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Point Loma Resources: THE INVESTMENT CASE

Point Loma gushes higher as it's set for production boost with new acquisition

The deal and price is expected to be finalised in March this year, subject to court and regulatory approvals..
Point Loma gushes higher as it's set for production boost with new acquisition
It will add production of around 450 barrels of oil equivalent per day (boe/d), Point Loma said

Alberta-focused oiler Point Loma Resources Ltd (CVE:PLX) has increased its production profile as it's set to buy a private oil and gas company involved in a receivership process.

The deal and price is expected to  be finalised in March this year, subject to court and regulatory approvals.

It adds production of around 450 barrels of oil equivalent per day (boe/d), comprising 35% oil and natural gas liquids, and adds around 29,000 acres (18,000 net) land in Point Loma's core area of west-central Alberta with an average working interest of 62%.

The property acquired had 2017 estimated net operating income of C$1.3mln

The acquisition has a liability management ratio (LMR) of 3.4, comprising deemed assets of C$11.5mln and deemed liabilities of C$3.4mln.

Expands growth in core area..

"This acquisition adds to Point Loma's production and further expands growth of our core area," said Terry Meek, president and chief executive of Point Loma.

"Multizone opportunities in the acquisition include Mannville, Cardium and Duvernay.

"Value acquisitions such as this continue to solidify a strong base of operations and expand the opportunity base in the corporation."

The properties include areas with proved undeveloped locations booked in addition to the base production.

The company plans to update the acquisition reserves to December 31, 2017 when the deal is closed.

Following the news, broker Mackie repeated a 'buy' stance and a target price of C$1.10 a share

Considerable reserves potential..

The deal has considerable reserves potential, the it notes.

"The acquired assets have a deemed value of C$11.5 million which is more than PLX’s current market capitalization," highlighted analyst Bill Newman.

The broker estimates the oiler had production of around 550 boe/d (barrels of oil equivalent per day) in November 2017.

"The acquisition announced today (effective November 1 2017) adds 315 boe/d taking corporate production to around 865 boe/d," it notes

In the first quarter of 2018, the firm intends to re-activate 15 to 20 wells in the Leaman/Paddle River area, which is expected to add net production of around 1.5 mmcf/d (million cubic feet per day) plus 100 bbl/d of NGL’s (natural gas liquids) (around 350 boe/d).

Point Loma also plans to re-activate 15 to 17 wells in the Thornbury area which is expected to add 1.2 mmcf/d (200 boe/d), it says.

"The acquisition plus low risk reactivations could increase corporate production to around 1,415 boe/d in Q1/18."

Mackie concludes: "PLX is highly undervalued and has a large concentrated land base with a large, multizoned drilling inventory to fuel rapid growth for many years."

The firm has no bank debt and positive working capital to fund low risk well recompletions, facilities expansion and drilling that should double production in the second half of 2018, it says.

Point Loma shares surged over 13%  in Toronto to C$0.22.

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