Valued at a market cap of $224 million, Alvopetro Vitality (TSXV:ALV) is an power inventory that has returned 653% to shareholders over the previous decade. If we regulate for dividend reinvestments, cumulative returns are nearer to 991%.
Regardless of these market-beating returns, Alvopetro Vitality inventory is down 43% from all-time highs, permitting you to purchase the dip. Let’s see why I’m bullish on this small-cap power inventory proper now.
Is that this power inventory purchase as we speak?
Alvopetro Vitality delivered robust third-quarter outcomes, showcasing the corporate’s balanced progress technique throughout its Brazilian and Canadian operations.
The Calgary-based oil and gasoline producer set a brand new manufacturing report in October, averaging 2,923 barrels of oil equal per day (BoE) on a complete firm foundation. This milestone displays the profitable execution of drilling packages in each geographic areas and the advantages of an upgraded gasoline gross sales settlement with Brazilian offtaker Bahiagas that elevated agency volumes by a 3rd.
The corporate’s Brazilian operations demonstrated spectacular efficiency, significantly on the Murucututu mission north of its core Caburé area. The not too long ago accomplished 183-D4 nicely got here on-line in August with an preliminary 30-day manufacturing fee of almost 1,100 barrels of oil equal per day, virtually double the forecast by impartial reserve evaluators.
The nicely recognized 61 metres of internet pay throughout three Caruacu sequences and produced 5.8 million normal cubic toes of gasoline plus 97 barrels per day of condensate from seven accomplished intervals.
By October, the Murucututu area was producing at 6.1 million normal cubic toes per day, successfully maxing out present area capability with solely two of three wells on-line.
Alvopetro’s working economics stay engaging, given it generated an working netback of $55.90 per barrel of oil equal within the third quarter (Q3), indicating an 85% margin on realized costs.
This efficiency stems from Brazil’s beneficial fiscal regime, which offers an efficient tax fee simply over 15% and royalty charges beneath 5%.
Realized pure gasoline costs reached $11.04 per thousand cubic toes, up 4% sequentially, whereas funds stream from operations remained regular at $10.4 million.
The Western Canadian enlargement continues gaining momentum. Alvopetro not too long ago expanded its partnership within the Mannville Stack Heavy Oil play to cowl over 74 sections of land, leading to a 50% working curiosity in almost 24,000 internet acres.
The power operator has drilled 4 gross wells to this point utilizing superior open-hole multilateral drilling expertise, with the Neilburg nicely performing above expectations. Extra drilling is deliberate to start in late November or early December, with two to 4 wells anticipated earlier than the tip of the primary quarter of 2026.
Capital allocation stays disciplined regardless of an energetic drilling interval. It elevated its quarterly dividend to $0.10 per share, yielding roughly 7% at present share costs. Since introducing the dividend in 2021, Alvopetro has returned over $60 million to shareholders whereas sustaining a debt-free steadiness sheet. Administration targets reinvesting roughly half of its money stream in natural progress, whereas returning the rest to stakeholders.
With capital spending set to reasonable within the fourth quarter and manufacturing capability increasing, the corporate is well-positioned to rebuild working capital whereas advancing its multi-year drilling stock in each Brazil and Canada.
Is Alvopetro inventory undervalued?
Analysts monitoring Alvopetro inventory forecast income to extend from $65.7 million in 2024 to $131 million in 2029. Throughout this era, free money stream (FCF) is predicted to develop from $28 million to $72 million.
If the Canadian power inventory is priced at 10 instances ahead FCF, it might virtually triple investor returns over the subsequent three years. If we regulate for dividends, cumulative returns can be nearer to 250%.
