Rex diversifies business for long-term growth
Company banks on oil and gas for short-term value
SINGAPORE: Singapore-listed oil and gas company Rex International is investing in drones and medical technology, betting that these new sectors will offer future growth as fossil fuels are gradually phased out in the transition to a greener planet.
Rex executive chairman John d’abo told The Straits Times that oil will likely decline in demand in the years to come, so diversifying into other areas offering growth might pay dividends in the future.
The company is investing in Xer Technologies, which provides drones that can be used for inspections and monitoring gas emissions.
“Putting small investments into companies in potentially very large sectors was the thinking behind our diversification,” d’abo said.
“We do not want to change the risk profile of the company at all.
“But we want to have majority stakes in areas where we can help drive growth, where we can see that we can create shareholder value in a relatively short space of time.”
Another alternative investment for Rex is in medical technology, specifically in cancer therapy.
It has invested in Moroxite T, a Swedenincorporated medical technology company that is developing a new system for the targeted delivery of anti-tumor drugs.
“Cancer therapy is a massive sector. Shareholder value can be created quickly, even in terms of pre-revenue through the filing and award of patents within that area,” d’abo said.
“We’re not dedicating a lot of money to alternative investments, but we want to keep our fingers in the game, and see how they develop over the course of time,” he said.
“We do recognise that oil won’t be around in 50 years’ time for sure.”
In the short term though, d’abo remains optimistic that oil and gas can still deliver value.
With geopolitical tensions brewing in the Middle East, oil prices have risen in recent months, and are predicted to hold above US$80 a barrel in 2024.
“Part of the whole process of being a listed company is to create value for shareholders, and we do believe that there is still significant upside for the company in the oil and gas business,” d’abo said.
“While there is clearly recognition that it is a sunset industry in the longer term, for now the major focus clearly is still on gas.”
Rex is in the business of oil and gas exploration and production.
It is active in areas like Norway, where it has interests in two oil-producing fields, Brage and Yme.
Its Norway subsidiary and partners on April 30 submitted a plan for field development work at the Bestla field in the North Sea.
Rex is also drilling for oil in Oman and plans to file a field development plan in 2024 for its newest field in Benin, West Africa.
“There’s optimism that we can certainly add reserves and Benin has the most obvious potential.
“We have got oil reserves of about nine million barrels in combination from Oman and Norway. Just looking at the current oil price, we know that points to quite significant revenues in the coming years,” he said.
He added that Rex is also sitting on an estimated 16 million barrels of oil resources in Norway.
“We hope to make progress in Norway. We are hopefully going to add reserves and give greater clarity on the future earnings of the business because once we’ve got a field development plan in there, we can start to forecast the revenues of the various wells that we drill.”
In general, he added that the oil price remains high and that peak oil – the estimated time that global crude oil production reaches its maximum rate – seems further away, which contributes to his optimism.
He added that there will still be a need for oil in 10 to 15 years, and Rex is focused on trying to extract the oil as economically as it can.
The company noted in a statement in February that 2023 saw an overall increase in oil production in Norway, which raised revenues.
However, this was partially offset by a drop in the volume of oil extracted and sold from the Yumna Field in Oman due to production stoppages for the maintenance of facilities and other operational issues.
For the financial year ended Dec 31, 2023, Rex’s revenues increased by 22% to Us$207.02mil, up from Us$170.26mil in 2022.
However, the company posted a loss after tax of Us$69.4mil, as compared with profit after tax of US$350,000 in 2022, owing to higher depletion rates at its oil fields during the period.
Rex was trading at 12.6 US cents on May 10, down by more than 30% since the start of 2024. At those levels, the company has a market value of over S$160mil.
Analysts appear divided on the stock though, with one forecasting that it could reach a target price of 32 US cents within the next 12 months.
In contrast, another analyst had a target price of just eight US cents on the stock. — The Straits Times/ann
“Putting small investments into companies in potentially very large sectors was the thinking behind our diversification.”
John d’abo