Hi all
Roc in my view is currently trading well below fair value. My reasons outlined below
- last year they had hedged in the mid 60s over 850 k barrels of production , this translates to in today's oil price to an additional 45 million in cash flow
- the BMG project is costing about 30 million ( rocs share ) to decommission. Spending on this will end this quarter
The chimese fields seem to contain reserve upside
Beibu will add 2900-4000 in production to roc so even with productiom depletion of existing fields , oil prod should be 9000 plus next year
- company has yet to receive about 15-20 million for divestments further increasing cash balance . Furthermore roc has a free carrried well in Africa with a good ownership 20 percent , which may be called/ bought for a payment of another 16 million USD by the operator per spud
The Malaysian contract in which Roc will mostly project finance has a protection of capital spent clause where Petronas will reimburse RoC even if project is uncommercial
Rocs ave valuation across the 5 analysts that cover Roc is 54 cents with most being very conservative on their assumptions ranging from the assumption of zero exploration success over the next few years , to minimal value for Malaysian contract , to no value for zhanghai assets until production life is confirmed. The average valaution is impacted by the UBS valaution which assumes an oil price of mid80s this year and mid 70s next year and OPEX in the 20s ( yeah right) where a realistic oil price of 100 plus and a sub 20 opex is used valuations are in excess of 60 amd as high as 68and. and these valautions as I mentioned before use conservative assumptions
Roc has transformed over the last 18 months , however due to its history I believe it has not been related as many probably need to see the turn around. It is trading at a very low EV per barrel of 2 p reserves of approx 10 dollars, and a 2013 pe of 4.5. I ofcourse am an oil bull so I expect Roc will do even better than 68 cents as my view is oil will ave 120 plus over next couple of years. Most producers have appreciated a fair bit recently , ROC has yet to be rerated - when it happens which I believe is soon I believe we will see a move into the 40s very quickly and the 50s soon after
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