Excerpts from analysts' report

Credit Suisse analysts: Shew Heng Tan & David Hewitt

■ We initiate coverage on RH Petrogas Limited with a NEUTRAL rating and S$0.40 target price. 

■ Fuyu-1 Block (China) in the spotlight. The value of the stock is dominated by the Chinese block, Fuyu-1, which is under development. Fuyu-1 sits in the same basin as China's largest onshore oil field, Da Qing. In October 2014, the company obtained final approval from NDRC to produce an estimated 7.2 mm bbl (21%), which leaves 26.9 mm bbl (79%) of oil awaiting the next phase of approval from CNPC and NDRC.

Yet to decide on licence extensions for Basin and Island PSCs (Indonesia). Basin and Island PSCs are two producing blocks in Indonesia. Much value resides in undeveloped resources, which risk being eroded upon licence expiry in 2020.

francischang11.14Francis Chang, CEO of RH Petrogas. He has more than 35 years of experience in the oil & gas industry having worked for a number of US-based oil majors in five continents. NextInsight file photoThere is a six-well development drilling campaign scheduled in the Basin PSC in 2015 to maintain revenue on cost recovery basis.

Feasibility studies are ongoing for the Koi and TBC fields in Island PSC. The window for development is limited unless there are licence extensions for the PSCs.  

Triple building blocks to valuation. The three keys to growing NAV in the next 24 months are:
(1) commercial production from Fuyu-1,
(2) finalisation of development plans for Island PSC and
(3) final approval for Phase 2 development of Fuyu-1.

Mr Francis Chang, an industry veteran with over 35 years of experience, was appointed CEO in January 2014. It will be interesting to see how he will bring the company forward, with the possibility of minor acquisitions to boost its portfolio.

Key risks. RH Petrogas' performance as operator will likely influence how soon ODP for the next phase of development at Fuyu-1 will come forth. The company is operator and it is their first block moving from development to production.

Recent story: RH PETROGAS: Completes drilling in China field, ready to start production

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