Deutsche Rohstoff AG (DR0) Earnings Call Transcript & Summary

Good morning. Well, good day, ladies and gentlemen, and a warm welcome to the second day of the first Deutsche Boerse Scale Summit. My name is [ Ingmar Gartenprader ], and I'm very pleased to welcome you on behalf of Deutsche Boerse. This new format brings together investors and high-growth scale issuers to enable a direct exchange on strategies, positioning and investment stories. Each presentation will last 20 minutes and will be followed by a 10-minute Q&A session. And as a participant, we warmly encourage you to actively participate in this discussion. With that, I'm pleased to welcome the CEO of Deutsche Rohstoff AG, Jan-Philipp Weitz, who will guide us through the company's presentation. And with no further ado, I hand over to you, Mr. Weitz.

Perfect. Thank you very much for the warm welcome and the introduction. And thank you very much, everybody, for attending today's Deutsche Boerse Scale Summit here and our short presentation on Deutsche Rohstoff in general and our outlook here for the coming months and years and our future plans. Some of you may already know Deutsche Rohstoff well and others may be new to our story. So I will try to balance the information here to give everybody the chance to understand what we are doing. And the disclaimer, obviously, as you know, everything that we say in terms of forward-looking statements has to be viewed with caution. So Deutsche Rohstoff AG, we are based in Germany. We're listed, obviously, in Germany in the Scale Segment here, have a market cap of roughly EUR 400 million today. And we are active in the natural resources space, oil and gas as well as metals. Oil and gas is what we call our bread-and-butter business. That's where 100% of our revenue comes from and a significant amount of our profitability, while at the same time, we do have a metals exposure, which stems from our historic activity where we were actually owner and operator of several mines. And these days, it is more an investment portfolio in which there is one particular investment in a U.S. company called Almonty Industries that has been extremely successful in developing tungsten mines over the past decade or so and has grown very significantly in value and, therefore, making up roughly EUR 230 million value of our company. At the same time, our oil and gas business is going to generate close to EUR 300 million of revenue for us this year and roughly EUR 200 million EBITDA, based on our current guidance at $75 oil prices. And the development in the oil and gas space, even the tailwinds -- with the tailwinds that we have had of higher oil prices here and some very positive operational development has helped us -- have helped the company. Our share price has gone up significantly over the past 5 years here, especially over the past 12 months. And the reason for that is that we have been very profitable on the oil and gas side, but now also with our investment in Almonty Industries have been able to already generate EUR 100 million net income in the first quarter of 2026. At the same time, we have a very healthy balance sheet and leverage ratio. I think this slide here shows you a little bit of the history of where our numbers come from. We've grown revenue from EUR 73 million in 2021 to, yes, close to EUR 300 million this year and according to our guidance also in the coming year. And that correlates strongly with the production growth from 7,000 barrels of oil equivalent of production up to 17,000 barrels of oil equivalent that we are aiming to produce this year. At the same time, we have always remained relatively modest leverage. So our net debt to EBITDA has always hovered around 0.5 to 1x, which obviously is a healthy leverage ratio even for an oil and gas company. I think if we look at what we have to offer in terms of assets and look at them versus our liability figures, we have a total debt amount, financial debt of EUR 229 million in the group. Our assets, from right to left, the reserves of our oil and gas reserves, just proved reserves that we are publishing once a year have a present value of EUR 430 million or [ EUR 760 million ], if you look at those numbers, either at $60 oil price or $80 oil price. And that means we have a very significant and strong reserve base. Those reserves reflect what we still have in the ground, what we can still produce and what the discounted-to-today value of those future cash flows is. So depending on whether you look at oil more as a $60 pricing commodity or an $80 pricing commodity, it is either EUR 430 million of proved reserves or EUR 770 million of proved reserves. And on the cash side, with roughly EUR 150 million in cash and then our Almonty shareholding, with today's market value around EUR 230 million, our combined asset base can certainly be viewed as potentially valuable or having a value of more than EUR 1 billion. Therefore, I think our financial debt to asset basis is extremely comfortable and gives us a lot of comfort and positive outlook for the future of our company. And I think the capital market understands that, obviously also, and that's why I said the share price has appreciated significantly here. And I think we have been able to outperform our peer group quite strongly. At the same time, we are a growth company. We are only, at this point, a EUR 400 million market cap company. And obviously, our goal is to grow that. But at the same time, we have always been a dividend payer other than years around the COVID pandemic. But in the last 10 years, we have been a very continuous dividend payer. As you can see, that dividend has continuously grown at yesterday's AGM, we got the approval from the shareholders to pay EUR 2.25 dividend for the year 2025 that will be paid out shortly. And we have always been buying back shares in the last 3 years here. So this year, we are in our largest share buyback program so far, where we are going to buy back shares for up to EUR 7.5 million under a currently ongoing share buyback program. And those are things that we are also doing to show the market that we do care about our shareholders, and we do have the idea to buy back shares here and to distribute dividends. And as you can see here, nonetheless, I mean, there is certainly a slight discrepancy maybe in the way the capital market is valuing our oil and gas business versus our U.S. peer group, and it's always hard to select a peer group. But at the same time, it is certainly, definitely obvious that our small cap peer group, if you look at it here, is trading at a significantly higher EV to EBITDA multiple despite us doing an adjustment here in our EV/EBITDA multiple, excluding the Almonty investment, which shows that our EV currently is at EUR 250 million if we exclude the value of our Almonty investment as of today. And our EBITDA, excluding the profits from the Almonty investment at EUR 200 million gives us an EV/EBITDA of 1.3x, showing that this is significantly below the peer group and obviously also significantly below much larger companies like, for example, Occidental Petroleum. But in that case, I mean, it is also fair to say that those companies have a lot broader -- a significantly broader production base and a production that would remain much more stable if they stopped investing additional capital. So it is not surprising that very large major oil and gas companies would have a higher EV/EBITDA multiple. But the much smaller ones for those, that statement does not necessarily hold true. So if we look at our U.S. business, we're active in 3 basins in the U.S., the Powder River Basin, the DJ Basin and the Appalachian/Utica Basin in Ohio. We are only currently producing in Wyoming and in Colorado, and the majority of our production with around 15,000 barrels of oil equivalent for this year guided will come from Wyoming, where we are one of the largest or most active operators. We are currently operating 3 drilling rigs out of -- out of 16 drilling rigs in the Powder River Basin. That makes us certainly one of the most active operators here. And we have an acreage position of 70,000 acres, which you can see on this slide here, it is a position that is really giving us significant running room to further develop our reserves to add additional wells over the coming years. And even at this significantly accelerated development pace, and that we are showing this year, it is possible for us to drill here for many years going forward. And that significantly accelerated development pace is important because at the beginning of this year, we were originally planning to only drill wells with one drilling rig and potentially drill up to 10 wells or somewhere around that number. And when oil prices increased drastically in March, we were really quick to react. And over the course of March and April, we added 2 additional drilling rigs. And yes, basically ramped up what is by far the largest development program in the history of our company here. Like I said, currently running 3 rigs. We are guiding to invest roughly EUR 230 million this year into our own oil and gas developments. And obviously, developments that we are doing with partners. The majority of our production comes from oil wells that we have drilled ourselves, that we are operating ourselves and that are what you would call operated by Deutsche Rohstoff subsidiaries. Yes, roughly 1/3 of our production comes from different nonoperated wells. One significant part of that is a joint venture that we have had with Occidental Petroleum here in the Powder River Basin in Wyoming for many, many years. And you can see, I mean, on this map, there's a lot of well-known names in the oil and gas space, oil companies, significant market caps, usually between $20 billion and $40 billion for those that are public. And they operate in other oil fields, too, such as we do in the Powder River Basin, EOG Resources and Anschutz are the largest operators with roughly 40,000 barrels of production, but you can see with our guided 15,000 barrels of production in the Powder River Basin for this year, we are definitely not far behind those much, much larger companies. So I think it's fair to say that we have a significant and very relevant footprint here in this basin. And what is extremely positive is the fact that the oil wells that we have brought into production this year, they have already been very prolific. So you can see here the dotted line is what we call our type curve that is basically the production results that we say we are expecting based on the economics that we are running, based on the financials that we are using to determine whether we should drill an oil well or not. And in a nutshell, you can see that even some of those wells that familiar shareholders will recognize what is called, for example, our Chinook pad that we drilled in 2025 and our Cottonwood pad that we drilled in 2024, those pads produced up slightly over 100,000 barrels of oil on average after 150 days. The pads that we have brought online this year, you can see here, they have already produced significantly more barrels in the first 40 to 50 days of their life. So it seems that we are going to be able this year to even create better production results, stronger wells. The reason for that is that we have made some changes also to our completion design and the way we design those wells. And yes, if that will hold true for all of our 2026 development program, which we don't know as of yet, and we are not currently anticipating that because we need to see whether we can continue with these significantly above-expectation results, that would be very, very interesting and very appealing and would definitely enhance the value of our Wyoming assets significantly. So we will have to see whether that's the case. There is also a price for that. I mean for some of these wells, we have used more expensive completion designs. And it is the question for us now, do we want to invest some additional capital around $1 million extra or so per well, increasing well costs from $9.5 million to $10.5 million per well for those wells in the Niobrara formation that we're talking about here, or do we not want to do that. But at this point, it looks like we are on a good path and are looking forward to see what we can do in the coming months. Yes, I've talked about oil and gas now for quite a bit. Deutsche Rohstoff, as I mentioned in the beginning, is not only oil and gas. Deutsche Rohstoff is also the metals and mining space. We have this investment in Almonty Industries since 2014 and Almonty, like I said, has been an extremely successful company, having been listed on the ASX and TSX in Australia and Canada for many years, they have now progressed also to the NASDAQ last year in the summer. So they are a NASDAQ-listed entity with, as of today, roughly USD 5.5 billion market cap, of which we still hold roughly 4.9%. And that is something that has obviously been tremendously valuable for us and has created EUR 100 million of net income or specifically EUR 97 million of net income already this year. And our residual value of the investment here is still at EUR 230 million. So that dwarfs other things in our metals portfolio quite a bit. But we have always maintained a portfolio of metals and mining investments over the past 7 years or so, where we have said we do like to have slightly more as part of our treasury also exposure to metals and mining investments with the idea and the vision to potentially find other companies that could be as successful as Almonty. And that is something that we are currently expanding a little bit. We are looking more actively at other metals companies. And just looking at the growth of our company size and our balance sheet size and our liquidity amount here over the last 12 months. I think it is fair to also say if we only want to keep our metals and mining portfolio that is non-Almonty somewhat, yes, of the relative size compared to the rest of the company, we would have to make a few additional investments. So yes, oil and gas is definitely going to remain our bread-and-butter business. That's what we have always said. But certainly, especially in this very interesting up cycle in the natural resources industry, the metals and mining industry and specifically elements like copper, lithium and also gold, there is opportunities that we see and where we feel like it would make sense for us as a company to maintain some of that exposure and be focused on that. Almonty, I've spoken about quite a bit. Just for those of you that don't know, Almonty is the most important western tungsten producer. They are producing in South Korea, in Portugal, potentially in the near term in Spain and the U.S. and have a portfolio of very strong assets, of which the strongest definitely is the Sangdong mine in South Korea, which is the largest tungsten mine in the world outside of China and makes it a strategically extremely important asset, like I said, with a $5.5 billion market cap. And tungsten is one of the fundamentally most seek metals in the world. I mean we hear a lot from people that are craving to find tungsten supply, and that's also the reason why tungsten prices have increased massively over the last 24 months from roughly $300, $400 per metric ton unit up to currently around $3,000. So that fundamental demand has been driving that and is certainly a key feature here of the high relevance of Almonty in the capital market. And last, I want to give you a quick outlook here and forecast for 2026 and 2027. As I mentioned earlier, we are guiding around close to EUR 300 million in revenue, specifically EUR 260 million to EUR 280 million in our base case, which assumes a $75 WTI oil price. At an $85 WTI oil price, it would be EUR 290 million to EUR 300 million. Our EBITDA midpoint guidance is around EUR 300 million for this year. For 2027, we are guiding close to EUR 300 million revenue again, EBITDA EUR 210 million, EUR 230 million, which is essentially 100% coming from our oil and gas business. So this year's EBITDA is significantly higher because of the EUR 97 million net profit we have generated in the first quarter due to the sale of Almonty stock. And you can see here also on the right-hand side that in the first quarter here, we have had an EBITDA of EUR 126 million. That is obviously the highest EBITDA we were ever able to generate in one quarter. In the second half -- in the second quarter, the EBITDA is going to be significantly lower. And then as we are guiding to ramp up our production to north of 20,000 barrels of oil equivalent in the third and fourth quarter of this year or the second half of this year, we are expecting a very significant, yes, production uplift. And therefore, if prices of oil hold steady, also a very significant uplift in our EBITDA and revenue figures compared to the second quarter of 2026. At the same time, we do maintain a strong hedge book. We have more than 1 million barrels of oil hedged currently at roughly $70 to $75 oil price, and that makes it quite compelling for us to be able to have some security layers in case oil prices go down further. On the other hand, we are never hedging 100% of our production because we do want to maintain upside. And in general, also, our hedging philosophy has been and is to roughly hedge 50% of our production. But at the same time, we do have a high liquidity and are relatively modestly levered. So we definitely feel like we don't want to take away too much upside here from potential future oil price spikes. Even though obviously, right now, the last few weeks have been quite negative oil prices. But obviously, that is totally okay. We have a strong hedge book, like I said. And therefore, we can live with that. Yes. And with that, I think I would like to close. And first of all, thank you very much for your attention. And hopefully, I've been able to give you some updates for those that know us already, and I have been able to introduce those that haven't heard much about Deutsche Rohstoff yet. And with that, I think we'll go over to the questions. I think maybe we'll start answering the questions that are on the line here, and then I'll try and answer some of the questions that have been posted into the chat.

That sounds perfectly great. And to all the participants, yes, now we move to the Q&A session. [Operator Instructions] And I look at the line if someone has raised his hand. That's not the case by now. So we have questions. And Mr. Weitz, you already saw that there are some incoming and you might...

Yes. Maybe start to answer them. The sales proceeds from the sale of our Almonty shares, whether they are tax-free and would we be able to distribute those to shareholders without further Kapitalertragsteuer payment? So when we sell shares of Almonty, for us, they are essentially tax-free. I mean there is roughly 5% of those proceeds or gains would be taxed. But effectively, it's simplistic, and this is not tax advice. The way to think about it is every $1 million of profit that we make, our effective taxation is at around 2% to 3% of those proceeds. So that goes for Deutsche Rohstoff as a company. In terms of distributing those proceeds to shareholders tax-free, that is something that we have not looked into. But I think, in general, all dividends that we pay out are subject to the recipient personal tax situation, and that is generally the Kapitalertragsteuer here in Germany. The next question is the market cap of Deutsche Rohstoff has increased significantly so that it might be possible to join the SDAX in the future? Do you plan a formal listing? If not, what are the reasons? I don't know whether I can get myself in trouble here now being on the Scale Summit and saying anything about leaving the Scale Summit. But in general, I mean, obviously, that is a very good question and has been asked before. The question is always, do we want to do an uplisting into the German Prime Standard. And that certainly is something that, yes, now where our market cap has grown significantly could make sense. It could make sense because maybe it reflects that the company is growing up further and it's becoming even more mature. On the other hand, the question would always be why and what could benefits be? And generally, I think liquidity and access for other investors would be good reasons. But the question also is, yes, can we get that? I think one thing that we have seen is that our liquidity has increased significantly over the last 24 months. Our stock has been trading this year, I think, around 35,000 shares per day, which is roughly EUR 3 million. That probably already puts us into at least somewhere not in -- at the very bottom of the liquidity of some SDAX companies. So I think we are seeing some of that liquidity already. Yes, maybe it could become more and maybe other investors could join our register. Maybe all of those that can do it in Germany are already there. We don't know. I mean, nonetheless, I mean, I think it is something that is on our radar that we are thinking about. We're not saying no. But on the other hand, right now, I mean, in the first half of this year, we had a lot to do with just building out the largest development program of the company of all times and growing the business. So we need to see where that will sit in the next 12 to 24 months. At the same time, one other factor on this is also the U.S. investors. I mean we have been doing quite a bit of Investor Relations work in the U.S. And I think we have seen that may also be where some of the new liquidity comes from that we have a relatively strongly growing U.S. investor base at this point in time. Then one next question is, what do you see as the most material risk to your business model over the next few years, particularly regarding commodity price volatility, regulatory developments in key U.S. states and the availability of drilling and service capacity? So I think, yes, our most material business risk, I think, is always fair to classify as commodity price developments. So if oil prices collapse, that is the most material risk that we face. At the same time, yes, it is something we can hedge. It is something that especially with our U.S. business, we can react to very quickly. We have had the ability here to add rigs now very quickly when prices were high. In the past, we have had the ability to drop rigs in development when prices are low. A very simplistic example is always if we decided right now that we would want to cancel all further drilling activities for this year, I think we could be stopping everything within the next 2 months or so, and we would maybe continue to spend some money on ongoing processes, but the penalties would probably be definitely [ sub ] -- in the low single-digit million range, meaning, yes, we can respond very quickly to those environments. And in the past, I mean, even crashes in oil prices have created quite a bit of opportunity for us because our liquidity situation is strong, and it could give us a chance to buy additional assets. On the other hand, our competitors have been more levered in the past. So therefore, we would have to see how that could go. Then another question is, could you please comment on the 2028 bond with a 7.5% coupon? Is there a likelihood of it being called before its scheduled maturity date? At this point, I mean, we have this 7.5% bond outstanding that matures in 2028, as you said. We are currently looking obviously at our debt profile, we have a 6% bond outstanding. We have not made any decisions to do anything. There is certainly really good growth projects -- prospects for us, so we can use the capital and don't see an immediate need to call any bond. On the other hand, it is always reasonable, I think, for a company to look at its financing structure and see could we reduce our cost of financing. If so, how and that would be potentially scenarios where we would call a bond, but that is nothing that is as of right now, specifically on our agenda. So we will also have to see in this extremely volatile environment here, how things go. And another question is around the estimate of the longer-term sustainable production of BOE in our acreage in Wyoming after we are further ramping up? I mean I think right now, obviously, we are trying to get the Wyoming production or our general group production north of 20,000 BOE. Something that we have showed at our Annual General Meeting yesterday is if we continue to invest around EUR 200 million per year here, we should certainly be able with these well results, if they continue to hold strong to get over a couple of years or so to get closer to a 25,000 barrel of oil production range here in a few years. And then I think the land in Wyoming definitely could allow us to get into the north of 25,000 barrels of oil production range. That always depends on development pace. So we can certainly get there. The question is how much more land do we then have to hold stable? I think 25,000 BOE certainly is a range that we can get to in not too many years. But then at some point, after 5 or 6 years, we will probably have to see whether we -- how many more wells can we develop. I think there's a lot of potential in formations like the Mowry Formation that is only, to a small extent, reflected right now in our results. So that is not a super specific answer, but I think it could certainly be possible to be north of 25,000 BOE here and potentially hold that steady for quite a long time. And if we accelerate development, even to get potentially to higher ranges. I think I'm out of time now, but I thank you very much for all of your questions. And I'm going to, yes, hand back over to [ Mr. Gartenprader ], and I think he'll take it from there.

Yes. Thank you very much. Due to the limited time, we come to the end of this event. Thank you to all the participants for your interest in Deutsche Rohstoff AG. And if there are any further questions, don't hesitate to contact Investor Relations. A big thank you to you, Mr. Weitz, for the presentation and the time you took to answer the questions. I wish you all a successful day and hand over to you, Mr. Weitz, for some closing remarks. Thank you, and bye-bye.

Thank you very much, everybody. Thanks for your attention. I'm glad to be on this call with everyone, and I'm looking forward to you following our story in the future. Thank you.