Point Loma "substantially undervalued" compared to its nearest peers

Point Loma will continue to focus on its multi-layered play types, including Nordegg oil, Banff, and Mannville (Ostracod and Sparky oil plays) and the Duvernay Shale
Onshore oil
Point Loma's production should exceed 1,000 boe per day during the first quarter of 2018.

Mackie Research has reiterated its ‘buy’ recommendation and C$1.10 target price on Point Loma Resources Ltd (CVE:PLX) after the energy firm’s results on Thursday.

The broker said it expects substantial growth as the company exploits its deep inventory of Mannville, Nordegg, Banff and Duvernay shale opportunities.

In its third-quarter results, Point Loma revealed that daily average production was 605 barrels of oil equivalent per day (boepd), up from 225 boepd in the third quarter of last year.

Mackie says that net production is expected to more than double with the tie-in of behind pipe volumes; “behind pipe” is an industry term that refers to a productive reservoir that is separated from the well bore by the casing.

“We estimate net behind pipe volumes in the greater Paddle River area is between 650 and 750 boe/d and another 250 boe/d in the Thornbury area for a total of up to 1,000 boe/d. These volumes are expected to be placed onstream later this year and into Q1/18,” Mackie said.

Mackie points out that Altura Energy Inc (CVE:ATU) and Traverse Energy Ltd (CVE:TVL) are companies with similar land positions and similarly sized production bases as Point Loma, yet they trade at substantially higher valuations.

“Altura and Traverse have a market cap of $46 million and $40 million respectively, versus Point Loma’s market cap of $12 million or approximately 25% of its closest peers,” Mackie observed, adding that Point Loma is highly attractive at current levels.

Point Loma racked up C$1.01mln of revenue in the third quarter, up from C$629,000 in the corresponding period of last year.

Capital expenditure rose to C$3.23mln from C$2.39mln the year before.

Net loss widened to C$2.79mln from C$124,000.

During the quarter, the West Cove 5-31-55-6W5 well was placed on production as a pumping oil well at Nordegg.

At Thorsby, the 103/11-18-49-1W5 Glauconitic discovery well was tied in and put on production mid-November. Production rates from the first week of operations averaged around 1.0mln cubic feet of gas per day and 10 barrels per day of condensate.

In 2018, Point Lomas intends to re-establish production in the Thornbury area. Potentially, the reconnect and optimize facilities could place another 1.2mln cubic feet per (mmcf) day (net) on production in the area through Point Loma's operated infrastructure.

At Leaman, plans are now under way to reactivate production of 16 area wells that had a previous combined producing rate of approximately 1.5 mmcf per day (net) with incremental associated liquids of around 80 barrels per day.

"Point Loma is executing a strong growth phase largely driven by low-risk reactivation activities," said Terry Meek, president and chief executive officer of Point Loma.

"The combination of new drilling, continued tuck-in acquisition opportunities and reactivation of key infrastructure in our core area has provided the impetus for a step change," he added.

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