Permex Petroleum (CSE:OIL) is a company, to quote its chief executive, which is "setting realistic operational goals" and "meeting targets".
The junior oil producer has made notable progress since the IPO (initial public offering) in May, in which it raised over C$4mln gross, and it has been on an acquisition spree since.
Permex has assets across the Permian Basin of west Texas and the Delaware subbasin of southeast New Mexico.
Its current portfolio includes eight producing properties, mainly focused on light oil, including six in Texas, and two in New Mexico.
These assets cover over 6,500 acres; it has around 145 wells it owns and operates, including 72 producing wells, 37 shut-in wells, ten saltwater disposal wells, and 24 water injection wells.
So what are the firm's aims? Chief executive Mehran Ehsan says the focus is on its reactivation, drilling and EOR (enhanced oil recovery) programs.
"....we feel these will lead to creation of significant value through increased reserves, production and of course cashflow. We are setting realistic operational goals and are meeting our targets," he has said.
A major milestone was reached in July this year when the group completed its strategic acquisition of two producing assets in West Texas via its deal with Energy Properties 2000-1 LLC, meaning it holds a 41.4% working interest in the ODC San Andres unit and 48% in the W, J. "A" Taylor lease.
The deal increased the group's Texas assets held by production (HBP) to 3,955 acres - an increase of 44%.
It also lifted the firm's 2P (proved and probable) oil and gas reserves to around 9mln barrels of oil equivalent (boe) - an increase of 25.6%.
Meanwhile, in late August, Permex told investors it had successfully re-entered and completed two shut-in wells, which will add to production, in Stonewall County, Texas.
The wells came online at an initial rate of 10 barrels of oil per day (bopd), before stabilizing to to five.
The remaining 35 shut-in wells that the company plans to re-enter have potential to yield an additional 175 net barrels in added daily production increasing the company's total daily production to 385 gross barrels of oil equivalent per day (boepd), solely by re-entering shut-in wells.
The firm reckons, due to the WTI oil price, that the two re-entered wells have a pay-out of less than six months, which made them "quite economic".
And there's more potential..
Permex also started its Waterflood EOR (enhanced oil recovery) work on its Pittcock property in Texas in July this year, which has begun increasing the field's production by a rate of 20%.
Management expects to continue increasing the production through added injection while targeting to reach 200 barrels of oil per day (bopd) from the field.
And this month (September), the firm said modelling had shown it can enhance oil recoveries from its Bullard property, also in Texas, where it has 100% working interest in the lease, and a 78% net revenue interest.
"Given the fact that this field already has a proven and established oil reservoir associated with its past production, we are encouraged and reaffirmed by this extensive phase one engineering report and we are ready to start the implementation of the waterflood to achieve increased oil production," the firm said.
What Fundamental Research said..
In July this year, Fundamental put a 'buy' on the shares, targeting C$1.46 - that's over four times' the current price of C$0.34.
It notes Permex has identified the potential for at least 59 new wells on its properties. The current gross daily production is 198 barrels of oil equivalent per day.
Fundamental says that if production remains flat at 122boepd (barrels of oil equivalent per day net) in 2018, it estimates that the firm can generate revenues of C$2.74 million, with a net loss of C$1.18mln.
It says its forecasts are very 'conservative' as Permex's management’s 2018 exit production estimate is for between 400 and 500boepd (gross).
For 2019, after the horizontal development of leases, the exit rate is between 3,000 and 4,000boepd (gross).
"If production remains flat at 122 boepd (net) in FY2018, we estimate, the company can generate revenues of $2.74 million, with a net loss of $1.18 million (EPS: -$0.03).
"Our forecasts are very conservative as management’s 2018 exit production estimate is 400-500 boepd (gross), and for 2019, after horizontal development of leases, is 3,000 – 4,000 boepd (gross)," it noted.