One big concern for investors when considering small resource stocks is will the company's talk about future production actually turn into revenue and how long will that take. Approvals and feasibility studies can take years by themselves, and still you have to wait for the development and construction phase before major revenue can be achieved.
The story definitely brightens once a certain stage of production and earnings can be achieved. Now the company can cover its running expenses, and may even be able to afford further expansion and exploration.
That's where Drillsearch Energy (ASX: DLS) is at now. With its 2013 NPAT before abnormals of $54 million, rising from $9.98 million in 2012. In 2013, production was 1.1 million barrels of oil equivalent (mmboe), rising 173% from 2012.
I have five reasons why the Drillsearch story is bullish.
Higher production, higher revenue
Before, like many junior resource companies, each year's results could move from positive to negative because revenue was low and unstable. After 2010 revenue went from $14.4 million to a little over $102 million in 2013.
Production expansion and earnings growth
Nothing says success better than earnings, and you can expect the earnings will be higher than the forecast $30.7 million EBIT in 2014. That amount is based on the company's forecast production of 2.3-2.5 mmboe.
