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PETRO RIVER OIL CO COM USD0.00001 (POST REV SP (OTCBB:PTRC) Is Today’s Energy Focus

Last week, traders became excited about the oil and gas exploration company, Petro River Oil CO COM USD0.00001 (OTCBB: PTRC), which announced a new oil field discovery in Osage County, Oklahoma. The share price went from trading under $1 to pass the level of $1.5 because of this news. Surprised by this event, we studied the company and found out that the book value per share is very close to the actual market price and the company has no long term debt. Hence, we believe that the company is not only interesting due to the new oil field discovery catalyst, but it is also undervalued. In this article, you will find detailed explanation of this fact. Check the last movement occurred in the beginning of May, and also note the volume increase.

Source

Business history

We could find in this document, the business objective of the company:

“Petro River Oil Corp. (the “Company”) is an independent energy company focused on the exploration and development of conventional oil and gas assets with low discovery and development costs. The Company is focused on taking advantage of the current downturn in oil prices to enter highly prospective plays with industry-leading partners.” Source

Honestly, this is not a different objective from the other ones seen in other bigger exploration companies operating in the United States. What do we need to care about? The amount of discoveries. That is the only way that investors get to know whether the company hired skilled experienced geologists, geophysicists and oil engineers.

Let’s review the current properties and operations of the company. The company develops its activities in Oklahoma and California in the United States, Northern Ireland, Denmark, and the U.K in Western Europe with the help of Horizon Energy Partners, LLC (20% of the company is owned by PTRC) . The following are the properties that were noted here:

  • Larne Basin licenses (9% interest and Horizon owns 16% interest): it is a 130,000 acres project in Northern Ireland. It is said to be “high-risk exploration project, but has the potential to be a significant discovery for the Company with strong risk reward characteristics“. It is interesting, as the political risk is low, the fiscal terms are very attractive, and the exploration costs are low.
  • Kern County, California (13.75% working interest and Horizon owns 27.5%): it has 5,000 acres. It is owned thanks to an Asset Purchase and Sale and Exploration Agreement, under which the company will pay $108,333 and certain costs on the closing date.
  • Northeastern Oklahoma (50% interest): this is the project from which traders profited last week. The company entered into a Subscription Agreement, under which the Company purchased 50% interest in Bandolier. Bandolier’s oil and gas assets are located in Osage County. It consists of 106,000 acres. The good news is that “significant infrastructure is already in place including 32 square miles of 3-D seismic, 3 phase power, a dedicated sub-station as well as multiple oil producing horizontal wells“. PTRC has already capitalized  $2,460,632 in proved developed oil and gas assets and $5,921,641 in proved undeveloped oil and gas assets. Undoubtedly, it is the most interesting asset in the company.
  • Missouri (87% net royalty interest): It consists of 320 net acres in Grassy Creek.

The following table shows the production volumes:

For the Years Ended
April 30, 2016 and 2015
2016
2015
Production volumes:
Oil (Bbls)
1,475
24,347
Natural gas (Mcf)
64,917
Total (Boe)
1,475
35,167
Average realized prices:
Oil (per Bbl)
$
52.92
$
77.93
Natural gas (per Mcf)
$
  –
$
2.31
Total per Boe
$
  52.92
$
58.22
Average production cost:
Total per Boe
$
252.91
$
46.04

Source

Oil discovery – Will the company find more in the area?

On May 8, 2017, the company announced a new oil field discovery in a concession in Osage County, Oklahoma. PTRC still needs to drill the Chat 2-11 exploration well, but initial results seem satisfactory:

“Initial results indicate up to 20 feet of oil productive formation, following flow and fracking tests, the Company plans to confirm IP rates. Additional wells are being planned to evaluate the extent of this chat field discovery. The Company is also planning to drill the Channel 1-3 to test a Red Fork channel sand and the Chat 1-30 to test a separate chat field. These structures were identified utilizing 3D seismic technology, indicating a potential of over 2.5 million barrels of oil.” Source

The use of 3-D seismic technology seems to be the key in this area. Additionally, the fact that the company had a positive discovery in Osage County may mean that the chances of more discoveries are higher now. It was noted in the same press release that the company expects to continue with the work soon.

“This discovery confirms that our exploration technique utilizing 3-D seismic is working. We plan to spud two other wells, the Channel 1-3 based on the data from logs of the Channel 1-11 which found approximately 45 feet of tight non-productive Red Fork sand, and the Chat 1-30 a separate chat structure test. Also, we plan to shoot more seismic along the southern part of our concession later this year.” Source

In fact, only a few days later, on May 15, 2017, the company noted that it expected to spud the Red Fork Channel 1-3 well on the same day in its Pearsonia West concession in Osage County, Oklahoma. As mentioned that the 3-D seismic technique worked last week, thus the company will be trying the same in other areas. These people are experienced explorers and know when the chances of finding new oil fields are higher. That is the reason that they are putting out more press releases at the moment noting every new step in Osage County.

“The Red Fork Channel 1-3 well will be drilled to a depth of 2800 feet – similar to the Chat 2-11 that discovered more than 20 feet of oil productive formation.  As previously stated, the Company’s exploration technique utilizes 3-D seismic, which has identified over a dozen fields. “ Source

The company is undervalued

PTRC shows a market cap. of $24.72 million as of May 16, 2017. Its balance sheet is stable being the main asset; the account receivables.

Period Ending 4/30/2016 4/30/2015 4/30/2014
Current Assets
Cash And Cash Equivalents 855.554 1,135.543 8,352.949
Short Term Investments
Net Receivables 5,001.249 42.688 51.979
Inventory
Other Current Assets 3,689.5 52.771 40.297
Total Current Assets 9,546.303 1,231.002 8,445.225
Long Term Investments 17,848 17,848 17,848
Property Plant and Equipment 880.567 15,817.964 0.93
Goodwill
Intangible Assets 2,203.393 2,203.393
Accumulated Amortization
Other Assets 53.778 27.922 8,947.592
Deferred Long Term Asset Charges
Total Assets 28,328.648 19,280.281 17,393.747

Source

Additionally, the company shows no long term debt and a large minority interest, thus the company does not show any serious financial risk. Have a look:

Current Liabilities
Accounts Payable 4,307.989 252.227 480.637
Short/Current Long Term Debt
Other Current Liabilities 561.958 541.959 481.658
Total Current Liabilities 4,869.947 794.186 962.295
Long Term Debt
Other Liabilities 201.104 376.471 336.352
Deferred Long Term Liability Charges
Minority Interest 12,051.318 3,644.776 3,644.776
Negative Goodwill
Total Liabilities 17,122.369 4,815.433 1,298.647

Source

Taking into account the 15 million shares outstanding, its book value per share is $1.02 and its cash per share is $0.09. Hence, PTRC seems to be a hidden gem as the share price is worth only 1.56x times its liquidation value and the company has a serious catalyst; the discovery of new fields in Osage County, Oklahoma.

Conclusion

PTRC is an emerging company; fair enough. But, the new discovery of oil fields thanks to the use of the 3-D seismic technology, its clean balance sheet and the current share price make the company an interesting option. To sum up, there is a lot to like in this company. Thus, we encourage investors to stay alert. We will be updating our subscribers as soon as we know more. For the latest updates on PTRC, sign up below!

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Disclosure: We have no position in PTRC and have not been compensated for this article.

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PETRO RIVER OIL CO COM USD0.00001 (POST REV SP (OTCBB:PTRC) Is Today’s Energy Focus
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