4. Did RIH buy shares in Fram Exploration ASA from Staur Exploration AS?

RIH must have bought at least 2.5 mln shares of Fram Exploration ASA in the secondary market and possibly some from Staur Exploration AS.

Now, here is why this is important:

Question 5. Legal opinion report or the Auditor's report - which of the two is correct?

On page B-7 of the prospectus, KPMG - the auditor - reports that RIH bought 5,802,909 converted shares of Fram Exploration ASA.

But on page D-125 of the prospectus, Arntzen de Besche Advokatfirma AS – the law firm – claims only 3,383,045 new shares of Fram Exploration ASA were issued between December 31 and June 24.

Now, which of the two is correct?

In reply to Investor Central's email, Mr Russell Kelly - the KPMG director who was in charge of RIH's audit – said he was unable to discuss the matter with third parties and asked us to contact RIH.

Which we did, through PrimePartners, but are yet to get a reply.

But let's now delve a little deeper into the background of Staur.
6. Is RIH's listing on SGX a proxy for the listing which Fram Exploration ASA didn't achieve in Oslo?

The Staur group of companies is owned by the family of Bernt Eivind Østhus – a non-executive director of RIH (page 171).

Staur Exploration AS – which has now ceased to be a shareholder of Fram Exploration ASA – belongs to the family of Mr Østhus, and Staur Private Equity AS – now the second largest shareholder of Fram Exploration ASA – also belongs to his family.

Fram Exploration ASA – being a Norwegian company – launched an IPO to list on Oslo Axess in June 2011.

The promoters were looking to sell down some of their stake in the IPO for between NOK 32 and NOK 44 per share.

But due to poor response to the IPO, Fram Exploration ASA had to terminate the offering.

Since then, Fram Exploration ASA has apparently not attempted to list on Oslo Axess.

Now, the Østhus family seems to have sold some of their stake in Fram Exploration ASA to RIH at US$5.70 (NOK 34) per share.

What's even more confusing is that RIH is a shareholder of Fram Exploration ASA.

But it is Fram Exploration which has nominated a director to the board of RIH.

And that director is: Mr Østhus.

(Total:34 questions).

We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

Sofar, we have not had a reply (which is why you are seeing this message).

(cont....)
3. How much of its 20% share in revenue from US concessions will it actually receive?

Probably, it depends on the number of rigs that will be used for drilling at the concessions.

If the two rigs of Loyz Rex will be drilling all of the 80 wells, would OCBC have the first claim over RIH's and Loyz's entire share in the net revenue from the concessions, until such time as the loan is repaid?

The shareholding of RIH in Fram Exploration is complicated and difficult to follow, but gives the impression that RIH is actually a listing of Fram Exploration.

We could be wrong, but read on and make up your own mind.

As mentioned, RIH has bought a 24% stake in Fram Exploration ASA, the 60% owner of the US concessions.

According to page 85 of the prospectus, the bondholders of Fram Exploration ASA converted their bonds into shares and sold them to RIH.

RIH acquired 5,802,909 shares (a 24% stake) in Fram Exploration ASA for US$33.1 mln (page B-7).

To pay for these shares, RIH issued 101,792,531 shares (a more than 10% stake) at 32.6 US cents (or 40.75 Singapore cents) per share.

According to the legal opinion report on page D-125 of the prospectus, RIH was the largest shareholder of Fram Exploration ASA with a 24.23% stake on June 24, 2013.

So, it looks pretty simple: RIH acquired the converted shares in Fram Exploration ASA to become the largest shareholder.

But this doesn't tally with Fram Exploration ASA's 2012 annual report.

Page 47 shows Staur Exploration AS was the largest shareholder with 9,127,174 shares (a 44.4% stake) as on December 31, 2012.

Six months later, Staur Exploration no longer appeared as a shareholder.

However, according to the legal opinion report in RIH's prospectus (page D-125), Staur Private Equity AS was now the second largest shareholder with 5,694,313 shares (a 23.78% stake).

RIH claims that it acquired all of its 24% stake in Fram from newly converted shares and not from existing shareholders.

But this doesn't tally.

Even if Staur Exploration has sold its 44% stake to Staur Private Equity, there's 20% that's unaccounted for.

We have looked at the shareholders' list of Fram Exploration ASA as on June 24 and compared it with that on December 31, 2012.

No other big shareholder has emerged during the period except RIH.

The only possibility is that Staur Exploration sold shares to RIH.

In a few moments we'll explain why this is important.

Fram Exploration ASA had issued capital of 20,563,943 shares as on December 31, 2012.

By June 24, 2013, that had risen to 23,946,988 shares.

That means Fram Exploration ASA must have issued 3,383,045 new shares between December 31 and June 24.

Now, the prospectus claims that RIH bought 5,802,909 converted shares of Fram Exploration ASA.

FINANCIALS
Rex International Holding Ltd (RIH) doesn't generate any revenue because all of its concessions are either under development or in the exploration phase.

But RIH holds interests in two concessions in the US, four in the Middle East and six in Norway.

Its concessions in the US are the Whitewater unit in Colorado and the Williston basin in North Dakota.

But it only owns 20% of them.

Fram Exploration ASA is the controlling shareholder of both the concessions with a 60% stake, while SGX-listed Loyz Energy Ltd owns the remaining 20% stake.

These three companies are not just the owners of the concessions, but also the operators and advisors.

For this purpose, RIH and Loyz formed a joint venture, Loyz Rex Drilling Services LLC, while Fram Operating LLC – a subsidiary of Fram Exploration ASA - is the operator of the concessions.

RIH is the minority shareholder of the joint venture, with a 49% stake.

The companies aim to drill 80 wells at the concessions before May 7, 2015 (page 114).

If they make a discovery, RIH will receive a 20% share of the net revenue from the production of oil and gas.

The fine print of the arrangements (pages 101, A-29) between RIH and Fram Exploration ASA raise some questions.

The drilling of 80 wells at the concessions is expected to cost US$80 mln (page 101).

According to the participation and exploration agreement, RIH and Loyz will together contribute US$40 mln while Fram Exploration will contribute the other half.

So, RIH and Loyz will contribute US$20 mln each.


2. Why would RIH spend more than its share in the US concessions?

It is strange that RIH will contribute 25% of the exploration costs, even though it owns only a 20% stake in the concessions.

The same goes for Loyz.

So, we sent this question to the company.

Also, Loyz Rex Drilling Services LLC has committed to provide two onshore rigs for drilling at the concessions (page 102) worth US$26 mln.

According to page A-29 of the prospectus, Loyz Rex has borrowed US$18.2 mln from OCBC to partly finance the acquisition of the rigs.

The loans, repayable before March 2015, are secured by drilling rigs and the revenue generated from the use of the rigs.

In other words, OCBC has the first claim over the revenue from the wells drilled using the two rigs of Loyz Rex.

That means OCBC has a claim over at least a part of RIH's 20% share in net revenue from the US concessions.

Therefore that makes us ask:

Rex International Holding Ltd - Why did associate appoint a director to the board, but not the other way around?

Investor CentralBy Ashish Saxena | Investor Central – 20 hours ago

$ Rex Intl

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12/8/2013 – Rex International Holding Ltd started its life as a listed company with a big leap, jumping 13% by the close of its first trading day on July 31, and meantime running up almost 50% after the National Day long weekend.

It is the second oil and gas company to list on SGX in July, and the third if you include Sona Petroleum on Bursa Malaysia.

Rising oil prices and economic recovery have made it feasible for companies to explore more for oil, to meet the expected rise in energy demand in coming years.

It took us two days to get through Rex International Holding Ltd's (RIH's) prospectus, and once we were done we still had some questions that we feel need to be asked.

We are not making any insinuations or accusations. We are merely left with unanswered questions a reasonable observer would ask, which we have sent to the company in good faith, in the hope of getting replies.

In a nutshell, it appears as though RIH is a second attempt to list stakes in assets which were offered to investors on Oslo's Axess market in a failed IPO on June 21, 2011.

These assets were under the name of Fram Exploration ASA.

Strangely, even as RIH has emerged as the largest shareholder of Fram Exploration ASA with a 24% stake, it has no representation on the board of Fram.

In fact, quite the contrary: Fram Exploration ASA has appointed a nominee director on RIH's board, even though it doesn't own any shares in RIH.

Further, even as the promoters of RIH sold a stake in RIH to Fram's shareholders, they kept stakes in some of RIH's subsidiaries.

The terms of their shareholdings will see them benefit from those subsidiaries' income streams before the shareholders of RIH have their turn.

The prospectus leaves us also wondering why RIH says the area of one of its partly-owned concessions in the Middle East is 75% smaller than other part-owners say it is.

These are some of the 34 questions asked in this report.

1. How much have the promoters invested in the company?

RIH is the result of a restructuring of various companies controlled by Rex Partners.

Rex Partners owns Rex Commercial.

And Rex Commercial owns a 55% stake in RIH, for which it paid just S$554 (pages 74, 82 and 83).

IPO investors, on the other hand, have been asked to pay S$71.25 mln, and between them they will own less than 9% of the company.

Rex Partners will be repaid a S$2.4 mln loan out of the IPO proceeds (page 66).

What's not clear is how much Rex Partners has invested in the business so far.

BACKGROUND

Rex International Holding Ltd (RIH) was incorporated on January 11, 2013.

It owns several concessions in the US, the Middle East and Norway.

RIH raised S$35.2 mln in convertible loans from pre-IPO investors in April and May.

On conversion, the pre-IPO investors were allotted about 88 mln shares of RIH at 40 Singapore cents per share.

Shares were also allotted at 40.75 cents to Fram's shareholders (page 86) as payment for a more than 24% stake in Fram Exploration ASA.

So, who is behind the ultimate controlling shareholder, Rex Partners?

Well, 80% of Rex Partners Ltd is owned by a company called Limea Ltd, which is equally owned by Dr Karl Lidgren and Hans Lidgren.

Mr Svein Kjellesvik owns the remaining 20% stake of Rex Partners.

These are key figures, because they have control of 55% of RIH.

RIH issued 142.5 mln new shares in the IPO at 50 cents per share, to raise S$71.25 mln in gross proceeds.

Asiasons WFG Capital Pte Ltd is the independent financial adviser to the IPO.

Dato' Zaid Ibrahim's law firm is the Malaysian legal adviser, and PrimePartners Corporate Finance Pte Ltd is the manager, sponsor and co-placement agent.

Further details can be found on page 37 of the prospectus. (continue..)

ADDRESSING WATERSHED CONCERNS
When the City of Grand Junction received notice in 2011 from the BLM about proposed oil exploration near the city’s water supply system, two of the proposed drill pads were close enough to be of concern to the city. Fram was willing to move those two pads.
“The city has worked very diligently since the first gas wells were drilled in the vicinity of the city’s watersheds in 2005,” City Utilities Manager Terry Franklin said in an email to the Free Press. “We have developed a comprehensive watershed water quality monitoring program, developed a good relationship with the BLM staff, and have met numerous times on-site with Fram staff to review possible well locations and have had Fram move well locations on our request.”
“Another very important point about the city’s water,” continued Franklin, “is all the water comes from surface waters originating on top of the Grand Mesa. Fram’s proposed wells are located in the lower end of the drainage basins and all potential surface flows off of any of Fram’s proposed well pads will flow away from the ditches and canals that may carry our surface water to one of our diversion structures.”

TRAFFIC CONCERNS
East Orchard Mesa farmer Carol Zadrozny is concerned about Fram’s drilling proposal for other reasons. Zadrozny has farmed in East Orchard Mesa for 40 years. She and her husband, Richard, own property that runs along 33 3/4 and C roads. So when Zadrozny recently learned that Fram plans to use C Road to access their Whitewater well pads, she became alarmed.
Fram’s Whitewater Unit Master Development Plan shows the primary access road will enter the southern portion of the project area from Hwy 50 and Kannah Creek Road. However, Mesa County C Road will be used from December 1 through April 30, during sensitive elk and mule deer winter habitats along the southern route.

“We have worked so hard to get that Fruit and Wine Byway, to promote agriculture,” Zadrozny said. “Now this — my business will be severely affected. My property values will decline by $100,000 or more.”
“Agriculture is the backbone of this valley. People have no idea of the economic significance of agriculture,” she said. “Oil and gas has gone up and down, up and down, up and down. It has devastated this valley.”
Zadrozny said she’s also concerned about the road itself, where she said there have been three bad car accidents. There is farm equipment, school buses, lots of traffic, she said.
Zadrozny has called for an “emergency meeting” of neighbors and other concerned residents to discuss the issue 6 p.m. tonight (Aug. 9) at Z’s Orchard, 315 33 3/4 Road.
AIR QUALITY CONCERNS
Citizens for Clean Air and Western Colorado Congress of Mesa County have also attempted to inform and mobilize the community. The two groups scheduled a meeting Thursday night at the Mesa County Road and Bridge Building, 971 Coffman Road.
Karen Sjoberg of Citizens for Clean Air said the BLM’s environmental assessment shows prevailing southeast winds will likely head to Palisade and Grand Junction.
According to Citizens for Clean Air, oil and gas production is responsible for the majority of Colorado’s air pollution enforcement cases. And, “the U.S. Department of Agriculture says ground level ozone causes more damage to plants than all other pollutants combined,” Sjoberg said.
“Grand Junction is already suffering from air quality issues. We’re close to exceeding national ambient air quality standards (for particulates and ozone).”

IF YOU COMMENT, BE SPECIFIC
“We’re trying hard to make people aware of the project,” BLM spokesman David Boyd said. “That’s why we’ve added an extra comment period.”
Thus far, the BLM has received about 26,000 comments associated with an action alert sent out by the National Resource Defense Council, said Boyd in an email to the Free Press. “We have also received approximately 70 other individual public comments. Areas of comment include wildlife concerns, air and water quality concerns and the access routes,” he added.
Boyd stressed the importance of being specific in making comments.
“One comment that brings up substantive issues, or something we haven’t considered; additional information we didn’t know, is more effective than 1,000 people saying something very general,” Boyd said.

Residents concerned about drilling proposal in Whitewater (Aug 8 2013)
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Expand Photo Sharon Sullivan / ssullivan@gjfreepress.com |
Fram Exploration drills an exploratory oil well on private property on Purdy Mesa Road near Whitewater.
Expand Photo Sharon Sullivan / ssullivan@gjfreepress.com |
Fram Exploration is drilling for oil at this exploratory well on Purdy Mesa Road.
Expand Photo Sharon Sullivan / ssullivan@gjfreepress.com |
The Bureau of Land Management has extended the deadline to Aug. 14 to comment on Fram's drilling proposal near Whitewater. Shown here is a Fram exploratory well on Purdy Mesa Road.
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Comment period extended to Aug. 14
The BLM will accept comments on Fram Operating’s proposal to drill in the Whitewater Unit through Aug. 14. Comments can be emailed to BLM_CO_GJ_Public_Comments@blm.gov or by mail to 2815 H Road, Grand Junction, CO 81506.
The most beneficial comments are specific, not general, BLM spokesman David Boyd said.
To view the BLM’s Environmental Assessment of the project, visit www.blm.gov and click on map of Colorado, and then Grand Junction Field Office. Or, call the BLM office at 970-244-3000 and someone will walk you through it, Boyd said.


“It’s worth the time to take a look at the document (EA). It’s our analysis of their proposal,” Boyd said. “We’ve tried to identify all the potential impacts and how we would require they be mitigated.”
Editor’s note: Fram Operating was contacted several times by the Free Press, but no one was available to speak and calls were not returned to comment for this story.
Don Lumbardy raises natural grass-fed beef without growth hormones — “the way nature made it” — on his property north of Kannah Creek on Whitewater Creek Road. He’s partially disabled from an assistant physical-therapy job he once had with the state and depends on the living he now makes from the land he owns near Whitewater.
Lumbardy, 64, said he has a “good-producing domestic water well downstream” from where Fram Operating, LLC, an international oil and gas exploration and production company, plans to drill 108 oil wells on both private and federal lands, pending approval from the Bureau of Land Management.
Although the 600 acres Lumbardy owns with his brother has been placed in a conservation easement, the federal government owns the mineral rights on about half of the property.
“My concern is that they will have two to three wells on my property above and in proximity of my (water) wells, Lumbardy said. “I’m concerned about chemical contamination. If I lose any of my water, it will be devastating.”
Even during the drought, there’s running water on his property, providing great wildlife habitat, said Lumbardy.
“There’s 90 head of mule deer, foxes, badgers, bobcats, lots of birds. It’s a safe haven here.”
Lumbardy said he didn’t learn until July about Fram’s proposal to drill 108 oil wells over a four-year period in what’s called the Whitewater Unit southeast of Grand Junction. The area is generally bounded by Palisade and Clifton to the north, the Mesa Plateau of the east, Kannah Creek to the south and U.S. Hwy 50 to the west.
The BLM’s original comment period on its environmental assessment of the proposal was to have ended July 31. However, after requests from the public for more time to respond, the BLM said it would accept comments another two weeks, until Aug. 14.


“Even a two-week extension is pretty short again,” Lumbardy said. “I wrote my comment and hand-delivered it this week.
“If something happens to my water like has happened in a lot of places where people’s wells have been ruined, it’d be like someone coming and doing something to your job. I don’t have another way to work. I can’t produce anything without water.”

Fram Exploration confirms first successful horizontal oil well in Whitewater, USA

Fram Exploration ASA today announced that it has completed its Siminoe 32-2-L horizontal well in Mesa County, Colorado, USA as an oil producer in the Dakota formation. The initial well is expected to produce at rates in excess of 60 barrels of oil per day once the well is cleaned up, which will generate an economic payback of investment of less than 12 months.
“We are very encouraged by the confirmation of oil reserves from the Siminoe well” said Patrick Keenan, group president and CEO of Fram Exploration. “The well results are in line with expectations and confirm the reservoir model we have developed to identify and produce oil from the Dakota formation in Whitewater.”
The well is located in the Whitewater Unit, the largest federal production unit in the state of Colorado, in which Fram has over 47,000 net acres under lease. The well is a step out to the Mansur well and reached TD at 3,887 feet, intersecting a total of 260 feet of the Dakota formation. Three high quality channel sands totaling 150 feet in thickness were identified and perforated. The Mansur well, which was completed and placed on pump in June 2010, has been producing at 30 barrels per day on a steady basis with no loss of reservoir pressure and no water intrusion. The Mansur has accumulated production volumes of approximately 9,000 barrels of oil and 20 million cubic feet of gas from a vertically drilled well.
The Company plans to continue to develop its oil reserves in Whitewater by drilling a series of high-angle/horizontal wells to maximize the exposure to the reservoir and increase production rates compared to vertical wells. This is a new concept for development of the Whitewater unit. The oil will be trucked to a pipeline point, which will result in a price realization of about $12 per barrel less than West Texas intermediate crude price.
Fram acquired a 95.6 per cent working interest in the Whitewater unit during 2008 and 2009 originally to develop natural gas reserves in the Dakota formation. The strategy was changed upon finding an oil leg to the reservoir after evaluating the Mansur well. The strategy is now changed to develop the oil reserves first and come back to the gas development once U.S. natural gas prices become more attractive on a relative basis.
Fram is currently a private company but has applied for listing on the Oslo Axess Exchange.
For further information on the offering and listing, please refer to the Company’s stock exchange notice of 3 June 2011 and the prospectus.
ABG Sundal Collier and Arctic Securities are acting as joint lead managers and joint bookrunners in connection with the initial public offering. The prospectus is available from today at the Company´s web page www.framexploration.no, and, for Norwegian persons resident in Norway, at the managers´ web pages www.abgsc.no and www.arcticsec.no. The prospectus is also available at the business office of ABG Sundal Collier Norge ASA and Arctic Securities ASA.

Loyz, Rex Oil & Gas in US farmin with Fram
HOUSTON, Aug. 29
08/29/2012
By OGJ editors

Loyz Energy Ltd. of Singapore and technical partner Rex Oil & Gas Ltd. have agreed to participate in the drilling of 80 wells in Colorado and North Dakota on acreage held by Fram Exploration, Trondheim, Norway.
Loyz and Rex Oil & Gas will provide two rigs and earn a 40% share of the net revenue interest in each producing well, convertible into a working interest. Splitting costs and interests evenly, they’ll supervise and execute drilling under a turnkey contract.
Fram will contribute $12 million of the cost of drilling the first 40 wells. Loyz and Rex will contribute the remainder, estimated at $28 million. For the other 40 wells, Fram will pay $28 million and Loyz and Rex the rest, estimated at $12 million.
In Colorado, Fram operates the 90,445-acre Whitewater Federal Production Unit in the Piceance basin (OGJ Online, Apr. 14, 2010). Within the unit, it holds a 95.6% working interest in 54,000 acres.
Fram made an oil discovery in the previously gas-prone area in 2010 in its Mansur 33-1-K well.
In North Dakota, Fram holds leases centered on 10,863 acres in Renville County in the Williston basin. It believes shallow Mississippian Mission Canyon carbonate is prospective for oil in the area. It says an exploratory well it drilled in March 2011, Funke No. 1, cut 32 ft of net oil pay in the formation.

at all time high, 81 cents.

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