rh petrogas 20150115 cs - initiate.pdf

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DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYSTCERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to dobusiness with companies covered in its research reports. As a result, investors should be aware that the Firm may have aconflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor inmaking their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION

Client-Driven Solutions, Insights, and Access

14 January 2015

Asia Pacific/Singapore

Equity Research

Oil & Gas Exploration & Production / Energy

RH Petrogas Limited(RHPG.SI / RHP SP)

INITIATION

Caught in an ambivalent position

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. There 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 minoracquisitions 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.Share price performance

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Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14

Pri ce (LHS) Rebased R el (RHS )

The price relative chart measures performance against the

FTSE STRAITS TIMES IDX which closed at 3333.45 on13/01/15

On 13/01/15 the spot exchange rate was S$1.34/US$1

Performance Over 1M 3M 12MAbsolute (%) 8.5 -23.8 -36.4Relative (%) 7.3 -29.4 -43.1

Financial and valuation metrics

ear 12/13A 12/14E 12/15E 12/16ERevenue (US$ mn) 86.4 73.7 76.1 87.3EBITDAX (US$ mn) 24.3 20.5 16.6 24.2EBIT (US$ mn) -30.9 9.0 4.6 11.5Net profit (US$ mn) -37.1 1.3 -0.7 2.9EPS (CS adj.) (US$) -0.06 0.00 -0.00 0.00Change from previous EPS (%) n.a. n.mConsensus EPS (US$) n.a. -0.01 0.01 0.02EPS growth (%) n.m. n.m. n.m. n.m.P/E (x) -5.0 156.9 -288.1 72.9Dividend yield (%) 0 0 0 0EV/EBITDAX (x) 8.5 11.1 15.4 10.8P/B (x) 1.2 1.3 1.3 1.3ROE (%) -20.7 0.8 -0.5 1.8Net debt/equity (%) net cash 9.1 27.9 30.5Source: Company data, Thomson Reuters, Credit Suisse estimates

Rating NEUTRAL* [V]Price (13 Jan 15, S$) 0.38Target price (S$) 0.40Upside/downside (%) 3.9Mkt cap (S$ mn) 283.1 (US$ 212.0)Enterprise value (US$ mn) 226.68Number of shares (mn) 735.28Free float (%) 33.052-week price range 0.96 - 0.33ADTO - 6M (US$ mn) 3.0*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

Target price is for 12 months.

[V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts

Shew Heng Tan65 6212 3014

[email protected]

David Hewitt

65 6212 [email protected]


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14 January 2015

RH Petrogas Limited

(RHPG.SI / RHP SP) 2

Focus ChartsFigure 1: RH Petrogas: Working interest production

profileFigure 2:Phase 1 drilling campaign and gross production

at Yong Ping oil field, Fuyu-1 Block

-

1.0

2.0

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2010A 2012A 2014 2016 2018 2020 2022

m boe/d

Basin & Island PSC Fuyu 1 Block

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2014 2015 2016 2017 2018 2019 2020 2021 2022

wellsb/d

Wells dri lled per year (RHS) Gross production

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 3:24-month catalyst map Figure 4:Corresponding upside to NAV value based on

24-month catalysts

Sanctioned Projects

Fuyu 1 - Yong Ping First prodn

Fuyu 1 - Later Phase ODP approv al

Assets under appraisal

Koi FEED & submit POD

TBC FEED & submit POD

1H15 2H15 1H16 2H16

40

62

+3.3 +0.8+2.5

+16.2

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20.0

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40.0

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60.0

70.0

Base NAV Fuyu 1-prod Koi -submi tPOD

TBC-submitPOD

Fuyu 1-ODP2nd Phase

Possible NAV

Scts/share

Source: Credit Suisse estimates Source: Credit Suisse estimates

Figure 5:RH PetrogasStock price movement to key corporate events

0.30

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Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14

S$/share27 Apr 2009:Purchased Fuyu 1 Block(Exploration, China)

3 Dec 2009:Purchased West Belida PSC(Exploration, Indonesia)

6 Sep 2010:Purchased Basin & Island PSCsfrom Lundin(Producing, Indonesia)

20 Sep 2010:Purchased Basin & Island PSCsfrom Pearl

6 Dec 2012:Entered into SK331 PSC(Exploration, Malaysia)

11 Dec 2012:Seismic option on Block M-1(Ceased, Myanmar)

Capital raising &Exploration drillingat Island and BasinPSCs

Disposalofelectronics business

to focus solely onE&P

Capital raising &ChineseMinistry's

verification ofresources atFuyu 1 Block

16 Oct 2014:ODP approval

for Fuyu 1 Blockfrom NDRC

Rumouredtakeover offer

Source: Bloomberg, Company data up to 13 Jan 2015


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14 January 2015

RH Petrogas Limited


Investment SummaryCaught in an ambivalent positionWe initiate coverage on RH Petrogas with a NEUTRAL rating and a S$0.40 target price.

The company's portfolio comprises of five assetstwo producing assets in Indonesia, one

asset under development in China and two exploration assets in Indonesia and Malaysia.

The current and upcoming production is predominantly that of oil. RH Petrogas transited tothe oil and gas sector on the Singapore Stock Exchange (SGX) in 2009/10 and benefitted

from investors' euphoria over the sector, which was booming with increasing oil price post

global financial crisis. However, the crude price environment has changed.

Fuyu-1 Block (China) in the spotlightThe value in the stock is largely built on the premise of obtaining a final approval from the

National Development and Reform Commission (NDRC) for the overall development plan

(ODP) on Fuyu-1 Block. Two-third of the total asset value resides in this Block. In October

2014, the company obtained the final approval to produce an estimated 7.2 mm bbl of oil (21%

of 2C contingency resources in the Fuyu-1 Block), which leaves 26.9 mm bbl (79%) of oil

awaiting for the next phase of approval from CNPC and NDRC. The development is low capital

intensive as it requires drilling shallow wells (200300 m). However, the operating cost is

higher as it requires US$10/bbl more to apply the huff and puff technique to bring up heavy oil.

Yet to decide on licence extensions for Basin andIsland PSCs in IndonesiaBasin and Island PSCs are RH Petrogas' two producing blocks in Indonesia. Much of the

value resides in undeveloped resources in the block, which risk being eroded upon licence

expiry in 2020. It is unlikely that the operator of Basin PSC will invest further after a six-

well development drilling campaign in 2015. Island PSC still holds 21.9 mm boe of 2C

contingency resources and has more favourable fiscal terms than Basin PSC. The

operators of Island PSC are making feasibility studies for developments in Koi and TBC

fields. The window for development could be limited unless there is licence extension.

Triple building blocks to valuationThe key building blocks to growing Net Asset Value (NAV) in the next 24 months are (1)

commercial production from the Fuyu-1 Block, (2) finalisation of development plans in

Island PSC and (3) obtaining approval on ODP for the next phase of development in Fuyu-

1 Block from CNPC and NDRC. Mr Francis Chang, an industry veteran with over 35 years

of experience was appointed as CEO in January 2014. We believe that the company is

looking out for minor acquisition opportunities to boost its portfolio ahead of the 2020

expiry of Basin and Island PSCs. Southeast Asia will most likely remain RH Petrogas'

main area of focus going forward. The Chinese block is likely a one-off opportunity for RH

Petrogas as conventional onshore licences in China have been harder to come by.

Financials: Adapting to a new crude price environmentThe company had previously operated in a US$100/bbl crude environment. With uncertaincrude price going in 2015, the company's earnings and operating cash flows will likely be

hit by lower crude prices.

Investment risks

The company is operator of Fuyu-1 and it is their first block moving from development to

production. The Chinese authorities and partner CNPC, will likely be monitoring the

company's abilities and their performance may influence how soon ODP approval for

Phase 2 will come forth.

Initiate coverage on RH

Petrogas with a NEUTRAL

rating and S$0.40 target price

Value in Fuyu-1 Block is

only partially realised until

final ODP approval for

Phase 2 is obtained

Undertaking feasibility studies

on Koi and TBC fields in

Island PSC, however window

for development is limited

unless there is licence

extension

The main catalyst to

valuation is obtaining final

approval for Phase 2 of

Fuyu-1 block

RH Petrogas' performance as

operator will likely influence

how soon ODP for Phase 2 at

Fuyu-1 will come forth


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14 January 2015

RH Petrogas Limited


RH Petrogas Limited RHPG.SI / RHP SPPrice (13 Jan 15): S$0.38, Rating:: NEUTRAL [V], Target Price: S$0.40, Analyst: David Hewitt

Target price scenarioScenario TP %Up/Dwn AssumptionsUpsideCentral Case 0.40 3.90Downside

Key earnings drivers 12/13A 12/14E 12/15E 12/16E

Income statement (US$ mn) 12/13A 12/14E 12/15E 12/16ESales revenue 86.4 73.7 76.1 87.3Cost of goods sold 58.7 55.2 58.6 62.9SG&A 6.1 6.0 8.0 8.0Other operating exp./(inc.) (2.7) (8.0) (7.1) (7.9)EBITDAX 24.3 20.5 16.6 24.2Exploration expense 44.2 EBITDA (19.9) 20.5 16.6 24.2Depreciation & amortisation 11.0 11.5 12.0 12.8EBIT (30.9) 9.0 4.6 11.5Net interest expense/(inc.) 3.3 2.9 5.3 5.7Associates/JV Forex losses (gains) Non-operating inc./(exp.) Recurring PBT (34.2) 6.0 (0.7) 5.8Exceptionals/extraordinaries (28.8) (20.5) Taxes 2.9 4.7 0.1 2.9Profit after tax (65.9) (19.1) (0.7) 2.9Other after tax income

Minority interests

Preferred dividends Reported net profit (65.9) (19.1) (0.7) 2.9Analyst adjustments 28.8 20.5 Net profit (Credit Suisse) (37.1) 1.3 (0.7) 2.9

Cash flow (US$ mn) 12/13A 12/14E 12/15E 12/16EEBIT (59.6) (11.5) 4.6 11.5Net interest 2.5 1.8 4.2 4.6Tax paid 5.3 4.7 0.1 2.9Working capital (14.7) (12.2) 1.7 (0.7)Other cash & non-cash items 78.6 12.7 1.3 (4.4)Operating cash flow 12.1 (4.4) 11.9 13.9Capex (48.0) (21.2) (39.9) (17.1)Free cash flow to the firm (35.9) (25.6) (28.0) (3.2)Disposals of fixed assets Acquisitions Divestments 2.8 Associate investments Other investment/(outflows)

Investing cash flow (50.0) (19.7) (41.8) (19.0)Equity raised 56.1 0.5 Dividends paid Net borrowings 4.9 (10.2) 36.3 6.3Other financing cash flow 1.5 0.2 Financing cash flow 62.6 (9.4) 36.3 6.3Total cash flow 24.7 (33.6) 6.4 1.3Adjustments 0.01 0.01 0.01 0.01Net change in cash 24.7 (33.6) 6.4 1.3

Balance sheet (US$ mn) 12/13A 12/14E 12/15E 12/16ECash & cash equivalents 52.4 18.9 25.3 26.6Current receivables 34.8 24.2 25.0 28.7Inventories 1.0 2.0 2.1 2.4Other current assets 0.62 0.50 0.50 0.50Current assets 88.8 45.6 52.9 58.2Property, plant & equip. 1.6 1.5 2.0 2.5Investments Intangibles 111.1 90.6 90.6 90.6Other non-current assets 133.0 145.1 175.5 182.3

Total assets 334.5 283.0 321.1 333.7Accounts payable 64.1 42.4 44.9 48.3Short-term debt 13.7 13.7 13.7 Current provisions 2.2 2.0 2.0 2.0Other current liabilities 0.26 0.15 0.15 0.15Current liabilities 80.2 58.2 60.8 50.4Long-term debt 33.5 19.8 56.2 76.2Non-current provisions 42.3 43.0 43.0 43.0Other non-current liab. 1.3 1.3 1.3 1.3Total liabilities 157.3 122.4 161.2 170.9Shareholders' equity 177.2 158.6 157.9 160.8Minority interests 2.0 2.0 2.0Total liabilities & equity 334.5 283.0 321.1 333.7

Per share data 12/13A 12/14E 12/15E 12/16EShares (wtd avg.) (mn) 639.7 733.8 734.8 735.8EPS (Credit Suisse) (0.06) 0.00 (0.00) 0.00DPS (US$) BVPS (US$) 0.24 0.22 0.21 0.22Operating CFPS (US$) 0.02 (0.01) 0.02 0.02

Key ratios andvaluation

12/13A 12/14E 12/15E 12/16E

Growth(%)Sales revenue 0.0 (14.7) 3.2 14.7EBIT (268) 129 (49) 149Net profit (708) 104 (155) 496EPS (592) 103 (154) 495Margins (%)EBITDAX 28.1 27.8 21.8 27.8EBITDA (23.1) 27.8 21.8 27.8EBIT (35.7) 12.2 6.1 13.1Pre-tax profit (39.6) 8.2 (0.9) 6.7Net profit (43.0) 1.8 (1.0) 3.3

Valuation metrics (x)P/E (5) 157 (288) 73P/B 1.19 1.33 1.34 1.32Dividend yield (%) P/CF 15.2 (47.9) 17.8 15.2EV/sales 2.39 3.08 3.37 3.00EV/EBITDAX 8.5 11.1 15.4 10.8EV/EBITDA (10.4) 11.1 15.4 10.8EV/EBIT (6.7) 25.2 55.7 22.8ROE analysis (%)ROE (20.7) 0.8 (0.5) 1.8ROIC (17.6) 6.9 2.7 2.8Asset turnover (x) 0.26 0.26 0.24 0.26Interest burden (x) 1.11 0.67 (0.15) 0.51Tax burden (x) 1.05 1.33 1.10 0.50Financial leverage (x) 1.89 1.76 2.01 2.05Credit ratiosNet debt/equity (%) (3.0) 9.1 27.9 30.5Net debt/EBITDA (x) 0.26 0.71 2.68 2.05

Interest cover (x) (9.3) 3.1 0.9 2.0

Source: Company data, Thomson Reuters, Credit Suisse estimates

0

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Jan-11 Se p-11 May-12 Jan -13 Se p-13 May-14 Dec-14

12MF P/E multiple

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Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Dec-14

12MF P/B multiple

Source: IBES


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14 January 2015

RH Petrogas Limited


Caught in an ambivalent positionEarly entrant to the Singapore oil and gas market.RH Petrogas has been an oil and

gas player on the Singapore Stock Exchange (SGX) for five years. The company

transformed itself at the doldrums of the electronics cycle to foray into the exploration and

production (E&P) of oil in 2009, a time when crude price was recovering from the bottom,

post the global financial crisis. The company went on an acquisition spree in 2009/10 to

purchase four assets, which still form the backbone of the company today. In 2012, RH

Petrogas added a fifth asset when it entered into a PSC with Petronas Carigali in Malaysia.

Figure 6:RH Petrogas' asset acquisition historyAssets Country Completion Purchase Stake Price Operator Status at purchase 2P Reserves PSC expiry

Fuy u 1 PSC Song Liao Basin, China 17-Aug-09 49% S$110mn RH Petrogas Ex ploration - Onshore 9-Jan-38

West Belida PSC South Sumatra, Indonesia 14-Jun-10 94% S$0.4mn RH Petrogas Ex ploration - Onshore 4-May -39

Basin & Is land PSCs West Papua, Indonesia 29-Dec-1060% - Basin PSC

33.2% - Island PSCUS$73.83mn

PetroChina - Basin PSC

PetroChina & Pertamina - Island PSCProducing 14.3mm bbl

Onshore/

Offshore

15-Oct-20 for Basin PSC

22-Apr-20 for Island PSC

SK331 PSC Saraw ak, Malay sia 6-Dec-12 80% na RH Petrogas Ex ploration - Onshore 5-Dec-40 Source: Company data, Credit Suisse estimates

Influential board and experienced management. The company's primary focus area for

growth and expansion is conventional oil and gas in Southeast Asia (SEA) and China. Theassets of the company reflect the wide influence of the Executive Chairman, Tan Sri Datuk

Sir Tiong Hiew King, in the region. Mr Tiong owns a conglomerate in Malaysia covering

timber, oil palm plantations, oil and gas, media and publishing, mining, fishery and

manufacturing businesses. The SEA-Chinese co-operation is apparent in PSCs in West

Papua where RH Petrogas is in partnership with CNPC/PetroChina together with local

partner, Pertamina. The current CEO, Mr Francis Chang, was promoted to the role in

January 2014. He joined the company in 2010 as Vice President of Exploration and

Production (E&P). Mr Chang has over 35 years of global E&P experience with North

American companies such as Anadarko, Burlington Resources and Amoco. Prior to joining

RH Petrogas, he spent the last seven years in China.

Conventional Southeast Asian/Chinese oil play. Even though the company's first oil

block is in China, future licences in conventional oil and gas blocks will be difficult to obtain

given that local Chinese oil and gas players have grown bigger with access to funds for

development. However, RH Petrogas is well situated within the Southeast Asian focus, an

area with rich hydrocarbon resources. Southeast Asia holds 72.4 bn bbl of recoverable oil

and 26.7 tcm of gas resources according to IEA. With robust economic growth as a region,

oil consumption has grown 52% from 3.6 mmb/d to 5.5 mmb/d and gas consumption has

grown 92% from 7.5 bcf/d to 14.4 bcf/d from 2000 to 2013. Crude production has not kept

pace with demand resulting in the region being a net importer of crude oil. Government

policies are supportive in growing the oil and gas sector to meet increasing domestic

demand. Investment in the region is robust with increased capital expenditure of more

than two times from US$9.5 bn to US$24.8 bn from 200513.

RH Petrogas transited into

the E&P sector in 2009/10

at a time when oil price was

recovering from GFC

The company is helmed by

an influential Chairman anda very experienced CEO

While the Fuyu-1 Block

appears to be a one-off in

China, SEA remains a land of

opportunity for the company


6/25

14 January 2015

RH Petrogas Limited


Figure 7:Southeast Asiademand and supply of oil Figure 8:Southeast Asiacapital expenditure

(4)

(3)

(2)

(1)

-

1

2

3

4

5

6

00 01 02 03 04 05 06 07 08 09 10 11 12 13

mm b/d

Oil production Oil consumption Demand-supply gap

Widening demand-supplygap

7

9

11

13

15

17

19

21

23

25

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E

US$bn

Source: BP Statistical Review of World Energy 2014 Source: Woodmac

E&P stock premium is eroded as more players jump on the bandwagon. There are

more upstream companies in the oil and gas sector listed on SGX today than in 2010when RH Petrogas entered the sector. In 2H2013, three new companiesLinc Energy,

KrisEnergy and Rex (upstream technology) were newly listed on SGX. Listed companies

such as Ramba Energy and Giken Sakata, which own other core businesses are also

trying to transit into the E&P business. Therefore, investors now have more investment

options. Coupled with an uncertain oil price environment, the sieve will get finer as

investors shed their initial euphoria on the sector to seek out companies which can offer

growth, strong financial position and hold quality assets.

Figure 9:RH Petrogas' daily production against peers Figure 10:RH Petrogas' reserves/resources against peers

3,910

7,403

4,350

-

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Kris RHP Linc

boe/d

Liquids Gas

166.3

182.8

62.7

19.1

32.3

- 50 100 150 200

RHP

Kris

RHP

Kris

Linc

mm boe

Liquids Gas

2P Reserves

2C Resources

Source: Company data as at Sep 2014 Source: Company data as at Oct 2014. Linc Energy does not publish

2C contingency resources

More players have joined

the E&P game on SGXsince 2013


7/25

14 January 2015

RH Petrogas Limited


Fuyu-1 Block (China) in the spotlightThe dragon arrived as smaller than anticipated. The Fuyu-1 PSC was the first asset and

bedrock of RH Petrogras' portfolio. The stock sat on excitement over the Fuyu-1 Block as it

resides in the same basin as China's largest onshore oil field, Da Qing, in the Song Liao Basin.

It is an onshore conventional low-capital intensive oil project. The company received a final

approval for its ODP on the Yong Ping oil field in the block to commence the first phase of

development to produce an estimated gross of 14.6 mm bbl (7.2 mm bbl net) of oil in October

2014. The approval includes the drilling of 1,008 development wells over five years. It takes an

average of seven days to drill each well. There remains 55 mm bbl (26.9 mm bbl net) of 2C

contingency resources in the block, which require a subsequent ODP approval. This is the first

block going into production where RH Petrogas acts as a project operator.

CNPC is a ready buyer of crude in the Fuyu-1 Block. RH Petrogas has entered into an

oil sales agreement with CNPC. CNPC has established oil and gas operation facilities in

the Song Liao Basin. The oil quality is heavy with a density of 18.5 API. We estimate

sales price to be at a 15% discount to Brent. The oil will be trucked to CNPC processing

facilities, which are 5 km away, for processing and blending with lighter oil. Production at

the Yong Ping oil field is expected to commence in 2Q2015 with peak production to be

achieved by 2019. RH Petrogas will be applying the huff and puff technique to flow the oil

out of the field, and hence we added US$10/bbl into the operating cost.

Low-capital investment in the Fuyu-1 Block. RH Petrogas has invested close to US$30

mn in the exploration and appraisal phase. Development capex associated with drilling

1,008 wells and related facilities is estimated to be about US$58 mn from 2014 to 2019

(US$50,000 per well) as these are shallow wells ranging from 200300 m in depth. RH

Petrogas completed 15 wells by the end of 2014. The production profile is estimated on a

gross 10 b/d production per well, with declines starting to set in from 2020.

Figure 11:Fuyu 1 block is situated in Northeast China,

Song Liao Basin

Figure 12:Phase 1 drilling campaign and gross

production at Yong Ping oil field, Fuyu-1 Block

15

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wellsb/d

Wells dri lled per year (RHS) Gross production

Source: Company Presentation Source: Company guidance, Credit Suisse estimates

Second ODP approval needed to fully realise value in Fuyu-1 Block. As a first time

operator, the company's back-end loaded drilling campaign is very sensible for it to iron

out operational issues. Chinese authorities and partner CNPC, together, will likely be

monitoring the company's abilities and performance. The company believes that ODP

approval for phase 2 could be forthcoming in the next two to three years. New drilling is

most likely required in phase 2 of development. Besides oil, the company is also doing

exploration work to ascertain deep gas potential in the block.

Final regulatory approval

only covers c.20%

resources in Fuyu-1,

requiring a second approval

for the remaining resources

Production at Fuyu-1 is

expected in 2Q2015 and

CNPC is a ready buyer of

the crude

Fuyu-1 Block has low capital

requirement with an

estimated development

budget of US$58 mn

ODP approval for Phase 2

in Fuyu-1 is estimated to be

in two to three years


8/25

14 January 2015

RH Petrogas Limited


Yet to decide on licence extensionsfor Basin and Island PSCs inIndonesia

Yet to decide on licence extension in Basin and Island PSCs (Indonesia). The Basinand Island PSCs are bread and butter assets for RH Petrogas. Since their acquisition in

2010, they have provided the company with production and cash flows to support

exploration and appraisal activities. Even though there is exploration upside in these two

blocks, their PSC expiry in 2020 puts a limit on their full realisation. The company has

achieved a 50% exploration drilling success rate for the two PSCs in the last four years,

writing off c.$30 mn in 2013 associated with unsuccessful exploration. We understand that

PSC extension is under consideration.

Six-well development drilling campaign in Basin PSC in 2015. There are plans to drill

six development wells in Basin PSC in 2015. These are pending regulatory approval,

which are expected to come by early 2015. Four wells are targeted at the North Klalin field

and two wells at the Southeast Walio field. The gross capex expected for the development

campaign is US$50 mn (US$30 mn net). The development of these fields do not add to

valuation as we understand from the company that their reserves have already been

booked. However, they will help the company in maintaining the production and

commercialisation of reserves. This investment also ensures the cost recovery portion of

revenue from the Basin PSC until expiry. There is no plan to invest further in the Basin

PSC after its development drilling campaign in 2015 unless there is licence extension.

Significant resources in Island PSC, a licence extension could justify further

developmental investment. The company plans to re-activate the offshore TBA field,

which ceased production in 2010. The TBA field has gross c.2 mm bbl (0.66 mm bbl net)

of remaining reserves. Production is targeted for 1Q2015 when an FPSO is secured and

brought to location. Further development could be expected in Island PSC as the reserves

are running low at less than 1.5 mm boe and a significant 2C resources of 21.9 mm boe

remaining. Fiscal terms at Island PSC are also more favourable than Basin PSC. The two

targets for future development are the Koi and TBC fields. Preliminary front endengineering design ('pre-FEED') study commenced in 2014 to evaluate the development

design and concept of the Koi field. Koi holds a gross 12 mm bbl (4 mm bbl net) of oil. The

TBC gas and condensate field is another potential candidate for future development. A

new CNG plant is being considered to process the gas feed. TBC is estimated to have

gross 182 bcf (60 bcf net) of gas and 6 mm bbl (2 mm bbl net) of condensate.

Figure 13:Development plans for Basin and Island PSCs

Block Operator Fields Development Plan Time frame 2P Reserves (net)

North Klalin 4 development wells 2015 Booked

Southeast Walio 2 development wells 2015 Booked

TBA Secure FPSO 2015 Booked

Koi Pre-FEED study 2014/20154mm bbl

Not booked

TBC Feasib ility study on feeding gas to CNG p lant 2015/2016 70bcfeNot booked

Basin PSC PetroChina

Island PSC PetroChina & Pertamina

Source: Company data, Credit Suisse estimates

Slight increase in gas sales in Indonesian PSCs . While oil is predominantly the focus of

Basin and Island PSCs, the company has been making efforts to commercialise their gas

production. Sales are expected to increase from 5 mmcf/d to 8 mmcf/d starting January

2015 and to 10 mmcf/d in years after. Gas prices are locked in for two years at $4/mcf.

Basin and Island PSCsexpire in 2020, and licence

extension is under

consideration

Developing drilling in Basin

PSC in 2015 to maintain

production and revenue

The company is conducting

feasibility studies on Koi and

TBC fields for future

development

Efforts are made to

commercialise gas

production at Basin and

Island PSCs


9/25

14 January 2015

RH Petrogas Limited


Figure 14:RH Petrogas: Working interest production profile

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2010A 2011A 2012A 2013A 2014 2015 2016 2017 2018 2019 2020 2021 2022

m boe/d

Basin & Island PSC Fuyu 1 Block


Plan for one exploration well in SK331 PSC (Malaysia). RH Petrogas (80% stake) enteredinto the SK331 PSC in Sarawak Malaysia with Petronas in December 2012. Preliminary study

indicated that the prospective resources could be gas prone. If true, there is an opportunity for

it to become a feedstock source to the Bintulu LNG production facilities, which are located

within SK331. Seismic acquisition was completed in November 2014. The company targets to

process and interpret seismic data, and drill one exploration well in 2015 budgeted at gross

US$25 mn (US$ 10.2mn net). The farm out of 39.2% stake of SK 331 to Tumbuh Tiasa was

completed in September 2014 for US$2.79 mn, leaving the company with a 40.8% stake. The

company is optimistic about this block based on exploration work to date.

Figure 15:Bintulu LNG facility, operated by Malaysia LNG (Petronas) is located within

SK331 PSC

SK331

Bintulu

Source: Company presentation

Preliminary studies indicatethat prospective resources

in SK331 are gas prone


10/25

14 January 2015

RH Petrogas Limited


Passive exploration strategy in West Belida (Indonesia). RH Petrogas purchased West

Belida PSC from Orchard Energy in June 2010. The company wrote off US$7.2 mn of

unsuccessful exploration expense associated with Gitar-1 well in the block. The West

Belida exploration licence is expiring in May 2015. The company is conducting passive

seismic programme and will be making a decision on whether to extend the exploration

licence based on the result by 1Q2015.

A decision on whether to

extend exploration licence in

West Belida is expected by

1Q2015


11/25

14 January 2015

RH Petrogas Limited


Triple building blocks to valuationRisked valuation suggests target price of S$0.40/share. The net asset value of the

stock is S$0.84 on an un-risked basis. On a risked adjusted basis, we arrive at

S$0.40/share. Fuyu-1 Block dominates two-third of the total asset valuation of RH

Petrogas. To arrive at our valuation:

We differentiate between Phase 1 and 2 of Fuyu-1 Block. We allocated 70% riskingfactor to Phase 1's estimated volume on the basis that this is the company's first

operatorship on a developing/producing block, a lack of production history and expert

view on the block presently (the reserve auditor's report will only be ready in 1Q2015).

We will fully derisk the value in the block when commercial production commences.

We used un-risked valuation in Phase 1 on a per boe basis as a proxy for Phase 2 in

Fuyu-1 block. We allocated a risk factor of 50% to Phase 2 to indicate that these are

volumes awaiting governmental approval. We understand from the company that

subsequent ODP approval process should be swifter than the first approval.

The valuation of 2P reserves in Basin and Island PSCs have been fully derisked. Until

development plans for Koi and TBC are confirmed, they are risked at 30% as 2C

resources. The value in Basin and Island PSCs will be eroded at the end of the expiryof the PSCs if there is no extension.

Figure 16:RH Petrogas: Sum-of-the-parts table

Assets Country WI Unrisked Reserves / Unrisked Risk Risked Unrisked Risked

Valuat ion Resources Valuation factor Valuation Valuat ion Valuation

(%) US$'m mm boe US$/boe % US$mn SGct/sh SGct/sh

Producing

Kepala Burung (Basin) PSC Indonesia 60% 22.8 8.6 2.6 100% 22.8 4.1 4.1

Salaw ati Kepala Burung (Is land) PSC Indones ia 33.2% 7.9 1.3 5.9 100% 7.9 1.4 1.4

Total 30.7 10.0 30.7 5.5 5.5

In d evelopment

Fuy u 1 Block - Phase I China 49% 60.6 7.2 8.4 70% 42.4 10.8 7.6

Fuy u 1 Block - Later Phase China 49% 226.6 26.9 8.4 50% 113.3 40.5 20.2Total 287.2 34.1 155.7 51.3 27.8

Under appraisal

Kepala Burung (Basin) PSC Indonesia 60% 36.1 13.7 2.6 30% 10.8 6.5 1.9

Salawati Kepa la Burung (Is land) PSC Indonesia 33.2% 130.2 21.9 5.9 30% 39.0 23.3 7.0

Total 166.3 35.6 49.9 29.7 8.9

Total asset value 484.2 79.7 236.3 86.5 42.2

Cash / (Net debt) (15.1) (15.1) (2.7) (2.7)

Net asset value (NAV) 469.0 221.2 83.8 39.5

Source: Credit Suisse estimates

Fuyu-1 Block is the main catalyst. The charts below show the catalyst map for the stockand corresponding upside to NAV. The next catalyst for RH Petrogas will be the

commercial production in Phase 1 Fuyu-1 Block in spring 2015. We believe that ODP

approval for Phase 2 in Fuyu-1 Block is only likely to come when commercial production

stabilises in two to three years. The next catalysts for RHP's assets are development plans

for Koi and TBC in Island PSCs. We view Koi development to be more probable given that

pre-FEED study has commenced and the volumes associated are smaller. The TBC

development plan is more likely upon a licence extension on Island PSC.

Fuyu-1 Block holds two-third

of total asset valuation of

the company

Final ODP approval forPhase 2 Fuyu-1 is the main

catalyst for the stock


12/25

14 January 2015

RH Petrogas Limited


Figure 17:24-month catalyst map Figure 18:Corresponding upside to NAV

Sanctioned Projects

Fuyu 1 - Yong Ping First prodn

Fuyu 1 - Later Phase ODP approv al

Assets under appraisal

Koi FEED & submit POD

TBC FEED & submit POD

1H15 2H15 1H16 2H16

40

62

+3.3 +0.8+2.5

+16.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Base NAV Fuyu 1-prod Koi-submitPOD

TBC-submitPOD

Fuyu 1-ODP2nd Phase

Possible NAV

Scts/share

Source: Credit Suisse estimates Source: Credit Suisse estimates

Figure 19:NAV sensitivity to crude price changes

Crude Assumptions US$/bbl 95 85 S assumptions 75 65 55 45Risked NAV Scts/share 48 42 40 35 28 18 0.2

Unrisked NAV Scts/share 100 89 83 76 61 42 8.9 Source: Credit Suisse estimates. CS' crude assumptions are US$75.3/bbl in 2015, US$80/bbl in 2016-19

and US$85/bbl long-term.

Ammunition in a soft-crude environment is quality assets. The stock price of RH

Petrogas had previously moved with corporate events, mostly driven by market euphoria

around the oil and gas business and Chinese oil consumption. The bullish investor

sentiments worked in a high oil price environment. However, with low oil prices, investors

will be more selective, looking for companies with strong asset base and execution. While

the company is growing its production at the Fuyu-1 Block, it will also need other assets to

replace production, which may cease at Basin and Island PSCs if their licences are not

extended. We believe that the company will be looking out for possible minor acquisitionsin the market place to boost its portfolio. The Chinese block is a likely one-off opportunity

for RH Petrogas as conventional onshore licences in China have been harder to come by.

Southeast Asia will most likely remain RH Petrogas' main area of focus.

Minor acquisition in the future

is possible as the company

looks to boost its portfolio


13/25

14 January 2015

RH Petrogas Limited


Figure 20:RH Petrogas stock price movement to key corporate events

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14

S$/share27 Apr 2009:Purchased Fuyu 1 Block(Exploration, China)

3 Dec 2009:Purchased West Belida PSC

(Exploration, Indonesia)

6 Sep 2010:Purchased Basin & Island PSCsfrom Lundin(Producing, Indonesia)

20 Sep 2010:Purchased Basin & Island PSCsfrom Pearl

6 Dec 2012:Entered into SK331 PSC(Exploration, Malaysia)

11 Dec 2012:Seismic option on Block M-1(Ceased, Myanmar)

Capitalraising &Exploration drillingat Island and BasinPSCs

Disposal ofelectronics business

to focus solely onE&P

Capitalraising &ChineseMinistry'sverification ofresources atFuyu 1 Block

16 Oct 2014:ODP approval

for Fuyu 1 Blockfrom NDRC

Rumoured

takeover offer

Source: Bloomberg, Company data, Credit Suisse estimates up to 13 Jan 2015

Figure 21:EV/2P multiple of E&Ps with SEA assetsRH Petrogas is trading above global median

Source: Company data, Bloomberg, Credit Suisse estimates as on 13 Jan 2015


14/25

14 January 2015

RH Petrogas Limited


Figure 22:EV/(2P+2C) multiple of E&Ps with SEA assetsRHP gas trading below global median

Source: Company data, Credit Suisse estimates, Credit Suisse estimates as on 13 Jan 2015

Figure 23:PSC assumptions for field valuations

Basin Island Fuyu-1

Realised prices:Discount to Brent 3% 3% 15%

Volume 2P reserves 2P reserves 2P reserves

Govt levies:

First tranche petroleum 20% 20% -

VAT - - 5%

Royalty - - 0-12.5%

Special oil levy - - 0-40%

Cost oil cap 100% of net revenue 100% of net revenue 65% of gross revenue

Profit oil - govt share 70% 60% 51%

Profit gas - govt share 46% 42% -

DMO price 15% of Brent US$0.20/bbl -

DMO quantity 25% *profit oil-contractor share*prodn 25% *profit oil-contractor share*prodn -

Income tax 44% 48% 25% Source: Credit Suisse estimates


15/25

14 January 2015

RH Petrogas Limited


Financials: Adapting to a new crudeenvironmentNew crude environment for RH Petrogas. The company previously operated in a

US$100/bbl crude environment. For a young E&P, it has maintained a healthy earnings

track record except for a goodwill and exploration write-off in 2013. Figure 24 is an

earnings sensitivity table on the company in a less certain oil price environment. Though

earnings risk is going negative, EBITDA breaks even at about US$47/bbl.

Figure 24:RH Petrogas' earnings sensitivity tableCrude Assumptions US$/bbl 95 85 S assumptions 75 65 55 45

2015 EPS UScts 0.8 0.4 (0.1) (0.1) (0.7) (1.4) (2.9)

2016 EPS UScts 0.9 0.6 0.4 0.2 (0.1) (0.5) (1.3)

2017 EPS UScts 1.6 1.1 0.9 0.6 0.1 (0.4) (1.2) Source: Credit Suisse estimates. CS' crude assumptions are US$75.3/bbl in 2015, US$80/bbl in 2016-19

and US$85/bbl long-term

Figure 25:RH Petrogas' EBITDA sensitivity tableCrude Assumptions US$/bbl 95 85 S assumptions 75 65 55 45

2015 EBITDA US$'m 24.8 20.7 16.6 16.5 12.4 8.3 (2.0)

2016 EBITDA US$'m 32.0 26.8 24.2 21.7 16.5 11.3 (1.0)

2017 EBITDA US$'m 43.7 36.5 32.9 29.3 22.1 14.8 2.3 Source: Credit Suisse estimates. CS' crude assumptions are US$75.3/bbl in 2015, US$80/bbl in 2016-19

and US$85/bbl long-term

Capex will taper off post 2015 as Fuyu-1 block is low cost . RH Petrogas' capital

expenditure should reach a peak of c.US$40 mn in 2015 and ease off in the years after

based on their existing portfolio. The bulk of 2015 capex will be US$20 mn net to RH

Petrogas on the six-well development programme in the Basin PSC. At the moment, the

company does not have plans to invest further in the block. An estimated US$6 mn will be

spent on its 40-well drilling plan in the Fuyu-1 Block in 2015. RH Petrogas' back-end

loaded drilling programme in Fuyu-1 is sensible as it gives them time to test out any

teething issues on their first operatorship and gives ample time to raise development

funding, if necessary. Exploration related expenses will mostly be focused on SK331 PSCin Sarawak estimated at US$10.2 mn for drilling one well in 2015.

Figure 26:RH Petrogas' capital expenditure requirements based on existing portfolio

-

10

20

30

40

50

60

2010A 2011A 2012A 2013A 2014 2015 2016 2017 2018 2019

US$m


Capital spending slows down

after 2015, based on current

plan, until new development

projects are injected


16/25

14 January 2015

RH Petrogas Limited


Internal funding may be able to sustain the status quo capex plan. RH Petrogas ended

3Q2014 with cash in hand of US$29 mn. In October 2013, RH Petrogas raised equity funding

of S$70.3 mn net (priced at S$0.63/share) for exploration, development and production

expenditure at Basin and Island PSCs and S$41.6 mn net (priced at S$0.80/share) in

September 2009 for acquisition of Kingworld Resources and E&A capital expenses at the

Fuyu-1 Block. RH Petrogas' 2015 capital expenditure plan is estimated at US$42 mn mainly for

a six-well development drilling programme in Basin PSC, Fuyu-1 development and SK331

exploration. If there are plans to develop Koi and TBC in Island PSC and also makeacquisitions to augment its current portfolio, RH Petrogas will need to raise more capital.

Figure 27:Leverage ratios of RH Petrogas vs peers

65%67%

25%

38%

3%

19%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Net Debt / (Net Debt + Equity) Total Debt / (Total Debt + Equity)

Linc Kris RHP

Source: Company data


17/25

14 January 2015

RH Petrogas Limited


Investment RisksCrude and gas price risk

As RH Petrogas' production is predominantly oil, the uncertainty in oil price will impact its

near-term earnings. In the past five years, the company has operated in a US$100/bbl oil

environment. Going forward, there will be less certainty on oil prices.

Executive/development risk

RH Petrogas is the operator of the Fuyu-1 Block. It is first time that the company is playing the

role of an operator in a block moving from development to production. This block accounts for

about two-third of the total asset value of the company, and hence the Fuyu-1 Block is critical

to the success of the company. As the company moves into the development phase at the

Fuyu-1 block, the CEO's over 35 years of E&P experience (of which seven years were spent in

China) are brought to the fore on making Fuyu-1 a success.

Regulatory and political risk

While China is a land of opportunities from a resource and consumption perspective, any

evolving regime is still capricious. There remains commercialisation uncertainty in 2C

contingency resources in the Fuyu-1 block until the company receives a final ODP

approval for Phase 2 development.

PSC expiry

Basin and Island PSCs have been the sole contributors to the production and revenues of the

company. With their PSC expiration approaching in 2020, RH Petrogas needs to grow new

sources of production and revenues. With the significant 2C contingency resources residing in

these two PSCs, valuation associated with these are at a risk of being eroded over time.

Exploration risk

All E&P companies are subject to exploration risk. RH Petrogas had written off

unsuccessful exploration expenses of over US$30 mn in 2013 in the Basin and Island

PSCs. We believe that the company will be cautious with exploration expenditure in

SK331 Malaysia and West Belida in Indonesia where they hold operatorship.

Organic vs Inorganic growth

RH Petrogas has had a stable portfolio in the last five years. There were two announced

attempts at growing its assets, the SK331 PSC in Malaysia and Block M-1 in Myanmar, which

the company decided not to farm into. The selection for assets for future growth and how the

newly appointed CEO will chart the future course of the company will be interesting to see.


18/25

RHPetrogasLimited

Figure 28:Valuation summary of companies with SEA assetsCompanies Tickers Price Market Cap

Enterprise Value

Net Debt EBITDA Debt/

Capital

EV /EBITDA

(Y=0)

EV /EBITDA

(Y+1)

PE(Y=0)

PE(Y+1)

PB(Y=0)

PB(Y+1)

Price-toSales(Y=0)

Price-toSales(Y+1)

13-Jan-15 (LC) (US$'mn) (US$'mn) (US$'mn) (US$'mn) (x) (x) (x) (x) (x) (x) (x) (x) (x)

Singapore

KrisEnergy KRIS SP Equity 0.65 507 654 (129) 28 20 32.8 28.9 na 28.4 1.1 1.2 3.8 5.8

Linc Energy LNC SP Equity 0.64 281 682 290 (4) 52 na 6.1 na na 0.7 0.7 2.2 1.2

RH Petrogas RHP SP Equity 0.39 212 222 (5) (16) 21 na 14.2 na 32.1 1.3 na 2.4 2.1

Ramba EnergyRMBA SP

Equity 0.31 88 126 4 (8) 13 na na na na 1.5 na 1.5 na

Interra Resources ITRR SP Equity 0.16 55 51 (10) 27 - 3.3 na na na 0.7 na 0.9 na

Indonesia

Benakat Integra BIPI IJ Equity 118 342 981 662 138 60 na na na na 0.7 na 1.3 naPT Energi Mega

Persada ENRG IJ Equity 110 390 883 578 462 45 1.8 na na na 0.4 na 0.5 na

PT Medco Energi MEDC IJ Equity 3,195 845 1,500 383 349 50 4.8 4.7 36.3 12.1 0.8 0.9 1.0 1.1

Australia

AWE AWE AU Equity 1.24 533 499 (34) 124 - 5.9 4.7 155.0 1,240.0 0.7 0.7 2.0 2.3

Carnarvon Petroleum CVN AU Equity 0.14 113 97 (16) 4 - na 10.1 35.0 na 1.5 1.0 6.0 7.1

Cue Energy CUE AU Equity 0.09 49 15 (33) 8 - 4.3 1.0 8.5 7.1 0.5 na 1.7 1.4

Horizon Oil HZN AU Equity 0.13 138 245 106 71 46 na 2.9 5.9 7.6 0.6 0.6 0.9 1.0

Lion Energy LIO AU Equity 0.15 12 7 (5) (1) - na na na na 1.1 na 1.3 na

Nido Petroleum NDO AU Equity 0.03 47 31 (21) 10 - 1.7 1.2 na na 0.5 0.5 0.7 0.8

Otto Energy OEL AU Equity 0.10 90 82 (8) 17 - 5.1 4.5 4.1 7.0 1.0 na 1.5 1.1

Tap Oil TAP AU Equity 0.38 76 89 (36) (36) - na na na 3.0 0.6 0.6 3.6 2.6

Thailand

PTTEPPTTEP TB

Equity 108 13,006 13,704 1,666 4,905 26 3.7 2.6 7.4 8.5 1.0 1.0 1.7 1.7

International

Premier Oil PMO LN Equity 137 1,058 2,736 1,440 911 47 4.9 2.7 3.7 7.9 0.5 0.5 0.7 0.7

SOCO SIA LN Equity 254 1,278 994 (210) 471 - 5.0 2.5 8.5 12.5 1.1 0.3 2.4 2.7

Canada

Bengal Energy BNG CN Equity 0.21 11 16 3 7 16 4.2 na na na 0.3 na 0.8 na

Niko Resources NKO CN Equity 0.25 20 253 316 (129) 62 na na na na 0.1 na 0.1 na

Pan Orient POE CN Equity 1.73 82 70 (35) 17 - 5.8 na na na 0.4 na 3.5 na

Source: Bloomberg, Credit Suisse estimates as at 13 Jan 2015


19/25

14 January 2015

RH Petrogas Limited


Company Financial StatementsFigure 29:RH PetrogasIncome Statement

Year end 31 Dec (US$'000) 2011A 2012A 2013A 2014 2015 2016

Revenue 89,424 86,376 86,393 74,439 76,087 87,295

Cost of sales (56,810) (54,179) (58,720) (55,239) (58,565) (62,904)

Gross profit 32,614 32,197 27,673 19,200 17,522 24,391

Administrative expenses (5,329) (5,319) (6,114) (6,000) (8,000) (8,000)

Other expenses (7,293) (8,487) (82,595) (24,000) (5,000) (5,000)

Other income 599 39 1,442 51 100 100

Finance costs (1,776) (2,222) (3,340) (2,944) (5,291) (5,670)

Profit (Loss) before tax 18,815 16,208 (62,934) (13,693) (669) 5,821

Income tax (15,883) (10,105) (2,949) (4,700) (67) (2,911)

Profit / (Loss) 2,932 6,103 (65,883) (18,393) (736) 2,911 Source: Company data, Credit Suisse estimates


20/25

14 January 2015

RH Petrogas Limited


Figure 30:RH PetrogasBalance Sheet

Year end 31 Dec (US$'000) 2011A 2012A 2013A 2014 2015 2016

Current Assets

Cash & ST deposits 23,623 28,615 52,448 19,367 26,026 27,293

Inventories 5,043 6,494 953 2,039 2,085 2,392

Trade & other receivables 5,535 8,816 34,821 24,473 25,015 28,700

Derivatives - 17 1 - - -Others 945 539 621 500 500 500

Total current assets 35,146 44,481 88,844 46,379 53,625 58,885

Non-current Assets

Oil & gas properties 64,636 67,657 73,455 86,013 106,412 108,222

Exploration & evaluation assets 53,449 66,571 59,519 59,124 69,124 74,124

Other PPE 1,187 911 1,593 1,543 2,043 2,543

Goodwill 139,872 139,872 111,115 90,641 90,641 90,641

Total non-current assets 259,144 275,011 245,682 237,321 268,220 275,530

Total assets 294,290 319,492 334,526 283,700 321,846 334,415

Current liabilities

Loans & borrowings 1,387 5,280 13,680 13,680 13,680 -

Income tax payable 2,425 2,798 2,190 2,000 2,000 2,000

Trade & other payables 49,152 49,403 64,079 42,375 44,927 48,255

Derivatives 3,194 488 257 150 150 150

Total current liabilities 56,158 57,969 80,206 58,205 60,757 50,405

Non-current liabilities

Loans & borrowings 78,628 37,006 33,526 19,846 56,166 76,166

Provisions 3,046 2,371 4,197 5,000 5,000 5,000

Deferred tax liabilities 37,619 39,817 38,066 38,000 38,000 38,000

Others 9,011 1,301 1,301 1,301 1,301 1,301

Tota l non-cur rent liabilities 128,304 80,495 77,090 64,147 100,467 120,467

Total liabilities 184,462 138,464 157,296 122,352 161,224 170,872

Net assets 109,828 181,028 177,230 161,348 160,622 163,543

Equity

Share capital 138,201 199,640 257,650 258,160 258,160 258,160

Reserves (28,373) (18,612) (80,420) (98,803) (99,529) (96,608)

Non-controlling interest - - - 1,991 1,991 1,991

Total equity 109,828 181,028 177,230 161,348 160,622 163,543



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14 January 2015

RH Petrogas Limited


Figure 31:RH PetrogasCash Flow StatementYear end 31 Dec (U S$'000) 2011A 2012A 2013A 2014 2015 2016

Operating Activities

Pretax profit/(loss) 18,815 16,208 (62,934) (13,693) (669) 5,821

Allowance for doubtful trade receivables 469 333 - - - -

Allowance for inventory obsolescence - 456 4,356 - - -

Allowance for doubtful debt - - - (100) (100) (100)

Amortisation of upfront fee paid for loans granted 264 220 393 - - -

Depletion & amortisation of oil & gas properties 12,975 10,389 10,531 11,048 11,516 12,273

Depreciation of other plant & equipment 434 437 422 450 500 500Realisation of foreign ccy tx on dissolution of subsidiaries - - 4,557 - - -

Interest on bank loans 1,472 1,811 2,563 1,844 4,191 4,570

Interest income from bank deposits (9) (19) (30) (12) (16) (16)

Impairment loss on goodwill - - 28,757 20,474 - -

Loss on disposal of other plant & equipment 13 53 - 5 - -

Net FV (gain)/loss on derivatives 112 1,078 86 100 - -

Share-based payments 758 559 965 120 120 120

Unwinding of discount on decommissioning provisions 304 411 777 1,100 1,100 1,100

Unsuccessful exploration & evaluation expenditure - 1,502 44,213 1,266 - -

Cancel lation fee/write off of upfront fees paid on bank loans refinancing - 789 - - - -

Others - - - (7,571) (2,220) (2,220)

OCF before changes in WC 35,607 34,227 34,656 15,031 14,423 22,048

Changes in working capital:

Decrease/(increase) in inventories 2,280 (1,905) 1,193 (1,086) (45) (307)

Increase in trade and other receivables 20,477 (3,570) (26,465) 10,348 (542) (3,685)

Increase in trade and other payables (15,590) (242) 10,585 (21,704) 2,551 3,328

CF from operations 42,774 28,510 19,969 2,589 16,387 21,384

Income tax paid (10,621) (7,539) (5,302) (4,700) (67) (2,911)Interest paid (1,472) (1,811) (2,563) (1,844) (4,191) (4,570)

Interest received 9 19 30 12 16 16

Net CF from operating activities 30,690 19,179 12,134 (3,944) 12,145 13,920

Investing activities

Additions to oil and gas properties (12,849) (10,810) (19,407) (13,211) (29,916) (12,082)

Additions to exploration and evaluation assets (15,495) (17,169) (28,578) (8,000) (10,000) (5,000)

Cash call contributions for asset retirement obligations (656) (1,087) (911) (900) (900) (900)

Proceeds from disposal of subsidiary - - - 2,786 - -

Purchase of other plant and equipment (60) (174) (1,083) (400) (1,000) (1,000)

Net CF used in investing activities (29,060) (29,240) (49,979) (19,725) (41,816) (18,982)

Financing activities

Increase in charge over project accounts (100) (1,767) - - - -

N et ( decr ease) /incr ease in amounts due to related par ties ( 10,000) - - - - -

Decrease on short-term deposit pledged - 874 884 - - -

Proceeds from loans and borrowings 31,099 44,486 10,900 - 50,000 20,000Loan from non-controlling interest - - - 3,503 - -

Proceeds from issuance of new shares - - 58,199 510 - -

Proceeds from exercise of employee share options - - 940 292 - -

Purchase of crude oil commodity options - - (300) (48) - -

Repayment of loans and borrowings - (28,700) (5,980) (13,680) (13,680) (13,680)

Repayment of advances from a corporate shareholder (4,000) - - - - -

Share issuance expenses - (93) (2,093) - - -

Upfront fee paid for loans granted - (645) - - - -

Net cash from financing activities 16,999 14,155 62,550 (9,423) 36,320 6,320

Net increase in cash & cash equivalents 18,629 4,094 24,705 (33,091) 6,649 1,258

Effect of exchange rate changes (661) 5 12 10 10 10

Beginning 2,897 20,865 24,964 49,681 16,600 23,259

End 20,865 24,964 49,681 16,600 23,259 24,526



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Appendix 1: Management profilesExecutive Chairman: Mr Tan Sri Datuk Sir Tiong Hiew King

Mr Tiong was appointed to the company as Executive Chairman and Executive Director

since March 2008. He is the executive Chairman of the Rimbunan Hijau Group (RH

Group), which is a large Malaysian conglomerate covering timber, oil palm plantations, oil

and gas, media and publishing, mining, fishery and manufacturing businesses. He is alsothe Chairman of Media Chinese International Limited, a publicly listed media company in

both Hong Kong and Malaysia, which publishes five Chinese language newspapers. Mr

Tiong was conferred the Knight Commander of the Most Excellent Order of the British

Empire by Queen Elizabeth II in June 2009 and awarded the 'Malaysian Business

Leadership Award 2010The Lifetime Achievement award' in recognition of his

entrepreneurship success.

Executive Director: Mr Dato Tiong Ik King

Mr Tiong was the Executive Chairman of the company since March 2005 and was re-

designated as Executive Director in March 2008. He is the younger brother of the

Executive Chairman. He is also an Executive Director of Media Chinese International. He

was trained as a physician with degrees from the National University of Singapore and UK

Royal College of Physicians.

Group CEO: Mr Francis Chang Cheng-Hsing

Mr Chang was appointed as the Group CEO of RH Petrogas on 1 January 2014. He had

joined RH Petrogas as Vice President of Exploration and Production in 2010. He has more

than 35 years of experience in the oil and gas industry, with US-based major and

independent oil companies such as Texas American Resources, Kerr McGee/Anadarko

Petroleum, Burlington Resources and Amoco working on assets in five continents. Before

joining RH Petrogas, he served as Vice President for International Operations at GNT

International and Chief Geophysicist for Anadarko Petroleum based in Beijing, China for

seven years. He was trained in geology from the National Taiwan University and attended

graduate school in Geophysics at Harvard University.


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RH Petrogas Limited


Companies Mentioned (Price as of 13-Jan-2015)

China National Petroleum Corporation(Unlisted)Giken Sakata(GISK.SI, S$0.25)KrisEnergy Ltd(KRIS.SI, S$0.645)Linc Energy Ltd(LINC.SI, S$0.64)Pertamina(Unlisted)PetroChina(0857.HK, HK$8.79)RH Petrogas Limited(RHPG.SI, S$0.38[V])

Disclosure Appendix

Important Global Disclosures

David Hewitt and Shew Heng Tan, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressedin this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensationwas, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse'stotal revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts stock rating are defined as follows:

Outperform (O) : The stocks total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stocks total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stocks total return is expected to underperformthe relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stocks total return relative to the analyst's coverage universe whichconsists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, andUnderperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are base d on a stocks totalreturn relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing themost attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratingsare based on a stocks total return relative to the average total return of the relevant country or regional benchmark; priorto 2nd October 2012 U.S. and Canadianratings were based on (1) a stocks absolute total return potential to its current share price and (2) the relative attractiveness of a stocks total return potential withinan analysts coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% anda 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stocks total returnrelative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain othercircumstances.

Volatility Indicator [V] :A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24months or the analyst expects significant volatility going forward.

Analysts sector weightings are distinct from analysts stock ratings and are based on the analysts expectations for the fundamentals and/orvaluation of the sector* relative to the groups historic fundamentals and/or valuation:

Overweight : The analysts expectation for the sectors fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analysts expectation for the sectors fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analysts expectation for the sectors fundamentals and/or valuation is cautious over the next 12 months.

*An analysts coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 46% (53% banking clients)Neutral/Hold* 38% (50% banking clients)Underperform/Sell* 14% (43% banking clients)Restricted 2%*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closelycorrespond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer todefinitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.


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RH Petrogas Limited


Credit Suisses policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or themarket that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please referto Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannotbe used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for RH Petrogas Limited (RHPG.SI)

Method: Our target price of S$0.40/share for RH Petrogas is based on individual run-out discounted cash flow (DCF) model for each asset usingassumptions published in the initiation report. We first derive the unrisked valuation and then assign a probability based on our riskingmethodology to reflect the asset's current stage of development to arrive at a risked valuation. From the risked asset valuation, we removenet debt to arrive at our target price of S$0.40/share for RH Petrogas.

Risk: Risks that could impede achievement of our S$0.40 target price for RH Petrogas include: (1) Uncertainty in crude oil price movement. (2)Successfully bringing Phase 1 of Fuyu-1 Block (China) development into from development into commercial production. (3) Obtaining finalODP approval on Phase 2 of Fuyu-1 Block. (4) Developing or acquiring assets in time to replace the value which may be eroded uponexpiry of Basin and Island PSCs (Indonesia) in 2020.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in thetarget price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (RHPG.SI) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of CreditSuisse.

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (RHPG.SI) within the next 3months.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (RHPG.SI) within the past 12months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;

SVS--Subordinate Voting Shares.Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may notcontain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visithttp://www.csfb.com/legal_terms/canada_research_policy.shtml.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are importantdisclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as researchanalysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to theNASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a

research analyst account.Credit Suisse AG, Singapore Branch....................................................................................................................... David Hewitt ; Shew Heng Tan

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.


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