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.
