Hillcrest Resources (CVE:HRH) has received initial coverage from small-cap focused corporate markets firm SeeThruEquity, which gave the oil and gas explorer a 46 cent price target on the back of a major deal announced late last year.
The Canadian junior company is focused on oil and gas exploration in both onshore and offshore basins of the US, with current production from fields located onshore in Newton County, Texas, and offshore in Louisiana in the shallow portion of the Gulf of Mexico.
In late November, it signed a letter of intent to acquire the Texas-based subsidiary of an international oil and gas firm, with the deal closing on December 19. The acquisition, combined with Hillcrest's current producing assets, is expected to deliver total production of around 700 barrels of oil equivalent per day (boepd) by year-end 2015.
The deal included all assets, property and commitments of the subsidiary, as well as production revenues from operating oil wells in the Gulf of Mexico, which are producing an average of 270 gross boepd.
Hillcrest is now expecting net revenue through 2016 to be in the range of US$25 to US$27 million.
"Hillcrest's current focus will be expanding production at its flagship Hartburg Field property as well as expanding production at its recently acquired properties," said Ajay Tandon of SeeThruEquity in the report.
"We see material growth potential for Hillcrest in the upcoming quarters and are initiating coverage with a 12-month price target of C$0.46 per share."
The report also noted room for "meaningful expansion" at its Texas properties in Newton County, where it has approximately $5.3 million in proven reserves. SeeThruEquity said it has the potential for over a million barrels of recoverable oil on its current leases in Texas.
The company has already identified up to 11 additional drilling locations on its current land at Harburg, and has announced a three-phase, six well drilling program. The first two wells have already been completed, with Hillcrest expecting the remaining wells to come online over the first half of this year.
"These additional projects represent significant expansion in revenues for Hillcrest in 2015 and beyond," added Tandon.
Hillcrest, which is based in Vancouver, has also taken steps to ramp up investor awareness of its operations in the US, given its growing presence in Texas. Investor conferences are planned for the coming quarters, according to chairman and CEO Donald Currie, as is a potential listing on the OTCQX Exchange.
Shares of Hillcrest are trading at around 8 cents.