Deutsche Rohstoff - Strong free cash flow expected in H218

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 €63.6m (up from €47.1m at June 2017) was driven by the Salt Creek sale proceeds and issue of a €10.7m convertible bond in March 2018 (3.625% coupon and €28 strike price).