In a June 2 research note, Mackie Research Capital Corp. analyst Bill Newman purported that Alvopetro Energy Ltd. (ALV:TSX.V; ALVOF:OTCQX) currently presents a buying opportunity as its stock has not yet responded to its announcement of impending production.
The company is on track to commence sales production from its Caburé natural gas field in Brazil before or on July 1, 2020. "Once on production, we expect the company to generate substantial free cash flow to fund an exploration program targeting the company's large prospect inventory and potentially pay a cash dividend," commented Newman.
As a comparator, Newman used Canacol and the trading pattern around its announcement and commencement of natural gas production in Colombia in 2016. "Despite a fully funded project, the market did not fully reward Canacol until only after production had commenced," he noted. When the market reacted, the stock increased to CA$4.50 per share from CA$3.30. This trend also held with Canacol in two other instances, with production increases.
Further, Newman highlighted that Alvopetro is trading at a deep discount to its net asset value, as determined by Mackie, of CA$2.15 per fully diluted share.
Thus, Mackie Research has a Speculative Buy recommendation and a CA$1.65 per share target price on Alvopetro. In comparison, the stock is trading now at about CA$0.67 per share.
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Disclosures from Mackie Research, Alvopetro Energy Ltd., Update, June 2, 2020
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