RH Petrogas

RH Petrogas: OSK-DMG initiates at Buy with TP $1.47. Believes the E&P firm is deeply undervalued, at 37% and 55% discounts to its producing and development assets and risked NPV respectively. Notes RH Petrogas and KrisEnergy have 73m mmboe and 76mmboe respectively of combined 2P + 2C resources, hence the enterprise value of the two should converge. KrisEnergy’s current EV/(2P+2C) is 2.6x that of RH Petrogas. The house sees the following catalysts: i) proving of its resources, ii) M&A, ie. possible takeover bid, iii) potential entry into Myanmar, iv) higher oil prices, v) contracts extension. Adjusted for a potential 20% new share placement to raise US$60m, RH Petrogas should still be worth $1.32 per share. Separately, The Star on Friday reported that Msia-listed Sona Petroleum could buy a stake in RH Petrogas via a share placement while acquiring some of its oil and gas blocks.