by Chris Cotton
The established Canadian energy producer is projecting a financial surge with heavy profits coming from their oil and natural gas business this year and an anticipated $10 million in recurring revenue from its revolutionary Integrated Energy Solution by 2024/2025.
With its portfolio of wholly owned wells, facilities and pipelines in Alberta, Avila Energy has built a strong foundation for growth. The company is on track to achieve cash flow positivity by year-end 2023 and forecasts approximately $4.2 million in free operational cash flow in 2024 from its oil and gas business, according to Catapult Research. They recently announced an additional $1.1 million expected from 3rd party processing of natural gas.
While the company showed a book value of $21 million in Q2, the breakup of an anticipated SPAC deal brought the share price down considerably. Avila’s stock (OTC:PTRVF) (TSXV:VIK) is now trading around an $8 million valuation. The book value translates to a roughly 13 cent share value, while the company has been trading in the 5-6 cent US range.
Avila’s largest potential growth driver is the Integrated Energy Solution, or IES, explains Catapult. The patented systems are modular high-efficiency power generators for homes and commercial sites. These cogeneration systems combine a boiler with a small power plant to produce power and heat with a unique microturbine design. The system is plug and play and can be run off green gas, propane, natural gas and even part hydrogen. The patented technology has been installed in commercial and residential locations across Europe, where it is CE certified. The biggest risk facing Avila Energy at this point appears to be the pending applications for Underwriter’s Laboratory and Canadian Standards Association approval, though pre-sales are underway, according to the Catapult analysis.
The disruptive clean technology will be leased directly to consumers and the company estimates that domestic units will save about 20 tons of CO2 emissions for a family of four annually.
IES provides a low-disruption green energy solution, enabling anyone to be off-grid or in control of their own energy production. Avila intends to license these systems and anticipates gross profit margins of around 40%.
“IES can generate power equivalent to 130 square meters of solar panels annually using clean fuels like green gas,” said CEO Leonard Van Betuw. “It’s a future-proof technology aligned with our sustainability mission.”
Initial IES sales were pushed to 2024 due to regulatory delays. But Avila still projects $10 million in high margin recurring revenue by 2024/2025. This cash flow surge comes alongside the company’s financial upswing in its oil and gas operations.
With technology like IES and increasing cash generation, Avila Energy is on the cusp of a transformative era, concludes Catapult Research. This looks to be one of the first examples of traditional oil and gas producers integrating clean energy technologies and vying for market share in the burgeoning industry.
2024 should prove decisive as Avila Energy rolls out IES and unlocks the potential in its assets. Investors seeking exposure to renewable technology and clean energy should watch to see if Avila hits their oil and gas production projections and if they receive approval for their IES system in North America.
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