Source: Prospera Energy Inc.
Market Herald logo

Subscribe

Be the first with the news that moves the market

The energy sector has been an engaging story for the first half of 2022, and as commodity prices rise, traders are hunting for stocks that can capitalize on this movement for the best share price.

Because of the impacts of the Russian-Ukrainian conflict overseas, Canada is uniquely positioned to foster energy security abroad. The dependence on Russian energy and natural resources could mean a recovery period lasting until 2028 – and a potential 20 more years before pre-war levels are achieved.

World Bank Governance Indicators and the Yale Environmental Performance Index rank Canada as the world leader among oil-producing countries on environmental, social and governance standards. This could make Canada an attractive and viable source of oil and gas imports.

There is a natural resource exploration and production company operating in Western Canada that investors should take note of, as it is primarily engaged on optimizing hydrocarbon recovery through environmentally safe and efficient reservoir development methods and production practices.

Prospera Energy Inc. (TSXV:PEI) is an oil and gas exploration and development company focused on conventional oil and gas reservoirs, with medium to heavy oil properties in Alberta and western Saskatchewan, acquired in 2018.

With an eye to reducing its operational expenditure while increasing its margin, Prospera’s new Chief Executive Officer, Samuel David came to the role during the COVID pandemic in late 2020. He recognized the considerable oil remaining in the ground, even though the properties were older and mature, very little had been recovered.

Having settled its historical liabilities to surface landowners and local municipalities and outstanding environmental and regulatory compliance, the team set to work.

Working capital was deployed to optimize production to the current 925 barrels of oil equivalent per day (750 barrels per day (bpd) plus 1,050 thousand cubic feet per day (Mcfd)), resulting in more than C$2,000,000 peak monthly revenue.

It was an incredible turnaround that put Prospera Energy on track to its growth phase.

In the past year, the team made significant progress in restructuring by settling historical liabilities and addressing all environmental and regulatory concerns. With a clean slate, the company is able to move towards increasing production from 750+ bpd to 1,500+ bpd by the end of the year.

Early in 2021, PEI was restructured to be compliant and profitable. Soon after, the team structured equity and convertible debenture private placement financing that raised $C9.1 million. The company also restructured its Board of Directors with diverse business and technical backgrounds and formed an experienced management team focused on technical delineation and financial discipline to optimize oil recovery in a safe and cost-effective manner.

Additionally, the company’s leadership team has acquired an interest in a light oil play with a development plan to increase production by 1,000+ light oil bpd.

This marks an opportunity for the company to expand its portfolio, diversify its product mix, and accelerate its growth even further.

Operations:

Source: Prospera Energy Inc.

Prospera Energy’s core properties include the Cuthbert, Luseland, and Heart Hills heavy oil projects in Saskatchewan, as well as the Red Earth, Pouce Coupe, and Brooks light oil projects in Alberta.

The company has piloted horizontal laterals to assess to improve technical and economic efficiency to effectively capture the significant remaining reserves (400milion barrels of crude oil). This is a step towards its production output increasing from 750+ bpd to 1,500+ bpd.

With half a billion barrels of oil in place, roughly 8 per cent was recovered with old vertical well technology, leaving significant reserves, and added upside recovery between 20 per cent to 40 per cent. The company’s compatible technical applications are conducive to reservoir mechanisms allowing for the capitalization on the high margin potential of these fields. On top of this, the company aims to eliminate all emissions, minimize environmental disturbances, and conduct environmentally safe operations.

The team is led by reservoir development engineers who set out to develop property interfaces by addressing the risk systematically to then prove its potential value to spend further capital by doing work in phases.

As CEO David explained in an interview with Market Herald editorial, if phase one worked, they had assurance, so they could commit more capital to do a second phase.

“If phase two works, then you’re committing even more capital to do phase three, et cetera. So, the first thing we had to do was to become functional, that was phase one, functional meaning we couldn’t go to some of the sites because the landowner blocked it because they hadn’t been paid, they want money upfront. Even if you go do all of those, the equipment or the facility infrastructure is not in a compliant, safe operating mode.”

With his work cut out for him, CEO David put money forward, and the company raised enough to do the first phase.

“Phase one was to become compliant, operate in a safe mode and address all arrears. We made a number of trips to local communities and trade owners. We made presentations, and we told them, this is what we are going to do, but we can’t pay you all a hundred per cent right up front, but we also have to optimize the production, and there are a number of options. We gave some of them an option where we can settle on a cent, on a dollar, we can pay you a certain amount, 25 per cent or so, and then put you on a payment plan after six months so that we can get our production up.”

It was a strategy that paid off.

2021 year-end reserves:

Source: Prospera Energy Inc.

In spring 2022, Prospera Energy released the results of its year-end reserves independently assessed by InSite Petroleum Consultants Ltd.

Prospera Energy conducted a full geological delineation substantiated by existing 3-D interpretation, backed by the report, which confirmed to the company its assessment of the significant oil in place of 387.9Mbbl, mainly in core PEI assets (more than 170 sq. km.) located in Southwest and West-Central Saskatchewan.

While historical production accounted for 8.6 per cent recovery of 33.2Mbbl from vertical wells, significant remaining proven reserves of 3,880 Mbbl gross, 2,808 Mbbl net, and a reserve life index of 23 years.

These fields have had no modern drilling or recovery methods applied, meaning there is a substantial upside for the company and shareholders here, given encouraging historical production response and recovery from vertical wells along with significant remaining recoverable reserves and the re-entry to horizontal wells.

Highlights:

  • Total proved plus probable (TPP) reserves increased 569 per cent from 464Mbbl to 2,644Mbbl
  • A corresponding increase in [email protected] per cent before income taxes from a loss of -$3.4 million to a gain of $56.2 million
  • The TPP reserve life index also lengthened from 10.1 to 22.8 years
  • PEI elected to apply a modest price of $70/bbl for the estimation of NPV, allowing for substantial NPV appreciation if the oil price sustains

Meet the team:

The company restructured its board of directors and brought together a team of people from diverse business and technical backgrounds to form an experienced management team.

Led by President and CEO Samuel David, P. Eng., BA Econ, with 34 years of experience in the development and management of oil and gas companies, management is committed to technical delineation and financial discipline, the goal is to optimize oil recovery in a safe and cost-effective manner.

VP Subsurface, George Magarian P.Geo., Honors BSc., has 36 years of experience in senior geologist and exploration manager positions.

Chief Financial Officer, Matthew Kenna CMA, CPA has been leading organizations to help them expand for 30 years. CEO David praised Kenna for helping turn the company around, noting that he believed in the plan.

The company’s VP Finance and Accounting, Chris Ludtke CPA, CMA comes to the team with two decades of oil and gas executive finance, economics, and accounting experience. He worked for Husky Energy before moving into an executive role in the junior oil and gas and hydrogen space.

Investment summary:

Prospera Energy Inc. has stabilized with the steady base revenue past the break-even point and brought all operations to operating safe operating conditions. The company is set up to start its growth phase, and the services that work with the company have grown.

This represents an opportunity to invest in an ESG-driven company, coupled with the benefits of investing in the oil and gas industry.

Through its modern oil and gas technology, the team can reduce its environmental footprint and produce valuable resources through modern and cost-effective horizontal drilling techniques to reduce the environmental footprint of numerous vertical wells.

With a mantra of “treating people as you would want to be treated”, CEO David added that good people run the company, who care for the environment as much as they care for people.

Prospera presents itself as a clean and safe energy producer with oil and gas operations in Western Canada. The company has worked to make significant progress in restructuring by settling historical liabilities and addressing all environmental and regulatory concerns.

Its properties are delineated, all areas of growth have been identified, and the reservoir has been defined. This company is set up for exponential growth.

FULL DISCLOSURE:  This is a paid article produced by The Market Herald.


More From The Market Herald

" Permex Petroleum (CSE:OIL) commences drilling operations

Permex Petroleum Corporation (OIL) has started drilling on its Breedlove Field prospect in Martin County, Texas.

" Silvercorp Metals Inc. Confirms Its Golden Potential with a Reserve and Resource Update

By Dr. Ryan D. Long

" Prospera (TSXV:PEI) sees substantial production increase

Oil and gas exploration company Prospera Energy (PEI) has announced an overall production increase of ten times its current rate.

" No pain, no blood: BETTER Type 2 diabetes testing is coming to market

Over the past two years, reporting on the Covid-19 pandemic has dominated media airwaves.