Brookeside Energy, an oil and gas exploration company seem to demonstrate strong operational performance, strategic expansion plans, and attractive valuation.
As of 4/4/24 they are approx. $72m market cap, $51.5m Rev & $16.6m NPAT in the last FY (which for BRK ended 31/12/23). They had $26.2m cash in the bank at that point and a cash flow from operations of AU$18.95 million for the year.
Operations
- The company's focus on the Anadarko Basin in Oklahoma, USA, coupled with its Flames-Maroons Development Plan (FMDP), has it positioned with the opportunity to significantly grow its production and revenue.
Expansion:
- The FMDP represents a significant growth initiative, aiming to monetize ~17% of the company's net reserves and substantially increase net production. Full operational capability is expected by Q4 2024, which could serve as a catalyst.
- With the FMDP, Brookeside aims to increase its production by 2,500 barrels per day. Currently “gross operated daily production of 2,269 barrels of oil equivalent (BOE) per day and Group net production (including non-operated production) of 1,410 BOE per day, including 64% liquids”
- Brookeside plans to fund the US$26 million required for the FMDP through existing cash reserves and cash flow from operations, indicating prudent financial management and operational cash generation capability.
Valuation:
- Currently trading at a P/E ratio of approximately 4.01 and a P/CF ratio of approximately 3.52, Brookeside's valuation is attractive relative to its growth prospects.
- Considering the oil and gas industry standard market multiples, there is significant upside potential if Brookeside's multiple is re-rated closer to industry averages. A re-rating could reflect market recognition of the company's growth trajectory, operational efficiencies, and successful execution of expansion plans.
The investment thesis would be that Brookeside Energy offers a compelling growth story backed by strong operational fundamentals and significant upside potential from expansion plans and potential market re-rating to more standard industry multiples.
