RH Petrogas Limited: Q2 & H1 2025 Financial Analysis

RH Petrogas Limited, a Singapore-listed oil and gas exploration and production company, has released its condensed interim financial statements for the second quarter and half year ended 30 June 2025. Below is an in-depth analysis of the company’s key financial metrics, performance trends, and significant factors impacting its operations, tailored for institutional and sophisticated investors.

Key Financial Metrics and Performance Comparison

Historical Performance Trends

• Revenue: Declined 23.3% YoY in Q2 2025, mainly due to a 20.5% drop in average realised oil price (from US\$83/bbl to US\$66/bbl) and lower crude oil liftings.
• Production: The gross production decreased 7% YoY to 6,605 BOEPD in Q2 2025, attributed to power outages affecting high productivity wells.
• Cost of Sales: Fell 8.2% YoY, driven by fewer well workovers, lower material use, and reduced repair/maintenance costs, partially offset by higher depletion and amortisation of oil and gas properties.
• Gross Profit: Decreased from US\$11.1M to US\$6.5M YoY in Q2 2025.
• Net Profit: Dropped 28.3% YoY in Q2 2025 to US\$3.47M.
• EPS: Declined from 0.46 cents to 0.33 cents YoY in Q2 2025.
• Cash Flow: Positive operating cash flows of US\$11.98M in H1 2025, compared to US\$18.06M in H1 2024. Cash and bank balances increased to US\$62.7M as of June 2025.
• Net Asset Value: Improved to 7.49 cents per share as of June 2025, up from 6.77 cents at year-end 2024.

Exceptional Earnings and Expenses

• Legal Compensation Reversal: US\$984,000 provision reversed following a favorable judicial review, boosting other income and reducing other expenses in Q2 and H1 2025. This relates to a prior Supreme Court verdict over a land dispute, now ruled in favor of the company.
• No impairment losses: No asset impairments recognized in H1 2025 after recoverable amount reviews on oil and gas properties and exploration assets.
• Finance Costs: Rose due to higher interest on lease liabilities for both the Kepala Burung and Salawati PSCs.

Corporate Actions and Share Capital

• Share Options: 740,000 new ordinary shares issued in Q2 2025 via employee share option exercise. Total issued shares increased to 835,917,400 (from 835,177,400 at year-end 2024). No treasury shares or subsidiary holdings outstanding.
• No Dividends: No dividend proposed for Q2 or H1 2025, consistent with prior quarters.

Material Events & Risks

• Oil Price Volatility: Brent crude averaged US\$68/bbl in Q2 2025, down from US\$76/bbl in Q1. Prices hit a four-year low due to OPEC+ production increases and US tariff policies. Geopolitical tensions (e.g., Israel-Iran conflict) led to transient price spikes but no sustained rally.
• Legal Dispute Resolved: Favorable outcome in a land dispute case, with provision reversed and no further expense expected.
• Audit Disclaimer: The FY2024 audit received a disclaimer of opinion from Ernst & Young LLP. Independent reviews by PwC and WongPartnership LLP are ongoing, with recommendations on internal controls and governance expected shortly.
• Exploration Commitments: The Group faces firm exploration work commitments of US\$68.2M over five years for its PSCs. As of June 2025, US\$40.2M remains to be spent. Extensions have been granted for both PSCs to fulfill these obligations.
• No Material Related-Party Transactions: None reported for the period.

Liquidity and Balance Sheet Highlights

• Cash and Bank Balances: US\$62.7M as of June 2025.
• Current Ratio: Current assets (US\$78.5M) comfortably exceed current liabilities (US\$31.1M).
• Net Financial Position: Net undiscounted financial assets of US\$41.6M.
• Lease Liabilities: Reduced due to payments, partially offset by new lease agreements.

Outlook and Forward-Looking Statements

• Industry Trends: Oil markets remain volatile, with OPEC+ production increases and macroeconomic uncertainty from US tariffs. OPEC forecasts 1.3M bpd demand growth in 2025, but IEA is more cautious at +700,000 bpd. Market risks are elevated.
• Operational Plans: RH Petrogas plans to drill two exploration wells in the Kepala Burung PSC in H2 2025, and continue well workover programs to sustain production.

Conclusion and Investment Recommendation

Performance Summary: RH Petrogas delivered positive operating cash flows and maintained a strong net asset position despite significant declines in revenue, profit, and EPS driven by lower oil prices and production constraints. The reversal of a substantial legal provision was a one-off boost to earnings. No dividend was proposed, reflecting a focus on meeting exploration commitments and maintaining liquidity.

Outlook: The company faces a challenging operating environment due to oil price volatility and macroeconomic risks. However, its liquidity remains robust, and the balance sheet is healthy. Ongoing audit issues and the need to fulfill large exploration commitments are notable overhangs.

• If you are currently holding RH Petrogas shares:
  
  Consider holding your position if you are comfortable with oil price volatility and the company’s focus on exploration growth rather than immediate returns. Monitor developments from the independent audit review and progress on exploration commitments, as these will affect future performance and risk profile.
• If you are not currently holding RH Petrogas shares:
  
  Consider waiting for greater clarity on the audit review outcome and improvements in oil market conditions before initiating a position. The lack of dividend and current earnings weakness suggest limited near-term upside, but the company’s strong liquidity may present opportunities if exploration results are promising or if industry conditions improve.

Disclaimer: This analysis is based solely on information provided in the company’s interim financial report and is for informational purposes only. It does not constitute investment advice. Please conduct your own due diligence or consult your financial adviser before making any investment decisions.

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