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Point Loma Resources has 'multi-bagger' upside, says Mackie after reserve report

Last updated: 14:51 19 Mar 2018 EDT, First published: 10:51 19 Mar 2018 EDT

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Point Loma had production of around 550 boe/d in November last year, reckons Mackie

Broker Mackie has hailed the latest reserve update from Alberta-focused oil producer Point Loma Resources (CVE:PLX), a company, which it says has "multi-bagger" upside and which it rates a 'buy'.

Analyst Bill Newman notes the company has a reserve value of C$41.3mln against a market cap of only C$12.7mln.

Earlier the firm said total proved plus probable (2P) reserves had been put at the end of 2017 at 4.452 mboe (million barrels of oil equivalent) and proved (1P) reserves were 3.5 million barrels - an increase of 119% and 128%, respectively, since the end of 2016.

The new reserve report  was carried out by McDaniel and Associates Ltd.

Gilby transaction..

Point Loma said that an estimated net present value discounted at 10% for the group, upon closing the recently announced Gilby transaction, as of December 31, 2017, would be C$41.3mln (or C$0.75 a share) based on 2P reserves and C$26.6 million on 1P reserves.

Analyst Newman notes that  at the current market share price of C$0.23, the oiler is trading at a 32% of its 2P valuation.

As reported on March 1 this year, PLX  announced a deal to buy, in joint venture with Salt Bush Energy, a private oil and gas company involved in a receivership process.

This is known as the acquisition of oil and gas assets in the Gilby area, and Newman points out that Point Loma paid an opportunistic bargain price of only C$0.45 per boe for 2P reserves.

"The effective date of the Gilby acquisition is November 1, 2017, and the transaction is expected to close later this month. The estimated net reserves of the Gilby asset, as at December 31st, 2017, include 2.9 million boe of 2P reserves, with a NPV-10 value of C$10.8 million. This is a highly accretive acquisition given PLX only paid $1.33 million net," says the broker.

"Point Loma acquires net production of 315 boe/d at a cost of just $4,127 per flowing barrel," it adds.

Mackie reckons the firm had production of around 550 boe/d in November last year and the

Gilby adds 315 boe/d, reckons Mackie..

Gilby acquisition adds 315 boe/d taking corporate production to around 865 boe/d. 

The firm also plans to reactivate 15 to 17 wells in the Thornbury area which is expected to add 1.2 mmcf/d (200 boe/d).

PLX is also working on re-activating 15 to 20 wells in the Leaman/Paddle River area, which is expected to add net production of around 1.5 mmcf/d plus 100 bbl/d of NGL’s (natural gas liquids) (around 350 boe/d).

"The acquisition plus low risk reactivations could increase corporate production to around 1,415 boe/d in the near term," says Newman.

In addition, notes the analyst, the firm plans to drill two horizontal wells in 2018 which could increase production to around 1,815 boe/d.

"PLX is highly undervalued and has a large concentrated land base with a large, multizoned drilling inventory to fuel rapid growth for many years. PLX has no bank debt and positive working capital to fund low risk well recompletions, facilities expansion and drilling that should double production in H2/18," says Newman.

Point Loma shares in Toronto added 4.35% to C$0.24.

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