Tuesday, January 31, 2012

Exciting News from Lynden!

Lynden Energy Corp. released an update on its Tubb A#1 Wolfberry well.  This is the first well that Lynden and Crownquest have drilled at their Tubb Prospect Area.  This well averaged 109 barrels of oil per day over the first 23 days and 106 mcf/da in the eleven days since it began producing gas.  Lynden has a 35.55% working interest in Tubb and it is likely that with the Tubb production, Lynden is meeting their projection of 500 boe/d.  Of additional significance is that the oil gravity is 43 degrees API which means that the oil that Tubb is producing is of the highest value!

The news release says "Initial results from the well have exceeded management's expectations and are suggestive of the significant development potential for the relatively untested Tubb Prospect Area."  It also states that there could be approximately 170 gross wells developed on the acreage. 

Since the market appears to be valuing Lynden on the West Martin and Wind Farms acreage only due to that being the area that has current reserves, success at Tubb has the ability to dramatically increase value.  Tubb is on the eastern edge of what is considered to be the fairway of the Wolfberry Trend but if it is ultimately proven to be an area that is developable, then the market should start assigning value to Lynden's Tubb land.   Lynden's net Tubb acreage is 2,470 acres and a valuation of only $10,000/acre would increase Lynden's value by $25 million.  Of course, if the land ultimately becomes as valuable as typical Wolfberry land, then it's possible that values could approach the $35,000/acre that is currently being paid for Wolfberry land.  This news release is indeed exciting news!

Of additional note, Chesapeake received approval to revise their current S150H horizontal well permit at Mitchell Ranch last week.  The revision changes the lateral length as well as revises the well type from an injection well to a producer/oil well.  Chesapeake is actively continuing their drilling at Mitchell Ranch and the change to a producer well is a good indicator.

Wednesday, January 18, 2012

Chesapeake Energy submits amendment to S150H well permit

Chesapeake Energy submitted an amendment application for the S150H horizontal well at Mitchell Ranch today.  They are changing the well type from an injection well to a producer and have modified the lateral.  This may have been their original intent but it appears that there is now a producer well on the land that they leased from Lynden Energy and Crownquest at Mitchell Ranch!

Lynden Chairman buys shares

Richard Andrews, Lynden Energy Corp.'s Chairman of the Board, purchased 401,000 shares in the market yesterday.  It would appear that if the recent trading were based upon a news leak, then he wouldn't have made such a large purchase.  This lends further evidence that the selling started with National Bank liquidating a large part of their position too quickly possibly leading to panic selling by others.  Time will tell but if that's the case, those that have picked up shares in the last few days will be rewarded.

Tuesday, January 17, 2012

Commentary on Lynden Energy's volume and stock price

Lynden Energy Corp. has seen another large increase in selling volume.  The selling appears to have started with National Bank selling a large part of their LVL holdings.  We don't believe the selling is associated with LVL's core Wolfberry holdings as Wolfberry land still commands a high price per acre and Wolfberry lands are a relatively low risk play.  Given LVL's past success rate with their completed Wolfberry wells, it would be hard to believe that the selling is related to that part of their holdings.

Results from LVL's Tubb area have not yet been released.  Again, this part of the Wolfberry play is low risk so the selling should not be related to any news leak from it as the play should only add to the upside.

LVL's Mitchell Ranch project provides the big upside potential for the stock price.  Chesapeake Energy, which has been confirmed as the joint venture partner, has six active well permits.  Most recently, a horizontal well permit was obtained on January 10.  It appears that CHK is spending a large sum on the play and still actively drilling.  A miss at Mitchell Ranch could have a short term negative impact on the stock but we don't believe results are known yet and given CHK's recent permit activity, it looks like they are still drilling.

Overall, we still believe that LVL is a buy.  Based upon their recent success on their core Wolfberry lands and recent Wolfberry transactions, LVL is worth more than twice its current value for the Wolfberry lands alone and should make this a relatively safe investment.  It appears that LVL is an easy double from these prices.  Our guess is that National Bank wanted out for a reason possibly not related to LVL.  If that's the case, then that makes LVL a strong buy at these levels.

This is just an opinion and please complete your own due diligence.

Tuesday, January 10, 2012

Thom Calandra article about Lynden Energy and recent Chesapeake drilling permit activity

Thom Calandra wrote an article on Lynden Energy (click here to read it).  He states that "should Mitchell Ranch prove up in terms of barrels of oil per day in a big way, Lynden's 50-cent shares will quadruple in short order."

One thing to note about Lynden that we have written about in the past is that Lynden has proved up a good portion of their West Martin and Wind Farms Wolfberry acreage.  That acreage adds up to 3,841 acres and good Wolfberry acreage is selling at upwards of $35,000/acre these days.  Adding in their 2,469 acres of Tubb Wolfberry land which they are currently drilling and Lynden's stock looks cheap!  The valuation of their Wolfberry lands alone set a floor for the company's market cap and should they achieve success at Mitchell Ranch, Thom Calandra's statement about quadrupling could easily occur. 

Chesapeake appears to be actively drilling at Mitchell Ranch, they have obtained several drilling approvals recently.  Here is a summary of their drilling permit activity at Mitchell Ranch:

S149 Vertical Well (approved 8/1/11)
S150H Horizontal Well (approved 8/4/11)
S249 Vertical Well (approved 8/4/11)
S250H Horizontal Well (approved 8/4/11)
S350H Horizontal Well (approved 8/4/11)
S149 (amended 9/1/11)
S250H (amended 11/29/11)
S250HR Horizontal Well (approved 12/23/11)
S450H Horizontal Well (approved 12/27/11)
S450H (amended 1/10/12)

It is encouraging to see Chesapeake's recent drilling permit activity.

Tuesday, January 3, 2012

Chesapeake permits two more wells at Mitchell Ranch

Chesapeake Energy has permitted two additional wells at Lynden Energy's Mitchell Ranch property.  The S250HR horizontal sidetrack well was permitted on 12/23/11 and appears to be in the same proximity as the original S250H well.  An amendment to S250H was permitted on 11/29 and looks to be a permit to shorten the original horizontal run.

The S450H horizontal sidetrack well was permitted on 12/27/11 and is indicated to be a new injection well.

Chesapeake is continuing to permit new wells at Mitchell Ranch and hopefully results will be released soon.