There is little that’s known about Turner Valley Oil & Gas Inc (OTCMKTS:TVOG) except for its past operations. The Texas-based entity was formed to conduct business in the mining and exploration, development and production of oil and gas within Alberta, Canada. It had since inception been focused on the development of this business and growing its reach within the country. However, there have been a few changes which have been made in the recent past and which have led them to reorient their strategic outlook and which has consequently affected their share price.
TVOG’s share price had previously stagnated, oscillating between $.01 and $.015. This followed a bearish period when the share price fell from $.06 to the $.01 mark, as shown in the chart below:
The result of this decision to shift their strategic orientation as at February 2019 has been an increase in the firm’s share price. In sum, the price skyrocketed, rising by over 360% to the firm’s current price of $.0365. Moreover, the trading volume witnessed during this period has also been significant with over 10 million shares having been traded over this period:
Given the above increment in share price, we opted to take a look at the firm and evaluate how this new strategy will impact their long run share price. Below is a synopsis of the same.
TVOG: The Background
As previously stated, there is little known about TVOG except for the firm’s previous operations (which are highlighted above). To add on to this, the energy sector-based firm was founded back in 1999 and headquartered in Houston, Texas.
Recently, however, the firm has opted to venture into the infrastructure space, opting to acquire different entities operating therein in the process. Their main goal currently entails the evaluating and acquiring medium-sized entities which are currently operational in this field. This has led them to acquire two such firms already with the expectation of acquiring a few more going forward.
The pivot from energy to infrastructure has been noted to have been a catalyst for the share price increment but this isn’t the full story. The real driver is a recent investment commitment TVOG recently received (discussed later in this piece).
The Strategic Drift
This shift to infrastructure has been the highlight of TVOG’s news as it highlights the transformation which has been witnessed within the company over the past few months.
It also provides the firm with a new outlook as a technology-focused firm in that their entry into the infrastructure space has been encompassed on bringing technology and its added capacity into the field.
The above two have drawn investors to the firm and consequently led to a share surge. The sections below explain how this has happened.
The Second Acquisition
The most recent acquisition by TVOG was of a 15-year-old Paving and Sealcoating company: American Paving – Visco Sealcoating. The firm, which operates in Columbia, South Carolina, United States of America, is expected to be a wholly-owned subsidiary of TVOG by the end of this transaction. In TVOG’s view, the acquired entity has the potential of adding between $1.5 and $5 million to their top lines and enable them to expand into other regions such as Columbia. According to the CEO, Steve Helm:
“It will provide an excellent building block onto which Turner can expand from as it begins to transform into a technology-oriented infrastructure company”
The transaction is expected to be completed using preferred stock so as to limit dilution of their position.
This acquisition follows the initial acquisition whereby TVOG acquired a Tennessee-based asphalt service contractor. Broadly, TVOG is currently seeking to acquire nearly a dozen other firms and working towards improving their revenue base and EBITDA potential to $90 million and $11 million respectively. With this, the firm expects to ingrain itself in the entire infrastructure segment value chain thus benefit from the synergy this brings.
The $4 million Commitment
TVOG has previously been considering different firms which would bankroll their expansionary strategy through their investments and especially their acquisitions. Its managers were therefore proud to announce that they had finally settled on GHS Investments, LLC, a New York-based private equity firm to do this.
The investment in TVOG is a major step for the firm which is currently working towards growing their portfolio of companies operated within the infrastructure segment. In total, this investment will grant TVOG the capital necessary to complete current and future transactions comfortably as stated by their CEO:
“The capital influx from GHS is a crucial step for Turner and will provide the foundation for growth that we envision… It is an exciting time now that we have secured the first two acquisitions for Turner within the infrastructure services segments to serve as cornerstones for the platform we have created…”
GHS has already settled with TVOG on several factors such as the extensive due diligence, management interviews and other company analysis. The firm is poised to bring with it a lot of relevant experience within the infrastructure segment therefore provide guidance to TVOG in addition to equity.
With this being the case, the market is comfortable that TVOG will comfortably purchase the assets which it needs to meet their $90 million top line potential. This level of aggressiveness is important to investors as it postulates that the firm is keen on meeting the value proposition made to them. With the firm’s financial muscle having been built, all that remains is the meticulous and keen execution of the acquisitions and expansionary strategy, a factor which TVOG seems to be aware of and successfully executing.
TVOG has been successfully evaluating different entities which will ensure they secure their position within the infrastructure segment. The additional capital has come to solidify their position and ensure they can easily execute their goals. Should the acquisitions be carefully considered and correctly valued, there is a lot of value to be unlocked in the segment. As such, we remain bullish about the stock.
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Disclosure: We have no position in TVOG and have not been compensated for this article.