American Petrogas (OTCPK:APEOF), an oil and natural gas firm located in Canada, recently reported its second quarter results. The 75% increase in net revenue along with a more than 70% jump in oil sales volume offers plenty of appeal for investors. The solid balance sheet furthers how attractive the company is for long term buyers.
For many small cap energy companies, there is always a concern about the cash position as it relates to the balance sheet and the ability of the company to sustain operations. For Americas Petrogas, there is no debt. But there is plenty of cash as evinced by the current ratio of 3.58, the quick ratio of 3.51, and the cash ratio of 2.90.
By contrast, Exxon Mobil (NYSE: XOM), with whom Americas Petrogas is operating with in a joint venture in Argentina, has a current ratio of 1.01, a quick ratio of 0.78, and a cash ratio of 0.15. Exxon Mobil also has a total debt-to-total-equity ratio of 6.98.
That is not to state that Americas Petrogas is more solid than Exxon Mobil, but to point out that the company has a very secure capital position that should please long term investors.
The increasing sales volume should also be alluring to long term investors, too. That should improve as a recent independent study of assets in Argentina from Ryder Scott concluded that:
*Best Case P50 total petroleum initially in place ("TPIIP"): 56.1 billion BOE, including,
*Best Case P50 Undiscovered PIIP ("UPIIP") of 55.2 billion BOE
*Best Case P50 Discovered PIIP ("DPIIP") 925 million BOE
*Best Case P50 total petroleum recoverable: 8.3 billion BOE, including,
*Best Case P50 contingent recoverable resources of 21 million BOE
*Best Case P50 prospective recoverable resources of 8.29 billion BOE.
For a variety of factors, including tension in the Middle East and speculative buying the price oil has not fallen in the aftermath of The Great Recession. The exchange traded fund for oil, United States Oil (NYSE: USO), is up more than 13% for the last quarter. Chevron (NYSE: CVX), active in Argentina like Americas Petrogas, is up more than 17% for 2013.
But the mean analyst target price for Chevron over the next year of market action is $132.45 with the current price almost $124.00. For Exxon Mobil, the mean analyst target price over the next year is $95.44 with the stock now at around $89. Americas Petrogas is now about $1.05 a share with the mean analyst target price being $4.65 from the five brokers follwed by Thomson/First Call.
With no debt, increasing net revenues, higher sales volume, and a balance sheet primed for future growth, Americas Petrogas is a very attractive for a long term holding.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BOE over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.