Deutsche Rohstoff’s (DRAG’s) business model has been built around management’s ability to identify, develop and monetise assets across multiple resources. In H118 the group delivered a 68% increase in revenue and a 121% increase in EBITDA y-o-y, driven by increased oil and gas production, profits on asset sales and higher commodity prices. In April 2018, Salt Creek Oil & Gas signed a sale and purchase agreement with Northern Oil & Gas to divest most of its acreage in the Williston Basin, resulting in $40m of cash proceeds, $7.6m reimbursement for investments made and 6m shares, valued at $21.5m as at 21 September 2018. Management expects continued FCF growth (excluding Salt Creek divestment) in H218, driven by strong production performance from Elster Oil & Gas with realisations at current commodity prices. A mid-year cash position and securities held of EUR 63.6m (up from EUR 47.1m at June 2017) was driven by the Salt Creek sale proceeds and issue of a EUR 10.7m convertible bond in March 2018 (3.625% coupon and EUR 28 strike price).
Deutsche Rohstoff’s (DRAG’s) multi-asset and resource strategy has been built around management’s ability to identify investment opportunities, development of prospects and ultimately monetisation. In 2017 the group delivered a 497% increase in revenue, and 472% in EBITDA driven by increased production, boosted by a full year contribution from DRAG’s 90% owned affiliate Salt Creek Oil & Gas. Subsequently, in April 2018 Salt Creek Oil & Gas signed a sale and purchase agreement with Northern Oil & Gas to divest most of its acreage in Williston Basin, generating a c 40% return on invested capital over 17 months. Management expects a strong increase in production over Q218 and Q318 as investment made in Elster Oil & Gas yields results.
Deutsche Rohstoff (DRAG) generated group sales of EUR 32.1m and EBITDA of EUR 23.5m in H117, significantly de-risking consensus full year forecasts, which imply 600% revenue growth in 2017. Sales are to be further enhanced in the coming months with a planned 50-well drilling programme across Cub Creek, Elster and Salt Creek. DRAG’s metals and mining investments saw a strong recovery during the first half of 2017, underpinned by a strong rise in the price of zinc, copper and a number of rare earth commodities.
Deutsche Rohstoff (DRAG) has a track record of shareholder value creation through timely investments in the resources sector across a range of commodities and geographies. The company's investment in Tekton Energy, for example, generated a 365% return on equity over three years. DRAG's current focus is on the development of oil and gas opportunities onshore US. Management expects to make strong returns on investment, drilling unconventional acreage in the Williston Basin and the Wattenberg field, while also using the company's balance sheet to acquire additional assets. Future returns will be susceptible to management's ability to anticipate commodity price cycles, structure transactions and exploit acquired assets.
Almonty has announced a C$1.5m reduction in the Wolfram Camp Mine (WCM) acquisition cost, stemming from the project's working capital adjustment. This will be satisfied through the surrender of a respective portion of the convertible debt issued to Deutsche Rohstoff. This reduction in net debt increases our valuation of the company to C$1.32/share.