Oil and Gas Company Trading at 25% Of Book Value Production Set to Double

Source: Jeffery Hunter  (11/2/23) 

Jeffery Hunter of BullishBriefs shares his thoughts on energy company Avila Energy’s stock.

Avila Energy Corp. (PTRVF:OTCMKTS;VIK:CSE) is an overlooked opportunity trading at a steep discount to book value. After the share price was hit hard after a dramatic SPAC merger breakdown, this diversified energy company currently has a market capitalization under US$5 million, despite having total equity of US$21.3 million on the books. That means Avila Energy’s stock trades at around 25% of its book value per share of US$0.15.

With the price of Western Canadian crude oil sustaining over US$64 per barrel, now could be the ideal time to take advantage of Avila’s discounted share price. The company is focused on ramping up near-term production to capitalize on high commodity prices.

Avila currently produces approximately 570 barrels of oil equivalent per day (boe/d) from its operations in Alberta, Canada. The company plans to double production to 950-1,040 boe/d through a combination of workovers, recompletions, and new drilling. Assuming the lower end of production, US$64 WCS oil and US$3.10 natural gas, my math gives me about 8.1m in annual revenue, considerably higher than their current market cap.

To help fund this growth, Avila Energy is undertaking a US$2.2 million private placement. The capital raised will go directly toward adding barrels and increasing cash flow at a time when market conditions are favorable.

Beyond conventional oil and gas production, Avila Energy is making moves into the clean energy space. The company is developing carbon capture and sequestration technology to reduce the emissions from its upstream operations. Avila is also launching a Vertically Integrated Energy Business using patented micro-turbine technology.

This micro-turbine technology enables modular power generation for homes and businesses. By selling the power directly to consumers, Avila can establish a stable recurring revenue stream. The company estimates each customer could generate around US$500 per month on average.

Avila Energy is positioning itself for the global energy transition. Through a balanced mix of oil and gas production and clean energy sales, the goal is to achieve carbon neutrality by 2024 and net zero emissions by 2027.

With fossil fuel production providing steady cash flow and clean energy initiatives driving future growth, Avila aims to become a unique diversified energy provider. The company has the team and vision to bridge the gap between traditional and renewable energy.

Trading at just a fraction of book value, with near-term production set to double and a pivotal move into clean energy, Avila Energy offers substantial upside for investors. With the CEO owning a whopping 28% of outstanding shares, the opportunity is compelling for those who see the long-term potential in the strategic transition Avila is undertaking.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Avila Energy Corp.
2. Jeffery Hunter: I determined which companies would be included in this article based on my research and understanding of the sector.
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