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Pulse Oil eyeing massive upside potential at Bigoray, broker says

The miscible flood project requires just an estimated C$3.0mln of investment per Nisku Reef "providing massive upside without the risk and significant cost of an extensive horizontal drilling program", Mackie Research said
Onshore oil rig
Mackie's valuation model assumed a recovery factor of 60%; Pulse is targeting 80%

Pulse Oil Corp (CVE:PUL) completed on Thursday its previously announced transactions that consolidate its interests in the Bigoray area of Alberta.

The transactions secure Pulse's interest in two strategic Nisku oil pools.

The company said the assets acquired provide substantial upside to Pulse through the addition of new reserves and the restarting of existing behind-pipe production.

Pulse will now have the opportunity to implement a low-risk enhanced oil recovery (EOR) project to increase recovery factors of the petroleum initially in place (PIIP) from roughly 35% presently and potentially up to 80%.

READ Pulse Oil shares up as it consolidates position at exciting Bigoray assets

In addition, the production history of these discoveries and some 50 others in the near vicinity have provided Pulse's technical team with an insight into how enhanced oil recovery procedures have resulted in an average recovery factor of 80%.

"Operationally speaking, we are excited to take control of these neglected assets at Bigoray. Our first step will be to immediately bring back on production that was shut in three years ago during historical low commodity prices,” revealed Drew Cadenhead, Pulse's president and chief operating officer.

“ As a proven low-cost operator with no debt, Pulse's team is ready to implement the same operational acumen we demonstrated in our previous successes; this is what we do: capture strategic assets, unlock the bigger picture upside and increase value for shareholders,” Cadenhead declared.

“By bringing on immediate cash flow from the restarting of existing behind-pipe production, we can begin to fund our EOR plan in the Nisku D and E pools, a low-risk operation with tremendous upside for a company our size," he added.

Mackie Research reiterated its 'speculative buy' rating and 50 cent target price on the news.

Mackie's valuation model assumed a recovery factor of 60%, which translates into about 6.5mln barrels of oil equivalent, which on a conservative basis it values at C$65mln, or 74 cents a share.

If Pulse cranks the recovery rate up to 80%, Mackie sees upside value potential of C$177mln, equivalent to C$2.01 a share.

“As most of the required infrastructure is in place (now 100% owned by Pulse), the miscible flood project requires an estimated $3.0 million of investment per Nisku Reef providing massive upside without the risk and significant cost of an extensive horizontal drilling program,” the broker said.

Shares in Pulse currently trade at C$0.17.  

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