purposes of avoiding any penalties.
Price Target: (12 months) for RH Petrogas Limited (RHPG.SI)
Method: Our target price of S$0.40/share for RH Petrogas is based on individual run-out discounted cash flow (DCF) model for each asset using
assumptions published in the initiation report. We first derive the unrisked valuation and then assign a probability based on our risking
methodology to reflect the asset's current stage of development to arrive at a risked valuation. From the risked asset valuation, we remove
net debt to arrive at our target price of S$0.40/share for RH Petrogas.
Risk:

Risks that could impede achievement of our S$0.40 target price for RH Petrogas include: (1) Uncertainty in crude oil price movement. (2)
Successfully bringing Phase 1 of Fuyu-1 Block (China) development into from development into commercial production. (3) Obtaining final
ODP approval on Phase 2 of Fuyu-1 Block. (4) Developing or acquiring assets in time to replace the value which may be eroded upon
expiry of Basin and Island PSCs (Indonesia) in 2020.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the
target price method and risk sections.
See the Companies Mentioned section for full company names

The subject company (RHPG.SI) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit
Suisse.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (RHPG.SI) within the next 3
months.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (RHPG.SI) within the past 12
months
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;
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Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not
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As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
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Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important
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NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a
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Credit Suisse AG, Singapore Branch ....................................................................................................................... David Hewitt ; Shew Heng Tan
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.creditsuisse.com/disclosures or call +1 (877) 291-2683.

RH Petrogas Limited
(RHPG.SI / RHP SP)

24

14 January 2015

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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can
be eroded due to changes in redemption amounts. Care is required when investing in such instruments.
When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS
as a seller, you will be requested to pay the purchase price only.

RH Petrogas Limited
(RHPG.SI / RHP SP)

OG0634

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