NG Energy is a Buy, says Beacon Securities

The stock has had a rough year, but things should be better in 2023 for NG Energy International (NG Energy International Stock Quote, Charts, News, Analysts, Financials TSXV:GASX), according to Beacon Securities analyst Kirk Wilson. In a client update on Friday, Wilson reiterated a “Buy” rating and C$2.25 target on GASX, representing a projected one-year return of 142 per cent at the time of publication.

NG Energy, a natural gas acquisition, exploration and production company with assets in Colombia, announced on Thursday a strategic alliance with Cox Energy America, a Mexico-based solar power company with photovoltaic plants across Latin America. The deal will see Cox develop, build and own solar stations to deliver electricity to NGE’s natural gas plants. NGE is committing about $200,000 to the project, with Cox to reap the reward of selling its electricity to NGE.

“NGE is fully committed to fuelling the clean energy transition in Colombia and providing a sustainable solution to the country’s energy needs. In collaboration with COX ENERGY, NGE will launch a renewable energy division in order to decarbonize and minimize the environmental impact of its operations and contribute to Colombia’s emissions reduction commitment,” said NG Energy in a press release.

Commenting on the announcement, Wilson said NGE’s move into more renewable energy was expected after the election of Colombia’s President Gustavo Petro earlier this year, as Petro was elected on a platform to transition the country away from reliance on fossil fuels. 

Moreover, the partnership with Cox should help NGE get future oil and gas permits, Wilson said, including one for the SINU-9 gas plant, on which the analyst is expecting more news in the near future.

“With the drilling success of the initial two wells on SINU-9 (Magico-1x and Brujo-1x) and the third well in that program (Hechicero 1-x) to spud in early January from the same platform as Brujo- 1x, it will be key for GASX to move forward expeditiously with a plant/pipeline solution in order to get natural gas flowing at SINU-9 in H2/23,” Wilson wrote.

At the same time, Wilson maintained that NGE’s partnership with Cox shouldn’t be read by investors as evidence of a shift in focus to solar power generation, as the Cox deal will merely see the electricity at NGE’s gas plants coming from solar. 

“GASX should continue to direct all its capex (other than the minimal amount noted above) to its O&G projects. In fact, this should be viewed as positive as GASX seems to be furthering its commitment to minimizing its carbon footprint while providing much needed natural gas in Colombia,” he said.