Meaningful Progress To Be Rewarded |
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Today we are releasing an update on PetroTech Oil & Gas Inc. (OTCPK – PTOG), our most recent initiation. Although the stock has gone down in concert with the market, management’s recent and pending progress are great signs for the near term and the lower price is a great entry point for investors.
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Recent and Pending Steps In the near term, management plans to install cameras in order to post live feed of activity of its current leases in Texas on the Company’s website. This is an unusual move which would keep investors apprised of its progress in real-time. This move will likely provide investors with confidence that management is on track relative to its enhanced oil recovery testing. In addition, the Company has commenced the building of production equipment with CGM Energy in Minneola, Texas. In just the past 2 weeks, PTOG moved a rig out, pulled two wells and have started conditioning two well bores on its leases. Moreover, management is currently testing wellbores for formation treatment. Separately, we expect to receive more clarity on progress in North Dakota later this month as not only has the Company lined up vendors for the Bakken Joint Venture for an AFE (similar to RFI/RFP.) Plus, management plans to visit the region and could seek to obtain additional leases. The Bottom Line Looking ahead, we continue to believe that PTOG’s 3-pronged strategy could ultimately result in huge profits. The innovative EOR tools could transform the way oil from depleted oil reservoirs is recovered and generate meaningful cash flow and profitability from the Company 110 wells in Navarro County, Texas. We expect that revenue meaningful production on a handful of wells could occur sometime in 2H13 which could ultimately produce a peak production level of hundreds of barrels per day over the next few years. Separately, we believe that the pending closing of the JV Bakken contract could be huge for the stock, which only has 3.8M shares in the public float. The 30,000 acres (including the option) has huge Probable and Possible Reserves of 116.2M barrels of oil. Management hopes to begin drilling one well in 4Q13. The oil produced via this transaction could dwarf the Company’s wells in Texas, especially if PetroTech uses its EOR tools. We plan to provide a forecast once closing on the transaction occurs and more clarity is provided. We rate PTOG Speculative Buy with a $0.78 price target based on the value of the EOR and services segments alone. Favorable field test results, clarity on new business and any activity on the JV front would likely prompt a higher price target as much of the risk in the stock would be reduced. Moreover, we will be able to better extrapolate and forecast future financial results. Senior Analyst: Robert Goldman Rob Goldman founded Goldman Small Cap Research in 2009 and has over 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund. Analyst Certification I, Robert Goldman, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report. Disclaimer This Opportunity Research report was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research and Goldman Opportunity Research. The Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. While stocks in the Opportunity format may have a higher risk profile, they typically offer greater upside as well. Goldman Small Cap Research has been compensated by a third party in the amount of $3,000 for due diligence, editing, and production of this report. The Firm does not accept any equity compensation. All information contained in this report was provided by the Company. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. 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