Oil & Gas Firm with ‘Multibagger Return Potential’ Trading at Discount

30th March 2019 Off By binary

The Energy Report

Source: Streetwise Reports   03/28/2019

A Mackie Research Capital Corp. report reviewed what a newly acquired oil resource in Alberta brings to this Canadian company.

In a March 14 research note, analyst Bill Newman reported that Point Loma Resources Ltd. (PLX:TSX) has “multibagger return potential” given the future aggregate production outlook from its three plays: Duvernay, Banff and Rex, which was recently acquired.

Newman indicated that in 2018, Point Loma increased its Proven and Probable (2P) oil reserves 19% year over year. The new total, 5.3 million barrels of oil equivalent, has a before-tax estimated net present value discounted at 10% (NPV10) of CA$38.4 million, or CA$0.54 per share.

Accounting for 92% of that 2P oil reserves increase is Point Loma’s high-impact, horizontal Rex discovery well, 16-17-48-27W4, in the Upper Mannville oil play in west central Alberta, explained Newman. That well has an estimated 105,000 barrels net (105 Mbbl) of 2P nonproducing reserves plus an assigned 420 Mbbl from three Proven undeveloped and one Probable location. These reserves take the 2P total for the Rex discovery to 525 Mbbl, with an NPV10 of CA$8.8 million, or CA$0.12 per share.

This value compares to Point Loma’s current market cap of CA$12 million, and indicates the stock is trading at 32% of its reserves value, excluding the company’s Banff and Duvernay plays, Newman highlighted. Point Loma “should be trading significantly higher than the current trading price,” which is currently at CA$0.20 per share. Mackie’s target price on the company is CA$1 per share.

Once the oil and gas exploration and development firm has regulatory approval, it intends to build production facilities for the Rex well and place it online in Q2/19. In the future, the company expects to drill in 14 more spots on its 3,385 acres at Rex.

The “potential prize” with Rex, Newman pointed out, is that the Rex pool “has the potential to hold 60 million barrels of original oil in place.” Its potential net recoverable resource is about 4.2 million barrels, which Mackie estimated using a 10% recovery factor for primary production only. “Valuing [that] at a conservative $5 per barrel results in an unrisked value of CA$21 million, or CA$0.29 per share,” he added.

Looking forward, Newman wrote, Mackie expects that with output from the Rex discovery well alone, Point Loma will double its Q2/19 oil production to more than 350 barrels per day, with additional drilling this year potentially driving up the production rate even more.

Mackie has a Buy rating on Point Loma.

Sign up for our FREE newsletter at: www.streetwisereports.com/get-news

Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

 

Disclosures from Mackie Research, Point Loma Resources Ltd., Update, March 14, 2019

RELEVANT DISCLOSURES APPLICABLE TO COMPANIES UNDER COVERAGE
Relevant disclosures required under Rule 3400 applicable to companies under coverage discussed in this research report are available on our web site at www.mackieresearch.com.

ANALYST CERTIFICATION
Each analyst of Mackie Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report.

( Companies Mentioned: PLX:TSX,
)

Read more and Click Here To Get Started