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Point Loma completes acquisition of oil and gas assets from company in receivership

Mackie Research said Point Loma had "completed another highly accretive acquisition within its core area which has boosted production and expanded an already impressive opportunity base"

Onshore oil rig
Production of around 1,100 barrels of oil equivalent per day is expected to continue to build through 2018

Point Loma Resources Ltd (CVE:PLX) has completed the acquisition of oil and gas assets from a private oil and gas company that is in receivership.

After closing adjustments, the net purchase price of the acquisition was in the region of C$779,000 for Point Loma’s 70% working interest share of the assets, which are in the west central area of Alberta, adjoining Point Loma's existing area of focus.

READ: Point Loma gushes higher as it's set for production boost with new acquisition​

The assets produce around 450 barrels of oil equivalent per day (boepd), or 315 boepd net to Point Loma, consisting of 35% oil and natural gas liquids.

The acquisition had total proved reserves of 2.6mln boe (1.9mln net) and a total proved reserve net present value, discounted at 10%, of C$8.9mln (C$6.2mln net).

Point Loma said the acquisition has an estimated net operating income of C$840,000 (C$595,000 net).

In a brief operational update, the company said the Thornbury project area is now complete and the company's production currently exceeds 1,000 boepd.

Further natural gas liquid (NGL) production gains are expected as Point Loma completes work to reroute existing production volumes and reactivate previously suspended volumes to a deep cut facility in the Paddle River area.

The initial component of the project is anticipated to be completed in May 2018 for a potential increase of around 40 bpd of NGLs with additional new volumes restarting later in the year with accompanying NGL production.

Point Loma will also continue to evaluate all producing wells for economic health during projected low natural gas prices in the summer months of 2018. This may result in some temporarily reduced production volumes, particularly natural gas, that can resume as prices increase, the company advised investors.

“This is another accretive acquisition in our core area that will expand our opportunity base,” said Terry Meek, the president and chief executive officer of Point Loma.

“As we continue forward in challenging times we feel the base we are accumulating will position us for excellent growth in the future,” he added.

Broker Mackie Research reiterated its 'buy' recommendation, saying that, based on the purchase price, the company is paying roughly 1.1 times the net operating income.

“The assets have development upside with ~29,000 gross acres (12,900 net) of undeveloped land and over 130 km of proprietary seismic, with booked proven undeveloped and probable drilling locations with multi-zone potential in the Mannville, Cardium and Duvernay shale,” the broker noted.

The broker liked what it called “excellent acquisition metrics”, saying: “Net proven reserves of 1.1 million boe were acquired for just $0.73/boe and 2P [proved plus probable] reserves of 2.9 million boe were acquired for just $0.27/boe.”

Shares in Point Loma were trading 2.1% higher at C$0.24. Mackie has a target price of C$1.10.

Quick facts: Point Loma Resources

Price: 0.045 CAD

TSX-V:PLX
Market: TSX-V
Market Cap: $4.01 m
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