Tuesday, April 8, 2014

Crownquest applies for permit to drill at Mitchell Ranch

Crownquest, Lynden Energy's partner at Mitchell Ranch, applied for a permit to drill a new well named Spade17-3 offsetting the Spade 17-1 well that was previously drilled in 2010.

Thursday, April 3, 2014

Crude Energy acquires 50% working interest in Sterling County

Crude Energy acquires a 50% working interest in 3,680 acres located in Sterling County (click here).  They are targeting many of the same zones that Lynden Energy will be targeting at Mitchell Ranch in Sterling County.  No price has been disclosed but at least there is interest in this area.

Tuesday, April 1, 2014

Potential Lynden Valuation Scenarios

Should Chesapeake's share of Mitchell Ranch revert back to Lynden Energy and Crownquest, which is mentioned by Torrey Hills Capital and Keith Schaefer as a possibility, Lynden would have approximately 51,000 net acres at Mitchell Ranch.  In addition, Lynden has approximately 5,966 net Wolfberry acres.

Lynden's recent transaction with Breitburn at $48k/acre and Diamondback Energy's recent Wolfberry transaction at $61.5k/acre demonstrate the potential of the Wolfberry acreage.  One can determine Lynden's potential land valuation by assigning values to both their Woflberry and Mitchell Ranch acreage.  Assigning $20k/acre to $40k/acre for the Wolfberry and $2k/acre to $5k/acre for Mitchell Ranch and dividing by 143.5 million shares results in potential valuations of $1.54/share to $3.44/share. 

Lynden's exposure to these two plays makes this an interesting story with potential upside from the current $0.84/share price.  Many people have touted Lynden Energy over the past year or so including Keith Schaefer of the Oil and Gas Bulletin, Torrey Hills Capital/Baby Bulls, Cormark, Thom Calandra, and Mat Wilson of Pinetree.   Could this be Lynden's time?  

Monday, March 17, 2014

Bullish analysis of Lynden Energy by Torrey Hills Capital

Torrey Hills Capital has issued a bullish analysis of Lynden Energy (click here).

Some of the positive statements:

"Lynden has stated that their intent here would be to basically sell the Company outright and spin out the remaining non-core Wolfberry land, i.e. the Mitchell Ranch land position"

"Our quick back of the envelope calculation... taking a conservative 45% discount... we would be looking at a share price of around $1.16 Canadian.  Bear in mind that we believe this is a conservative number based on a number of land sales we have seen in the area recently."

"The real kicker here is the Mitchell Ranch property, wherein Lynden owns a 50% position in roughly 67,000 contiguous acres with their JV partner Crownrock.  In addition, there is an additional 35,000 acres (50% Lynden's) which are very likely coming off lease to Chesapeake Energy on March 31, 2014 which is just 19 days away from putting Lynden's acreage ownership north of 50,000 acres in an area bordering the eastern edge of what many are now calling the most important oil asset in North America if not the entire globe."

"We have been hearing some rumors of very good, low cost production coming from the upper zones of the Wolfcamp just adjacent to Lynden's Spade 17 well... which could make this play comparable or even worth more than the acreage in the core Wolfberry play."

"We are getting the sense that the time is likely getting close wherein Lynden is going to pull the trigger on this land package (Wolfberry) and monetize it in a onetime sale."

Read the full article as its very bullish on Lynden's Wolfberry acreage and Mitchell Ranch potential.

Saturday, March 8, 2014

Schaefer buys 50,000 shares of Lynden Energy and releases update

Keith Schaefer of the Oil and Gas Investments Bulletin recently purchased 50,000 shares of Lynden Energy and released an update.  He indicates that it's possible that Lynden could IPO their Mitchell Ranch acreage or option it to another group once/if Chesapeake loses their option.  He says that in a perfect world, they "sell the entire company and spin out Mitchell Ranch".  He appears to be very bullish on Lynden's potential.

Tuesday, February 18, 2014

Diamondback to purchase Permian acreage in Martin County for $61,500/acre!

Diamond Energy announced it has entered into agreements to purchase 6,450 gross (2,825 net) acres in Martin County with a 43.8% net revenue interest and production of 1,600 boe/d for $174 million.  This transaction equates to $61,500/acre! (click here)

Lynden Energy has a 43.75% interest in 2,817 net acres (1,232 net acres) at their West Martin project in Martin County.

Sunday, December 29, 2013

Breitburn/Lynden Energy transaction analysis

Here is one way to analyze the recent Breitburn transaction.

The Breitburn transaction includes 4.7 net wells and 403 net acres for $19.3 million.  The price per acre equals $48k/acre which can be assigned to proven/developed acreage.  The transaction equates to approximately 86 acres per well.

To approximate the amount Lynden’s developed and undeveloped acreage, one can multiply their net wells by 86 devloped acres/well.  Lynden has a total of 33.0 net wells equaling 2,830 developed acres.  With a total of 6,466 net acres, Lynden’s remaining undeveloped acreage equals 3,636 acres (6,466 – 2,830).  After the sale to Breitburn, Lynden will have 2,427 remaining developed acres (2,830 – 403). 

Assigning a value of $48,000/acre to Lynden’s remaining developed acreage and using a conservative number of $10,000/acre for their remaining undeveloped acreage results in a Wolfberry value of $153 million (2,427 acres x $48k/acre + 3,636 acres x $10k/acre).  These conservative numbers result in a fully diluted share price of $1.07/share ($153 million / 143.5 million shares).  Using $20k/undeveloped acre results in an additional $0.25/share.

Mitchell Ranch is still a very exciting upside opportunity.  With other companies delineating resource potential around Mitchell Ranch and Lynden interpreting their own seismic data, Lynden’s 34,150 net acres could become very valuable.  At $2k/acre, the Mitchell Ranch property could add $0.48/share and at $4k/acre the upside could be $0.95/share. 

What does all of this add up to?  LVL’s Wolfberry valuation conservatively ranges from $1.07/share to $1.32/share and Mitchell Ranch adds from $0.48/share to $0.95/share totaling a range of $1.07/share (no value assigned to MR) to $2.27/share!  Obviously, an upside to today’s share price.

One last thing to keep in mind… With Chesapeake focusing on acreage outside of the Permian Basin, it would not be surprising if they let their Mitchell Ranch term assignment expire.  Should this occur, our view is that this would be a positive by increasing LVL’s Mitchell Ranch exposure by 17,000 net acres.