Tenth Avenue Petroleum Balances Reserve Growth with Financial Challenges in 2024

Tenth Avenue Petroleum Corp. (TPC) has emerged from 2024 with a paradox: its reserves and production capacity surged dramatically, yet its financial health faced significant headwinds. The Calgary-based company reported a 162% increase in proved reserves and a production jump to 175 barrels of oil equivalent per day (Boe/d) by year-end—driven by the Patricia assets acquisition—while revenue fell 27% and net losses widened. This juxtaposition highlights TPC’s strategic bet on long-term resource growth amid short-term financial strain.

Production Surge and Strategic Acquisitions
The Patricia Acquisition, finalized in December 2024, was the linchpin of TPC’s operational progress. The deal added 82 Boe/d (100% gas) and 10,240 net acres in Alberta, boosting year-end production to 175 Boe/d from an annual average of 92 Boe/d. However, the gas-heavy profile of the acquisition may have contributed to lower revenue, as natural gas prices remain depressed compared to oil.

Reserve Growth Amid Mixed Financials
Reserve evaluations by Trimble Engineering revealed a 43% increase in proved developed producing (PDP) reserves to 304.9 million Boe, while total proved reserves soared to 655.0 million Boe—a 162% rise. Yet the before-tax net present value (NPV) of PDP reserves dropped 21%, suggesting commodity price declines or reserve quality shifts (e.g., higher gas exposure) eroded their valuation. Meanwhile, working capital swelled to $858,406 due to tax pool assets, including $18.0 million in non-capital losses (NCL), which could provide future tax shields.

The company’s cash flow from operations collapsed 70% to $124,785, while capital expenditures rose 43% to $691,151—funded partly by the Patricia acquisition’s cash consideration of $247,799. The widening net loss to $1.5 million underscores the strain of investing in growth during a low-price environment.

Operational Initiatives: Waterflood and Exploration
At the Murray Lake field, waterflood upgrades have been a success, with oil production climbing to 43 barrels per day (bbls/d) and water injection reaching 926 barrels per day (bwpd). Management aims to push injection rates to 1,200–1,400 bwpd to improve recovery rates in the Mannville "A" pool, which holds 8.9 million barrels of original oil in place—only 9% recovered. Meanwhile, the Hays property’s Mannville Basal Quartz (BQ) play offers 12 un-booked horizontal drilling targets, with offset wells demonstrating strong initial production rates. These initiatives position TPC to capitalize on untapped reserves if commodity prices stabilize.

Financial Crossroads: Liquidity vs. Profitability
Despite the $858,406 working capital surplus, TPC’s liquidity faces two critical tests. First, its $1.5 million net loss and declining cash flow suggest reliance on external financing or asset sales to fund future capital expenditures. Second, the $24.1 million tax pool—while boosting balance sheet flexibility—does not directly translate to cash. Investors must assess whether TPC can convert its reserve growth into free cash flow without diluting shareholders.

Risks and Uncertainties
Commodity price volatility looms large. Natural gas, now constituting a larger share of TPC’s production, remains under pressure, with Henry Hub prices averaging $2.50/MMBtu in 2024—down from $4.30 in 2022. Regulatory risks, such as Alberta’s carbon tax increases or pipeline constraints, could further squeeze margins. Execution risk is also critical: the waterflood program’s success depends on achieving targeted injection rates, while the BQ play’s potential hinges on drilling outcomes.

Conclusion
Tenth Avenue Petroleum’s 2024 results paint a company at a crossroads. Its reserves and production capacity have expanded significantly, positioning it to capitalize on future oil and gas price recoveries or operational efficiencies. However, the financial metrics—shrinking cash flow, rising debt, and reliance on tax pools—highlight near-term vulnerabilities.

Investors should weigh two factors: the company’s 162% proved reserve growth and $655 million Boe resource base versus its $1.5 million net loss and 70% cash flow decline. The stock’s valuation—assuming it trades below the $0.10 exercise price of recent stock options—suggests the market has priced in near-term risks.

Long-term, TPC’s focus on waterflood optimization and untapped BQ targets could unlock substantial value. Yet its success hinges on commodity price stability and cost discipline. For now, TPC remains a high-risk, high-reward play for investors with a long-term horizon and tolerance for volatility.