RockRose Energy (RRE) – If Carlsberg did acquisition updates

RockRose Energy (RRE) – If Carlsberg did acquisition updates

Since covering Rockrose a few weeks ago (here), its shares are up over 15% and were briefly above 600p a share following the Dyas acquisition and a trading update (latest share price 540p, market cap £83 million).

Dyas Acquisition

On the 2nd October the company announced the completion of the Dyas acquisition. This included a working capital adjustment in favour of the company of €77.3 million based on the effective acquisition date of 1st January. The acquisition cost was €107 million which means the asset has already returned 75% of the capital cost within nine months. If gas prices remain elevated the asset could pay for itself by year end which would be an excellent result.

Strengthened Balance Sheet

On the date of the Dyas acquisition the company had $58 million (£44 million) of unrestricted cash. This is more than half the company’s market cap and allows the company to fund other developments without using debt or leverage.

Increased Future production – Arran development

Rockrose has acquired a 30% stake in the Arran development field alongside operator Shell. Peak gross production is expected to be 21,000 boepd, circa 6,300 boepd attributable to Rockrose. The company has not announced expected development costs but it has been estimated that net costs would be £50-£60 million here (note: total costs could be 33% higher as the article was written when Rockrose had a 20% stake). Once Arran comes on stream (light blue in the chart), production at Rockrose will increase:

(Source RockRose Energy)

Hilariously cheap?

Given oil and gas price increases, the company could outperform the top end of its 2018 $120 million EBITDA estimates. After discounting decommissioning costs of 25% (which will probably be 20%) and using the top end EBITDA estimate Rockrose should generate at least £68 million this year. Management have shown excellent deal making ability and it wouldn’t be a surprise to see more. Given the balance sheet, cash generation and historic deal making I believe the company to be materially undervalued.


At the time of publication, the author holds a long position in RRE.

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