Deutsche Rohstoff(DE:DR0G)’s business model has been built around management’s ability to identify, develop and monetise assets across multiple resources. In H118 the group delivered a 68% increase in revenue and a 121% increase in EBITDA y-o-y, driven by increased oil and gas production, profits on asset sales and higher commodity prices. In April 2018, Salt Creek Oil & Gas signed a sale and purchase agreement with Northern Oil & Gas to divest most of its acreage in the Williston Basin, resulting in $40m of cash proceeds, $7.6m reimbursement for investments made and 6m shares, valued at $21.5m as at 21 September 2018. Management expects continued FCF growth (excluding Salt Creek divestment) in H218, driven by strong production performance from Elster Oil & Gas with realisations at current commodity prices. A mid-year cash position and securities held of €63.6m (up from €47.1m at June 2017) was driven by the Salt Creek sale proceeds and issue of a €10.7m convertible bond in March 2018 (3.625% coupon and €28 strike price).
Growth in US production and realisations
In H118, production increased significantly to 1.69mmboe compared to 1.0mmboe in H117. Of this, c 56% was oil; the remainder was natural gas and condensates. Production from Elster was above management expectations, offsetting a weaker than expected outturn for Cub Creek. The non-cash depreciation charge at Cub Creek increased in H118. However, at €52m EBITDA was a material improvement on the prior year (€23.4m), driven by higher production, realised prices and lower overheads. Management has increased revenue expectations for 2018 from €75–85m to €90–100m, and EBITDA from €65–70m to €85–90m.
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