Despite slow recovery, some locally listed O&M players outperform STI

SINGAPORE (Dec 2): Year to date, the Straits Times Index has climbed 4.8% to close at 3,215.53 points on Nov 27. But more than a handful of the locally listed companies that operate across the oil and gas (O&G) value chain have outperformed the benchmark index. While the low base certainly helps with the outperformance, the share price gains can be attributed to various factors, including improved fundamentals, mergers and acquisitions and disposals, amid a slow recovery in the sector.

The best-performing stock within the sector so far this year is Rex International Holding, an oil exploration and production (E&P) company. Shares in Rex more than doubled to close at 18.9 cents on Nov 27. The share price surge can be largely attributed to the company’s farm-in opportunities in the Norwegian Sea. A farm-in arrangement is one where an operator acquires an interest in a lease owned by another operator on which oil or gas has been discovered or is being produced.

On Oct 31, Rex’s 90%-owned subsidiary, Lime Petroleum, completed the acquisition of 30% interests in each of the licences PL838 and PL838B from DEA Norge. This was announced by the company on Nov 1. The operator, PGNiG Upstream Norway, has a 40% interest, while AkerBP holds the remaining 30% interest in the licences. Although the acquisition is already completed, it will take effect only from Jan 1 next year, as per standard practice for licence transactions in Norway.

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