Rex Oil Discovery In Second Well Drilling In Oman

Rex is principally involved in the business of oil and gas exploration and production. Through the use of Rex Technologies, a set of proprietary and innovative exploration technologies, Rex is able to increase the possibility of finding hydrocarbon reserves and reduce the duration, risks and costs involved in the exploration process

VALUATION
 Maintain BUY and target price of S$1.27.
 Price catalysts for the stock include new concession wins and oil finds

WHAT’S NEW
 Oil find in second well drilling in Oman. Rex announced today that it has completed drilling of its second exploration well in Oman. Hydrocarbons were discovered in several formations with good oil sample extracted. The well will undergo data acquisition before setting the completion for testing. While we are positive on the oil shows at this junction, further testing will need to be done before it could be determined if the oil resources are significant enough to be commercially viable. According to estimates from Hibiscus Petroleum (from its earlier presentation slides), GA-South is estimated to hold an unrisked best estimate recoverable prospective resource of 31.5 mmbbl (9.8mmbbl net to Rex based on its 31.2% effective working interest).

 New concessions rolling in. On 22 January, Rex also announced the award of five
new offshore licenses in the 2013 Awards in the Predefined Areas (APA 2013) to its 65%-owned subsidiary Lime Petroleum. With the award of the licenses, Rex has grown its portfolio to 21 licenses internationally.

Our View
 We are upbeat on the oil find in Oman as it will not only generate profit, if resources are found commercially viable, but also further validates Rex’s claims on the effectiveness of its technology. With its proprietary Rex Technology, Rex has also displayed its ability to constantly secure new concessions with its most recent win in the APA 2013.

 Stock implications: With the slew of positive newsflow, we believe share price is poised for a recovery after it was heavily beaten down on negative sentiment in the broader market. Prices have also seemed to have stabilised near S$0.53/54.

 Strong newsflow ahead. We expect newsflow from the company to be strong this year with Rex’s plans to start its drilling campaign in other concessions. Drilling campaign for Trinidad and Tobago is expected to commence in 1Q2014.