RH Petrogas

RH Petrogas: Credit Suisse initiated with Neutral and TP $0.40 as it is caught in an ambivalent position with uncertainty in regulatory approval and the crude price plunge. Currently, RHP has five assets – two producing assets in Indonesia (Basin and Island), one asset under development in China (Fuyu-1), and two exploration assets in Indonesia and Malaysia. Basin and Island are profitable, but much of its resources risk becoming undeveloped if its licence is not extended upon expiry in 2020. Fuyu-1, a shallow water block, is low capital intensive and profitable even in the low oil price environment, but RHP is still awaiting final approval from National Development and Reform Commission to develop 79% of the 2C oil reserves in the block. As with most other O&G developers, RHP had been operating with the assumption of an US$100/bbl oil price environment. But with the most recent oil price plunge that caught many by surprise, earnings and cash flow will be impacted.