In a Sept. 24 research note, analyst Bill Newman with Mackie Research Capital Corp. reported that Point Loma Resources Ltd. (PLX:TSX) and partner Salt Bush secured rights to a new Rex oil play that represents a "third high-impact play for large value creation," along with its Duvernay and Banff assets.
"Drilling of the Banff and Rex plays starting in Q4/18 offer the potential for multibagger returns and a great catalyst for the stock," Newman added. Point Loma holds an 80% working interest in Rex; Salt Bush owns the remaining 20%.
"Drilling of the Banff and Rex plays starting in Q4/18 offer the potential for multibagger returns and a great catalyst for the stock." - Bill Newman, Mackie Research
Newman pointed out that Rex, in the Upper Mannville group, has large reserves potential in that it could hold up to 60 million barrels of original oil in place (OOIP). "Assuming a 10% recovery factor based on primary production only, we calculate a potential net recoverable resource of about 4.8 million barrels (4.8 MMbbl), equivalent to ~65% of Point Loma's current Proven and Probable reserves." For comparison's sake, other wells in the area have reached 250–300 barrels of oil equivalent per day of initial production.
As for Banff, Point Loma plans to drill a horizontal well this quarter at one of the two defined oil pools it identified on its West Cove lands, which "could be a game changer," wrote Newman. "Based upon OOIP resource of between 25–75 MMbbl, we calculated a mean potential net value of CA$40 million, or CA$0.66 per share (CA$0.66/share) per pool with an upside case of CA$135 million, or CA$2.24/share, per pool."
Regarding its Duvernay holdings of 12,544 net acres of prospective rights, Point Loma is exploring ways to unlock shareholder value from them, Newman relayed. The Duvernay shale is an area that is bustling with activity, including drilling, land sales and partnership formations.
The analyst purported that despite Point Loma's "exceptional" success in adding asset value via transactions, the company's stock does not reflect it. Rather, the company is still "highly undervalued."
As such, Mackie reiterated its CA$1.10/share price target and Buy rating on Point Loma, whose share price today is about CA$0.27.[NLINSERT]
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Disclosures from Mackie Research, Point Loma Resources Ltd., Update, Sept. 24, 2018
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