Point Loma Resources poised for growth as its plans accelerate

Oil producer Point Loma Resources (CVE:PLX) is eyeing a busy year ahead operationally, alongside a production boost as it develops its highly exciting assets in the Mannville trend in West Central Alberta.

In a milestone moment, the Toronto -listed junior has now closed its previously announced joint venture funding deal with Transerv Energy‘s subsidiary Salt Bush and gained Evenergy as a strategic investor.

A boost for output and new opportunities…

Last month, the junior oil group revealed it had sold a 20% working interest (WI) in its Alberta assets for $5mln and formed a joint venture with the latter, which will boost crude output and help it seek new opportunities.

It means that Salt Bush will contribute $5mln in cash to the firm in exchange for a 20% working interest (WI) in Point Loma’s lands, property and equipment.

These funds will be allocated to re-activate currently suspended wells and build  facilities that will lead to operating cost reductions. It will also start a drilling program.

The company aims in the short term to drill four to five wells in 2017 alone, with each successful one set to have a big impact on output.

It also wants to reactivate it Paddle River asset production adding around 400 boe/d (barrels of oil equivalent per day). Each well has the potential to add 200 to 300 boe/d.

So Point Loma’s current output of around 900 boe/d is anticipated to increase.

A large land base amassed….

The firm has amassed a large concentrated land base within the multi-zone Mannville trend and established an inventory of over 400 potential horizontal well locations providing a significant development growth platform.

Its portfolio includes over 210,000 net acres with significant shallow to medium depth horizontal drilling potential.

Broker Mackie upbeat….

Mannville horizontal wells are highly economic even at low crude prices with IRR (internal rate of return) of between 50%  and 70%, broker Mackie recently noted.

Point Loma remains highly undervalued, said analyst Bill Newman, who rates shares a ‘buy’ and targets $1.10.

It trades at 47% of the broker’s core NAV (net asset value) of $1.01 per fully diluted share and 37% of its risked NAV, he pointed out.

The company reported $1.6mln of gross revenue for the year for the 12 months ended December 31, while for the fourth quarter, revenue amounted to $970,000.

It also in April reported a net loss of $4.42mln loss for the year, and the loss for the fourth quarter totalled $2.52mln.

A new strategic investor..

The firm has also recently announced its is raising just over $4mln with a strategic investment from Evenergy Company to accelerate the growth plans.

Evenergy will buy 8.375mln shares in Point Loma at 48 cents a share for $4.02mln. Shares are now at 48.5 cents.

“Evenergy is an organization seeking further investment opportunities with Point Loma that, in conjunction with Salt Bush Energy, will allow for strong access to capital in this challenging energy market we face today,” said chief executive Terry Meek.

“With this combination of capital sources, Point Loma can look to strong growth in 2017 and beyond,” he added.

Mackie adds: “The $4 million investment by Evenergy Company not only allows PLX to accelerate its current exploration, development and acquisition plans, it also provides the company with a strong strategic partner to provide additional funds in the mid to longer term.”

Story by ProactiveInvestors