Regal Petroleum reports strong operations, financials in 2017

Ukraine-based oil and gas E&P company Regal
Petroleum (RPT UK) posted a 37% yoy rise in net revenue to USD 35.05 mln in 2017,
according to its Apr. 3 annual report. Its operating profit surged 2.3x yoy to
USD 5.44 mln, implying EBITDA growth of 50% yoy to USD 17.26 mln. Its net
profit totaled USD 2.29 mln in 2017 vs. USD 1.26 mln in losses a year before.

The company boosted hydrocarbon output 40% yoy to
2,237 boepd in 2017, which was the result of the successful commissioning of
the MEX-109 well and statistical result of the full-year operation of the VAS
field (operational since 2H16). The company’s average 1Q18 output amounted to
2,775 boepd, or 24% higher compared to the average level in 2017.

Regal generated net USD 16.78 mln from operating
activity in 2017 (up 96% yoy) and spent just USD 6.15 mln for investments, which
allowed it to boost its cash and short-term deposits by 51% yoy to USD 30.25
mln as of end-2017. The company had no financial debt as of the year end.

In 2018, the company is planning to drill a new well
at its VAS field (already spudded), workover a well at its older field, and
reassess its hydrocarbon reserves at all its assets.

Alexander Paraschiy: The company’s results look strong, but its revenue growth should have
been much higher than reported given its 40% higher production yoy and 17% yoy
higher average hydrocarbon prices in 2017. Regal Petroleum’s stock was
overlooked by the market for many years, having traded with a negative EV for
most of 2014-2017. So far this year, the stock has surged 230%, now trading at
a 2017 EV/EBITDA of 4.3x. With its solid 2017 financials, we believe there is
some more price gain potential in this stock.