High operational leverage to provide benefit

Deutsche Rohstoff 11 May 2021 Update
Download PDF German PDF Download

Deutsche Rohstoff

High operational leverage to provide benefit

Oil & gas

Scale research report - Update

11 May 2021

Price

€14.0

Market cap

€71m

Share price graph

Share details

Code

DR0

Listing

Deutsche Börse Scale

Shares in issue

5.082m

Net debt at end Q121

€88.4m

Business description

Deutsche Rohstoff identifies, develops and monetises resource projects in North America, Australia and Europe. The company’s focus is on the development of oil and gas opportunities in the US.

Bull

High operational leverage provides benefit in recent strong oil price environment.

Cheaply acquired undeveloped acreage offering potential for up to 100 new wells.

Stable liquid position in current environment.

Bear

Permanently low oil price (WTI<$40/bbl) would threaten DRAG’s existence.

May be unable to raise sufficiently low-cost debt.

Faster than expected declines in existing wells, or more than expected uneconomic wells in yet-to-be developed acreage.

Analysts

James Magness

+44(0)20 3077 5700

Elaine Reynolds

+44(0)20 3077 5713

Deutsche Rohstoff’s (DRAG’s) flexible business model has enabled it to rise out of the 2020 downturn with cash, including marketable securities, of €22.8m and cheaply purchased undeveloped acreage (in June 2020) offering potential for up to 100 wells. Production could increase by up to 50% during FY21 (based on the top end of management guidance) and EBITDA could almost double, based on an oil price of $60/bbl. DRAG expects to invest up to $60m in FY21 to build up additional production, including c $45m in drilling 12 horizontal wells (2.25 miles in length), which should commence production in Q421, and therefore production is expected to increase further in FY22. We are encouraged by Q1 results (reported today), which show DRAG is comfortably on track to meet its full year guidance.

Production ramping up again as oil price recovers

The key Cub Creek Olander pad was opened again in early January and is ramping up production. DRAG now expects net production of 5,700–6,300boepd from existing wells in FY21, an increase of 35% to 50% from FY20 (4,213boepd). This does not include new wells such as those expected at Bright Rock, where a possible 10 to 15 new wells could see production increase by c 75% to 700boepd during 2021 (from c 400boepd in January), or the undeveloped acreage acquired in June 2020 (potential for up to 100 wells), which could commence drilling in 2021.

EBITDA expected to almost double

Assuming the recent strong oil and Henry Hub prices persist, with WTI averaging above $60/bbl since mid-February, DRAG will benefit from its high operational leverage. Management, which is typically conservative in its guidance, expects FY21 EBITDA in a range of €42–47m, which is almost double FY20 EBITDA (€23.9m).

Valuation: Below audited reserve values

DRAG’s 8 March 2021 independent 1P and 2P valuation of its oil and gas assets was $211.6m (€176.3m), including Elster Oil & Gas, Cub Creek Energy, Salt Creek Oil & Gas and Bright Rock Energy. It assumes a long-term oil price of c $55/bbl. We assume DRAG’s mining assets are valued at book value and adjust for end-FY20 net debt. This amounts to a SOTP valuation for 1P reserves of c €103m or €20.3/share (45% above current share), rising to €24.2/share including 2P reserves.

Historical results for FY18–20 and company guidance for FY21–22

Year
end

Revenue
(€m)

EBITDA
(€m)

EPS
(€)

DPS
(€)

Capex
(€m)

Dividend yield (%)

12/19

41.2

22.7

0.1

0.1

28.7

0.7

12/20

38.7

23.9

-3.1

0.0

36.8

N/A

12/21e*

59.5

44.5

>0**

N/A***

N/A

***

12/22e*

62.5

42.5

>0**

N/A***

N/A

***

Source: Edison Investment Research, DRAG. Note: *FY21 and FY22 figures are mid points of company guidance; **DRAG expects to achieve a clearly positive group results in both FY21 and FY22; ***payment of a reliable and, if possible, increasing dividend remains a key objective.

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

Production already back at pre-COVID-19 levels

DRAG’s business strategy remains the identification, development and monetisation of attractive resource projects in North America, Australia and Europe, with a focus on the development of oil and gas deposits in the United States, where it operates through its subsidiaries Cub Creek Energy (88.46% ownership), Elster Oil & Gas (93.00%), Salt Creek Oil & Gas (100%) and Bright Rock Energy (98.35%). It is mostly active in shale basins in Colorado (c 90% of production in FY20), North Dakota, Utah and Wyoming. The company responded quickly to the COVID-19 global pandemic by reducing costs and cutting back production, particularly in Cub Creek Energy. A drilling programme to develop the Cub Creek Knight pad was postponed. Despite the challenging conditions, the company produced 4,213boepd in FY20, only 6.6% below FY19 (4,509boepd), with production in FY20 comprising 46% oil (43% in FY19).

The key Cub Creek Olander pad, which was producing c 6,000boepd prior to significant onset of the pandemic, was cut back from mid-March 2020 and completely closed in by the end of April to avoid selling oil at historically low prices. The wells remained closed for the rest of 2020 and were opened again in early January as the oil price recovered, with rates at 4,000boepd by the end of January and expected to continue to rise. The older Cub Creek drilling sites began producing again in October 2020 at around 1,000boepd, in line with expectations.

The company now expects net production of 5,700–6,300boepd from existing wells in FY21. This does not include new wells such as those expected at Bright Rock, where a possible 10 to 15 new wells could see production increase by c 75% to 700boepd during 2021 (from c 400boepd in January). In addition, Bright Rock purchased c 30,000 acres in the Powder River basin (Wyoming) at a low cost in June, which, due to the market conditions at the time, represented only the discounted value of existing production. The Powder River basin accounts for c 50% of Bright Rock’s existing production (c 400boepd) and there is also significant undeveloped acreage (offering potential for up to 100 wells), which could start to be drilled as early as 2021. In total, DRAG expects to invest up to $60m in FY21 to build up additional production, including c $45m in drilling 12 horizontal wells (with 2.25 miles length), which should commence production in Q421, and therefore expects to increase production further in FY22. We are encouraged that Q121 results give production of 6,432boepd which is above the top end of the full year (FY21) guidance range, and back at pre-COVID levels (Q120: 6,348boepd).

Exhibit 1: O&G production reported in Q120 to Q420 against guidance for FY21 (boepd)

Source: Edison Investment Research, DRAG

Financials

The company generated sales of €38.7m in FY20, within the forecast range of €37–40m and only marginally below FY19 sales (€41.2m), assisted by €12.4m hedge proceeds. EBITDA was €23.9m, 5% ahead of FY19 (€22.7m), again within the guidance range (€23–26m). Management had significantly increased guidance in November (at the nine-month results), having previously increased it in August (at H2 results), following a massive cut to initial guidance for 2020 in April.

Revenue for H220 was €12.6m, which is 26% below H219 (€17.0m). This is due to a combination of lower production, lower oil price and most of the hedge proceeds being realised in H120 (€10.2m versus €2.2m in H2). Reported EBITDA for H220 was €8.2m, which is 8% above H219 (€7.5m); however, on adjusting for one-off items, mostly within ‘other operating income’ (which includes profit on sale of mining shares), adjusted EBITDA for H220 was €3.8m, which was 30% below H219 (€4.4m). With oil prices (and oil and gas shares) increasing significantly since November, DRAG should start to see benefits from its high operational leverage; WTI was sub-$40/bbl at the start of November and has averaged above $60/bbl since mid-February; similarly, Henry Hub, which spent most of March 2020 to July 2020 below $1.8/mmbtu, has been mostly trading above $2.5/mmbtu since October 2020, with periods above $3/mmbtu. We note that some upside is capped as DRAG has entered hedging contracts at c $45/bbl for 45% of its 2021 production.

Management has announced the following guidance for FY21 and FY22:

Group sales: FY21 in a range of €57–62m; FY22 in a range of €60–65m.

EBITDA: FY21 in a range of €42–47m; FY22 in a range of €40–45m.

Group (net profit) result: clearly positive in both years.

EBITDA guidance includes ‘other operating income’ of €7.7m, which typically includes sales of assets (fixed and/or current). This likely explains the higher EBITDA guided in FY21. We note that the company opportunistically built up a portfolio of $25m in oil and gas stocks and bond and gold stocks during market weakness in 2020; by March 2021, realised gains amounted to €8.2m (€8.5m reported in unaudited Q1 results) and there were still €3.8m of unrealised gains – gains would be recorded as ‘other operating income’. The guidance above assumes WTI of $60/bbl in 2021 and 2022, a Henry Hub price of $2.5/mmbtu and an exchange rate of US$1.2/€.

DRAG’s end-FY20 cash, including marketable securities, stood at €22.8m (which has already increased to €35.7m by end-Q121), having placed a corporate bond in late 2019, which raised €87.1m. We note that the other of the two corporate bonds has a maturity of 20 July 2021, with €16.7m still outstanding at end-FY20. Assuming the recent strong oil and Henry Hub prices persists, DRAG should generate considerably higher operational cash flow in FY21.

We are encouraged by DRAG’s preliminary (unaudited) Q121 figures released on 10 May. Consolidated net profit was c €11.7m with sales of c €17.9m and EBITDA of c €21.3m, suggesting that DRAG is comfortably on track to meet its full year guidance. Both earnings figures were heavily influenced by ‘other operating income’ of €9.5m, which included €8.5m resulting from gains on sale of the equity and bond portfolio. Adjusting for ‘other operating income’ from the Q1 results still gives consolidated EBITDA of €11.8m, which is an increase of 42% from Q120 (adjusted EBITDA of €8.9m), and net profit of €2.1m (versus an adjusted net loss of €0.3m in Q120).

Exhibit 2: Financial summary

(€000s)

2016

2017

2018

2019

2020

Q121*

Income statement

 

 

 

 

 

Sales revenue

9,170

53,746

109,052

41,204

38,683

17,924

% growth

383%

486%

103%

-62%

-6%

11%

Other operating income

10,497

1,124

19,060

4,312

7,692

9,501

EBITDA (reported)

6,374

36,138

97,933

22,725

23,935

21,293

% margin

70%

67%

90%

55%

62%

119%

EBITDA (adjusted)

(1,923)

35,014

79,251

20,283

18,243

11,792

% margin

n/m

65%

73%

49%

47%

66%

EBIT (reported)

(541)

5,306

32,691

5,630

(16,135)

14,326

Net profit (after minority interests) (reported)

102

5,549

13,872

308

(15,509)

11,018

Number of shares

5,063

5,063

5,063

5,082

5,082

5,082

EPS (reported) (€)

0.02

1.10

2.74

0.06

(3.05)

2.17

DPS (€)

0.60

0.65

0.70

0.10

0.00

0

Balance sheet

 

 

 

 

 

Fixed assets

120,556

148,361

126,985

161,690

134,671

136,714

Financial assets (non-current)

21,043

22,710

22,001

36,780

35,697

34,827

Cash and cash equivalents, including marketable securities

28,091

29,699

59,989

66,637

22,816

35,695

Total assets

193,472

213,574

224,845

278,925

206,722

231,803

Total debt

75,243

106,576

93,385

139,111

128,381

124,057

Total liabilities

127,351

156,899

151,007

207,424

161,133

169,983

Shareholders’ equity

66,121

56,675

73,837

71,501

45,589

61,820

Net debt

47,152

76,877

33,395

72,474

105,566

88,361

Cash flow statement

 

 

 

 

 

Net cash from operating activities

13,991

37,848

68,674

13,938

13,991

n/a

Net cash from investing activities

(48,730)

(51,625)

(28,268)

(34,238)

(48,730)

n/a

Net cash from financing activities

(17,692)

24,735

(28,626)

35,292

(17,692)

n/a

Forex movement

639

(7,225)

5,136

1,004

639

n/a

Net cash flow

(53,071)

18,183

6,644

13,989

(53,071)

n/a

Cash and cash equivalents

24,634

28,368

45,646

61,281

8,210

16,236

Capex (included in net cash from investing activities)

(36,841)

(51,775)

(66,208)

(28,728)

(36,841)

n/a

Source: Edison Investment Research, DRAG. Note: *Unaudited.

Valuation

We have calculated a sum of the parts (SoTP) valuation (Exhibit 3) for DRAG, based on the following:

An independent O&G reserves valuation (competent person’s report, or CPR), dated 8 March 2021, published by the company, which valued 1P+2P reserves at $211.6m (€176.3m). We show separate valuations for 1P and 2P reserves.

Book value of financial assets at end-Q121 (€34.8m). This includes listed shareholdings in Almonty Industries, Hammer Metals and Northern Oil & Gas, as well as an unlisted shareholding in Rhein Petroleum.

Book value of net debt at end-Q121 (€88.4m).

The share valuation based on 1P reserves is €20.3, which is 45% above the current share price of €14.0. Including the 2P reserves adds €3.8 per share, giving a share valuation of €24.2, which is 73% above the current share price. The CPR is based on a long-term oil price assumption of c $55/bbl (Nymex forward price), which is the same price assumption that DRAG adopts in projects appraisals.

Exhibit 3: DRAG assets and per-share value

Asset

Value basis

Reserves (mboe)

Value
(€m)

Value per share (€)

Oil & gas assets:

CPR*

2P reserves

14.6

19.5

3.8

1P reserves

128.8

156.8

30.9

Sub-total

143.4

176.3

34.7

Financial assets (non-current)

Q121 book value

34.8

6.9

Cash and cash equivalents

Q121 book value

16.2

3.2

Marketable securities

Q121 book value

19.5

3.8

Less: total debt

Q121 book value

(124.1)

(24.4)

Total equity valuation: 1P+2P reserves

122.8

24.2

Excluding 2P reserves

(19.5)

(3.8)

Total equity valuation: 1P reserves

103.3

20.3

Market value**

70.6

13.9

% difference

46%

46%

Source: Edison Investment Research, DRAG. Note: Number of shares: 5.082m; $1.2/€. *CPR dated 8 March 2021. **Share price at 10 May 2021 (intra-day).

As a downside sensitivity, we note that DRAG also published a CPR, dated 31 December 2020, based on a long-term oil price assumption of c $45/bbl (Nymex forward price at that date). This report valued 1P+2P reserves at €119.5m (using $1.2/€). All else equal, this gives a share valuation based on 1P+2P reserves of €13.0, or €10.6 based on 1P reserves. We note that the oil prices have enjoyed a sustained rally since the year end, with the WTI spot price averaging above $60/bbl since mid-February.

General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

This paragraph mark is needed to maintain formatting, please leave this text for the editors.

Share this with friends and colleagues