Overview of RH Petrogas
RH Petrogas is an upstream oil and gas company operating in Indonesia with two producing assets. The company boasts a robust 2P oil and gas reserve portfolio, totaling 27.8mmboe with 87% of its reserves in oil. Despite a slight drop in daily production to 4,910 boe/day in 2024, its strong cost control measures have yielded impressive financial results. With an emphasis on maintaining low production costs and capitalizing on its significant cash reserves, RH Petrogas is strategically positioned for future growth.
Key Financial Data and Market Metrics
RH Petrogas trades in the Energy sector with a Bloomberg ticker of RHP SP. The company has 835.2 million shares issued, a market capitalization of S\$130.3 million (US\$97.0 million), and an average daily turnover of US\$1.1 million over 3 months. Despite being volatile, its share performance reflects its underlying fundamentals, with the 52-week price ranging from S\$0.125 to S\$0.215. As of the report’s publication, the share price stood at S\$0.156, with a target price raised to S\$0.254—implying an enticing upside of +62.8% for investors.
Financial Performance and Results for 2024
Strong Cost Control in a Challenging Environment
In 2024, lower oil prices and a mild drop in production impacted revenue, which slightly dipped by 1.7% to US\$92.5 million. However, operational excellence was evident as the company achieved a fourfold increase in PATMI (Profit After Tax Minority Interest) to US\$14.6 million. This performance was underpinned by a 16% year-on-year reduction in production costs – lowering the cost per barrel to US\$31.40, well below the guidance of around US\$33/bbl. Coupled with a 49% drop in depreciation, depletion, and amortisation expenses, the company generated a significant boost in EBITDA margins, resulting in EBITDA of US\$41.1 million.
Detailed 2024 Financial Breakdown
The key financials for 2024 are as follows:
- Brent Oil Price: US\$79.86/bbl (down 2.8% year-on-year)
- Revenue: US\$92.5 million
- Gross Profit: US\$35.9 million (gross margin improved from 27.7% to 38.8%)
- EBITDA: US\$41.1 million (a 13.9% increase)
- Pre-tax Profit: US\$31.7 million (an impressive 508.4% jump)
- PATMI: US\$14.6 million (up 460.9%)
- Free Cashflow: US\$8.3 million (up 64.8%)
The results underscore the company’s operational efficiency and ability to manage costs even in an environment of lower production and softer oil prices.
Exploration and Future Growth Initiatives
Upcoming Drilling Campaigns
Looking ahead to 2025, RH Petrogas has planned significant exploration activities. The company will drill two onshore wells in the Arar area of its Salawati block:
- NW Klagagi Well: Targeting 55bcf of low-risk gas—with the potential for an additional deeper segment estimated at 120bcf of gas.
- Karim Well: Aiming to target approximately 10mmbbl of recoverable oil.
If both wells are successful, RH Petrogas could boost its reserves by an additional 39mmboe, which translates into a 1.3-times increase over its current 2P reserves of 29.9mmboe. These exploration activities are expected to play a critical role in driving future earnings upward, particularly if oil production strengthens or if oil prices see a rebound.
Operational and Financial Impact
In addition to the planned exploration, the successful commencement of production from the Piarawi-1 well—though modest at 70 barrels per day—has already generated positive momentum. Given the company’s strong cash position, with over 60% of its market cap held in cash, RH Petrogas possesses ample liquidity to fund these capital-intensive exploration programs. Detailed cost estimates indicate that the NW Klagagi well is expected to cost US\$9.0 million on a gross basis, while the Karim well should cost around US\$5.6 million.
Earnings Revisions, Upside Potential, and Investment Valuation
Earnings Forecast Upgrades
Enhanced cost control measures have led to upward revisions in earnings forecasts for 2025-26 by 12-54%. The company’s production cost estimates have been revised down to about US\$32/bbl from the previous US\$38/bbl estimates. These revised estimates have mitigated the impact of the lower oil price assumptions (US\$70/bbl for 2025 and US\$68/bbl for 2026), allowing for more robust earnings realizations if the company delivers stronger production or benefits from higher oil prices.
Valuation and Investment Thesis
Based on a Sum-of-the-Parts (SOTP) valuation method, RH Petrogas’s target price is set at S\$0.254. The detailed net present value analysis indicates that on an ex-cash basis, the company’s 2025 forward PE ratio stands at an attractive 3.2x. The asset valuation breakdown includes:
- Production & Development Assets: Valued at US\$50.6 million contributing S\$68.2 million based on a low valuation per barrel.
- 2C Oil and Gas Resources: Adding another significant value, culminating in a grand total valuation of US\$157.1 million and an estimate of S\$0.254 per share.
Clearly, the low-cost structure, significant cash reserves (US\$58.2m, equivalent to S\$78.4m), and promising exploration upside underpin the Buy rating maintained on RH Petrogas. The report also highlights that RH Petrogas is favored over Rex International for its superior oil and gas production management, better operational track record, a higher reserves-to-production ratio, more quality assets, and robust governance practices.
Comparative Analysis: RH Petrogas vs. Rex International
While the detailed deep dive is primarily centered on RH Petrogas, the report also offers a side-by-side comparison with peer Rex International. Key points include:
- Production: Rex International reported significantly higher production levels at 11,042 boe/day compared to RH Petrogas’s 4,910 boe/day.
- Revenue and Profitability: Though Rex International’s revenue (US\$298.9 million) and gross profit (US\$99.1 million) appear larger, RH Petrogas outperforms in terms of gross margin (38.8% vs. 33.2%), EBITDA, and PATMI, with RH Petrogas registering US\$14.6 million PATMI against a negative figure for Rex International.
- Cash Flow and Financing: RH Petrogas generated positive free cash flow of US\$8.3 million alongside maintaining a net cash position, whereas Rex International recorded negative free cash flow and had net financing costs.
This comparative framework reinforces the strategic preference for RH Petrogas, as the company offers a more cost-efficient model, operational reliability, and an attractive exploration-led growth narrative.
Financial Forecasts and Key Metrics
The report provides comprehensive financial forecasts for RH Petrogas covering the period from 2024 to 2027. Highlights include:
- Profit & Loss Forecasts: With declining turnover figures from US\$92.5 million in 2024 to US\$74.1 million in 2027, the EBITDA is also projected to decline gradually from US\$29.3 million to US\$11.5 million. Nevertheless, the company’s disciplined cost control measures have preserved profitability.
- Balance Sheet and Cash Flow: Fixed assets remain stable while the cash position is robust, fluctuating between US\$51.9 million and US\$58.2 million. Operating cash flows, after accounting for capex and other investing activities, support the company’s growth outlook despite a moderating trend by 2027.
- Profitability Metrics: Key ratios such as EBITDA margins, pre-tax margins, and ROE remain healthy, gradually declining from a pre-tax margin of 34.3% in 2024 to 16.0% by 2027, reflecting the evolving market dynamics yet underpinned by strong operational fundamentals.
These forward-looking metrics not only reinforce the strong operational footing of RH Petrogas but also underline its market attractiveness given its low leverage and ample liquidity.
Investment Recommendation and Catalysts
UOB Kay Hian reiterates its Buy rating on RH Petrogas. The following catalysts are highlighted:
- Upcoming Drilling Results: The results from two wells to be drilled in July 2025 are expected to serve as a key share price catalyst, with successful outcomes having the potential to significantly boost the reserves.
- Potential Dividend Payout: There is talk of a potential dividend payout for 2024 which could also add value for shareholders.
- Robust Financial Position: With over 60% of its market capitalization held in cash, RH Petrogas offers a very undemanding ex-cash PE ratio, making it an attractive investment in the current low-cost environment.
The combined factors of superior cost control, robust cash reserves, promising exploration upside, and a disciplined operational strategy collectively support the Buy recommendation and suggest strong potential for future capital appreciation.
Conclusion
In summary, the comprehensive analysis of RH Petrogas reveals a company that has not only managed to weather the challenges of a mild production decline and lower oil prices but also leveraged robust cost control to drive record profitability and EBITDA. With strategic exploration initiatives in 2025 poised to add significant recoverable reserves and a financial structure bolstered by ample cash reserves, RH Petrogas presents an attractive investment proposition. Furthermore, when compared to its peer Rex International, RH Petrogas outshines in nearly every operational and financial metric, making it the preferred choice for investors seeking exposure to the upstream oil and gas segment in Indonesia.
