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Point Loma highlighted among growth stocks to watch by Mackie

Analyst Bill Newman has looked at growth stocks which he sees as under-leveraged and undervalued.

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Producer Prairie Provident Resources says its assets consist of light and medium oil with associated natural gas

Alberta-focused oiler Point Loma Resources Resources Ltd (CVE:PLX) was highlighted among stocks to watch in 2017, by broker Mackie.

Analyst Bill Newman has looked at growth stocks which he sees as under-leveraged and undervalued.

Point Loma issued a trading update on Friday, in which it revealed another step-up in output and said the increase in oil and natural gas prices would have a positive impact on its 2017 cashflow.

"With our expectations for an improved commodity and investment climate, we highlight two domestic companies (Point Loma Resources and Prairie Provident Resources), and two international oil and gas companies (Condor Petroleum and TAG Oil) that have similar strengths that should allow each to prosper in 2017," said Newman.

Strong balance sheets

These four companies have strong balance sheets to weather weaker commodities prices and take advantage of acquisition opportunities, he said.

They also have strong production growth potential and low cost structures which could amplify returns in a rising commodity prices environment.

Thirdly, they  are highly undervalued with the potential for significant returns upon achieving milestones, said the analyst.

He notes that oil prices last year were highly volatile but closed near to a yearly high with the OPEC production cut agreement reached at the end of November.

Expect higher oil prices

"We expect oil prices to trend higher in 2017 as the market moves closure to balance," he added.

Producer Prairie Provident Resources (TSE: PPR) says its assets consist of attractively priced light and medium oil with associated natural gas.

The focus is the Wheatland and Princess properties in Southern Alberta and its Evi area  in the Peace River Arch area of Northern Alberta.

Meanwhile, Point Loma was producing around 620 boe/d (barrels of oil equivalent per day) at year end, consisting of around 55% oil and natural gas liquids.

Newman rates Point Loma a 'buy' with a $1 price target.

It is a rapidly growing firm with a large concentrated land base in west central Alberta, he said.

"The company holds an average 78% working interest and operatorship in 162,233 acres of land that is prospective for conventional oil and gas within the multi-zone Manville trend.

"Point Loma has identified 67 bypassed pay opportunities for horizontal well locations and an inventory of over 400 follow up locations (unrisked) which is expected to provide years of stable per share growth."

Prairie Provident is also rated 'buy' with a $2 target.

Mackie expects expect significant near term production growth, with an estimated Q4/16 average rate of around 4,475 boe/d (barrel of oil equivalent per day) increasing to 5,000 boe/d by year-end 2016.

"In 2017, PPR has an active development drilling program planned with the majority of drilling occurring in the Wheatland core area and combined with an expanded water flood program at its Evi property we expect the company to exit 2017 at over 6,000 boe/d," added the broker.

Quick facts: Point Loma Resources

Price: 0.055 CAD

TSX-V:PLX
Market: TSX-V
Market Cap: $4.9 m
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