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Point Loma's potential going unnoticed, reckons Mackie

Last updated: 16:18 03 May 2017 EDT, First published: 09:28 03 May 2017 EDT

point-loma
Point Loma is an oil producer in Alberta

Point Loma Resources Inc (CVE:PLX) is a good buying opportunity for investors, reckons broker Mackie.

"The company has amassed a large concentrated land base within the Mannville trend in West Central Alberta and has established an inventory of over 400 potential horizontal well locations providing a significant development growth platform," says analyst Bill Newman.

Mannville horizontal wells are highly economic even at low crude prices with IRR (internal rate of return) of between 50%  and 70%.

As well as having a board of "company builders", with the completion of its joint venture JV with Salt Bush, the firm plans to drill four to five wells in 2017, with each successful well having a large impact on production.

Last month, Point Loma said it had sold a 20% working interest (WI) in its Alberta assets for $5mln and formed a joint venture. The extra capital will help potential acquisitions in the area, said Mackie.

Elsewhere, Newman continues that with around 110 million barrels of original oil in place at its West Cove Nordegg field, this has the potential to add substantial reserves.

"We believe the West Cove Nordegg field could be a company maker on its own," says the broker.

"Point Loma is highly undervalued trading at a large discount to its peer. We feel the market may not be fully valuing PLX’s development growth potential and we expect a rerating of the stock as the company demonstrates rapid, sustainable production growth leading to better visibility and awareness by investors," concludes the analyst.

He has a $1.10 target price on the shares, which is more than double where they are now at 50 cents.

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