PetroFunders is raising at a $11.4 million valuation cap with no discount. At its current valuation, PetroFunders is trading at $1.14 a share. This price is quite high given the company’s current stage of development. The lack of a discount also reduces the incentive for prospective investors. Thus, PetroFunders’ price score is quite low.

The COVID-19 pandemic and the incoming Biden administration has caused capital markets to move away from oil and gas and into renewable technology. This market shift has given a company like PetroFunders a unique opening to find alternative ways to fund smaller oil and gas companies. According to PetroFunders themselves, they see a total available market of $75 billion needed by smaller companies that may turn to crowdfunding. The global oil and gas market sits at a lofty $3.2 trillion in 2020, and there are many small cap companies that are in need of an injection of capital. PetroFunders provides the platform for this symbiotic relationship to take hold. PetroFunders also estimates a SOM (Serviceable Obtainable Market) of $1.5 billion for them to capture through their business. PetroFunder’s market score is above average in reflection of this sizable opportunity.

CEO Maurice Dukes and COO Ryan Werking co-founded PetroFunders in 2019. Dukes has previous experience working at Caerus Oil & Gas, where he maintained and built the company’s enterprise value to over $1 billion. He holds a B.S in Petroleum Engineering from the University of Oklahoma. His co-founder Ryan Werking previously founded a contracting company that specialized in financial modeling — with clients including various national oil companies. He holds a B.S in Petroleum Engineering from Colorado School of Mines.

On the financial side, they are joined by finance lead Scott Sloan (30 years of experience in the oil and gas industry) and Chief Investment Officer Stephen Gornick (also 30 years of experience). The team at PetroFunders brings a wide breadth of knowledge and experience in leading and working with oil and gas companies. The team is one of the strongest aspects of the young company, as reflected by its strong team score.

PetroFunders is differentiated in the way that it is entering into a niche space — that being oil and gas crowdfunding. The company is hoping that there are enough retail investors out there who would see its platform as something that would enhance their investment strategy. Given the lack of name recognition already existing in this niche space if there are enough people who want to utilize PetroFunders’ services, there are few options to turn to aside from PetroFunders.

That being said, there are other adopters to this space that do pose a challenge to PetroFunders. EnergyFunders is a company with a similar business model that encompasses the entire energy space. PetroFunders is differentiated by being specific to oil and gas – which could work in their favor. PetroFunders’ differentiators score is the company’s strongest due to this clear distinction from current competition.

PetroFunders’ online crowdfunding platform has been fully built and launched. In the company’s first offering on the platform, $1.91 million was raised from 15 different investors. This initial success shows that the product has viability. However, PetroFunders is still very early stage, and there is no financial data available on the company’s operations. This lack of information creates substantial risk for investors, since there is no insight into the firm’s operations cost, cash flow, potential debt, or margins. Therefore, PetroFunders’ performance score is its worst across all five metrics and is extremely low.

The company may have conducted one successful listing as of yet, but there is no guarantee that PetroFunders has a business model that will scale to the levels of a billion-dollar business. Simply put, are there enough people out there who would utilize a platform that allows them to invest in smaller oil companies? Even in their successful listing, only 15 unique investors participated. Is that enough people to indicate that there is, or ever will be, an active enough user base to propel PetroFunders into success? Adding to these concerns are the company’s high valuation with no discount. Concerns over long term operation success paired with a questionable reward for early investors are both worrying marks against PetroFunders.

The COVID-19 pandemic has given investors the opportunity to make “buy low, sell high” into a reality. Oil stocks are being traded at a huge discount as compared to previous years’ prices. If enough investors believe that a massive, industry wide rebound is due, they may be driven to use PetroFunders to invest.

PetroFunders is a young platform and has already seen a successful, million dollar listing on its website thus far. Combine this proven traction with an experienced leadership team and a successful future for PetroFunders seems attainable.

PetroFunders provides a platform for retail investors to find and put money into smaller cap oil and gas stocks. The company has offered one listing on its platform thus far, which drew 15 investors and raised a total of $1.91 million. Final due diligence of legal terms prompted PetroFunders to halt the deal and refund money, but the traction that Petrofunders’ platform showed is reason to believe in future success.

However, oil and gas prices have been decimated due to COVID-19, and money has been slow to move around the industry. This is a looming issue for a company like PetroFunders, as its business relies on retail investors finding small, unique oil and gas companies to invest in. It also has a competitor in EnergyFunders who poses a threat to occupy some of the same market share. While the path to profitability for PetroFunders is imaginable, these roadblocks do provide cause for concern. Therefore, PetroFunders has been rated a Neutral Deal by the KingsCrowd investment team.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written by Ethan Thomas.