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Oil & Gas Spinout Co Is a 'Good Buying Opportunity,' Analyst Says

Source: Bill Newman

 

September 8, 2022 (Investorideas.com Newswire) This firm is undervalued, has a near-producing oil asset in Alberta with large resource potential and upside, and is pursuing an opportunity to expand in Thailand, noted Research Capital Corp., which initiated coverage on it.

CanAsia Energy Corp. (CEC:TSX.V) attracted the attention of Research Capital Corp., which initiated coverage on the new Canadian oil and gas exploration and production company with a Speculative Buy rating and a CA$0.50 per share price target, reported analyst Bill Newman in a September 7, 2022 research note. CanAsia is currently trading at about CA$0.26 per share, a substantial discount to its risked contingent resource value.

"At the current market price, we believe CanAsia represents a good buying opportunity," Newman wrote.

He explained that CanAsia is a recent spinout company of the former Pan Orient Energy Corp.'s non-Thailand assets, which started trading on the TSX Venture Exchange on August 29. In fact, most of CanAsia's management and board is comprised of former Pan Orient team members, including Jeff Chisholm, Marcel Nunes, and Bill Oslund, the spinco's chief executive officer, chief financial officer, and adviser, respectively.

Along with CanAsia being undervalued, its primary asset is another reason to invest in the company because it has large resource potential and considerable upside, Newman highlighted. It is the Sawn Lake heavy oil play in northern Alberta, which the company holds through its 71.8% interest in Andora Energy Corp.

The most recent, independent, risked best estimate of Sawn Lake resources, done in March of this year, is 248,200,000 barrels (284.2 MMbbl), which amounts to 178.2 MMbbl net to CanAsia, Newman indicated. The after-tax net present value discounted at 15% is $165 million ($165M) to Andora, $119M net to CanAsia.

At Sawn Lake, CanAsia plans to restart steam-assisted gravity drainage (SAGD) production, previously proven by Andora to be viable in the Bluesky Formation there, relayed Newman. As for the associated timeline, in Q1/23, CanAsia will start refurbishing the Sawn Lake facility. In Q2/23, the energy firm will restart the existing SAGD well pair, and in late Q4/23, drill a second SAGD well pair.

With these efforts, Sawn Lake production should increase to about 1,235 barrels per day (1,235 bbl/d) in 2024, Newman purported. Research Capital forecasts CanAsia will reach peak production of at least 20,000 bbl/d two years later.

"Given the significant amount of capital invested to date in the SAGD facilities and the relatively small amount of capital needed for the first phase development [about $10M gross] and our strong outlook for oil prices, we believe it's likely that the Sawn Lake development will proceed," added Newman.

The analyst pointed out that CanAsia also "plans to participate in the upcoming Thailand concession offerings, adding a potential new growth avenue for the company." If it is successful, "we believe management has the experience and relationships to repeat on its past success."

The spinco has 49,800,000 outstanding common shares and, as of September 1, 2022, about $7.1M in cash and cash equivalents.

Disclosures:

1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.

3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures For Research Capital Corp., CanAsia Energy Corp, September 7, 2022

Analyst Certification: I, Bill Newman, CFA, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report. Research Capital Corporation publishes research and investment recommendations for the use of its clients. Information regarding our categories of recommendations, quarterly summaries of the percentage of our recommendations which fall into each category and our policies regarding the release of our research reports is available at www.researchcapital.com or may be requested by contacting the analyst. Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst's personal views and (ii) no part of the research analyst's compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report.

General Disclosures: The opinions, estimates and projections contained in all Research Reports published by Research Capital Corporation ("RCC") are those of RCC as of the date of publication and are subject to change without notice. RCC makes every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and that contain information and opinions that are accurate and complete; RCC makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained therein and accepts no liability whatsoever for any loss arising from any use of or reliance on its Research Reports or its contents. Information may be available to RCC that is not contained therein. Research Reports disseminated by RCC are not a solicitation to buy or sell. All securities not available in all jurisdictions.

Company Specific Disclosures: Within the past 12 months, Research Capital has provided investment banking services to the issuer. The Analyst currently owns or is short shares of the issuer, which represents less than 1% of shares outstanding.

Potential Conflicts of Interest: All Research Capital Corporation ("RCC") Analysts are compensated based in part on the overall revenues of RCC, a portion of which are generated by investment banking activities. RCC may have had, or seek to have, an investment banking relationship with companies mentioned in this report. RCC and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned in our Research Reports as principal or agent. RCC makes every effort possible to avoid conflicts of interest, however readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies.

RCC USA: Information about Research Capital Corporation's Rating System, the distribution of our research to clients and the percentage of recommendations which are in each of our rating categories is available on our website at www.researchcapital.ca. The information contained in this report has been drawn from sources believed to be reliable but its accuracy or completeness is not guaranteed, nor in providing it does Research Capital Corporation assume any responsibility or liability. Research Capital Corporation, its directors, officers and other employees may, from time to time, have positions in the securities mentioned herein. Contents of this report cannot be reproduced in whole or in part without the express permission of Research Capital Corporation. US Institutional Clients - Research Capital USA Inc., a wholly owned subsidiary of Research Capital Corporation, accepts responsibility for the contents of this report subject to the terms and limitations set out above. US firms or institutions receiving this report should effect transactions in securities discussed in the report through Research Capital USA Inc., a Broker - Dealer registered with the Financial Industry Regulatory Authority (FINRA).

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