Is now the time to buy Drillsearch Energy Limited?

Production has increased by 650% in just 3 years, but this may just be the beginning.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Now could be a great time for long-term investors to buy rapidly growing energy producer Drillsearch Energy Limited (ASX: DLS). While some investors shy away from the capital intensive energy industry, there are several reasons why Drillsearch deserves special attention.

Drillsearch is focused on developing the revived Cooper Basin oil and gas region and one of the most compelling draw cards is the company's rapid growth profile. Earlier this week Drillsearch raised its FY14 production guidance by as much as 43%, from between 2.3 million to 2.5 million barrels to between 3 million and 3.3 million barrels of oil equivalent (mmobe).

If the higher target is reached it would triple the 1.1 mmobe produced in FY13 and represent a production increase of 650% in just three years, from 0.4mmobe in 2012. The result is being driven by better-than-anticipated performance of the company's Bauer field, as well as by an increased share of production from another block as a result of a deal with Santos Limited (ASX: STO) in 2013.

It is a highly positive result for Drillsearch, with the additional revenue to be used to bolster the balance sheet and reinvest into further exploration.

The market was positive about the news. Shares jumped 6.3% and passed the love on to other Cooper Basin energy companies including Senex Energy Ltd (ASX: SXY) which climbed 5.3% and Beach Energy Limited (ASX: BPT) which jumped 4.7%.

However Drillsearch, like several other Cooper Basin producers, still appears attractively priced given the aggressive growth it has displayed and its prospects to deliver further growth and add value for shareholders. The company is in a prime position to capitalise on potential gas price rises on Australia's east coast and the high margin oil business significantly funds capital expenditure, keeping debt in check.

Foolish takeaway

Drillsearch is a S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) listed company and given its current price to earnings ratio of around 13 appears to offer great value relative to its growth profile and the price of some of its more established peers (Santos has a ratio of around 27). It is this that I feel gives Drillsearch a good shot at a big future.

Motley Fool contributor Regan Pearson owns shares in Senex Energy

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »