Permian Basin Oil News

Here are some updates on the Permian Basin and oil:


"End of Oil Collapse in Sight for BofA, BNP Paribas" (click here for article).


"WTI Rebound Above $80 Holds as Goldman Sees No Oil Glut" (click here).


"Oil Collapse Gives Buyers Chance at Top Target: Real M&A" (click here).

Buying opportunity?

 Along with oil prices, Lynden Energy Corp. has taken a big hit the last few weeks.  The stock price is down over 40% from its high reached on September 2.  This has created a tremendous buying opportunity.  Lynden has acreage located in the heart of the Permian Basin.  Is this a high risk/high reward investment?  Those who have read the analysis on Seeking Alpha in August and agree with the summary can argue that there is little risk in this investment. 

Lynden Energy has zero net debt and a market cap of $80 milllion (US).  With 5,883 net acres in the Wolfberry, Lynden’s per acre valuation is $13,500/net acre (US).  Wolfberry land deals over the past year have averaged $43,870/net acre (US). 

One can look at the valuation metrics a number of ways but the conclusion remains the same, Lynden Energy is undervalued!  Those who have the patience and confidence that LVL will eventually find a suitor to acquire their Wolfberry acreage could realize the significant upside. 

Recent Significant Events Relevant to Lynden Energy

Several recent events relevant to Lynden Energy Corp. have occurred over the past year including nearby land sales and bullish analyses.  We have listed them below.

October 2014 - Cormark Securities increases LVL target price to $2.00
August 2014 - Excellent Seeking Alpha analysis of LVL released
June 2014 - Energy Report mentions Lynden Energy
March 2014 - Torrey Hills Capital issues bullish analysis
March 2014 - Keith Schaefer of Oil and Gas Investment Bulletin issues update
November 2013 - Cormark initiates coverage
October 2013 - Thom Calandra releases bullish analysis
October 2013 - Torrey Hills Capital release article


Recent Deals
9/13, FANG, Midland County, $440.0 M, 12,500 net acres, $35,200/net acre

12/13, QEP, Martin and Andrews Counties, $950.0 M, 26,500 net acres, 6,700 boe/d, $35,849/net acre, $141,791/flowing barrel

12/13, Breitburn, Martin County, $19.3 M, 403 net acres, $47,891/net acre

1/14, ATHL, Northern Midland Basin, $85.0M, 5,645 net acres, 750 boe/d, $15,058/net acre, $113,333/flowing barrel

2/14, FANG, Martin County, $174.0 M, 2,825 net acres, 1,600 boe/d, $61,593/net acre, $108,750/flowing barrel

4/14, Crude Energy, Sterling County, 1,840 net acres                      

4/14, ATHL, Martin, Upton, Andrews and Glasscock Counties, $873.0 M, 23,500 net acres, 4,800 boe/d, $37,149/net acre, $181,875/flowing barrel

7/14, FANG, Midland and Glasscock Counties, $538.0 M, 13,136 net acres, 2,173 boe/d, $40,956/net acre, $247,584/flowing barrel

7/14, RSPP, Glasscock County, $259.0 M, 6,652 net acres, 1,106 boe/d, $38,936/net acre, $234,177/boe/d

8/14, ATHL, Martin, Midland and Glasscock Counties, $382.0 M, 6,450 net acres, 3,000 boe/d, $59,225/net acre, $127,333/flowing barrel

8/14, PE, Reagan County, $252.0 M, 5,472 net acres, 1,800 boe/d, $46,053/net acre, $140,000/flowing barrel

9/14, CPE, Midland, Andrews, Martin and Ector Counties, $205.0 M, 3,862 net acres, 1,465 boe/d, $53,081/net acre, $139,932/flowing barrel

9/14, ECA, Martin, Howard, Midland and Glasscock Counties, $7,100.0 M, 140,000 net acres, 30,000 boe/d, $50,714/net acre, $236,667/flowing barrel

10/14, KKR, Midland and Ector Counties, $350.0 M, 7,200 net acres, $48,611/net acre    

Averages, $43,870/net acre and $167,144/flowing barrel.
LVL has 5,883 net acres in Glasscock, Howard, Martin and Midland Counties.
5,883 net acres at $43,870/acre = $258 million (US$)
143.4 million shares fully diluted = $1.80/share (US$)

Cormark Securities increases LVL target price to $2.00

Cormark Securities reiterated their Buy rating for Lynden Energy Corp. and increased their target price to $2.00 from $1.75 on Wednesday.  They also expect continued consolidation and believe that Lynden could be a candidate for acquisition.

Encana Buys Athlon Energy for $7.1 Billion

EnCana entered into an agreement to buy Athlon Energy for $7.1 billion (click here).


Valuation metrics for the deal:
$5.93 billion and assumption of $1.15 billion debt
100% Permian primarily in Martin, Howard, Midland and Glasscock Counties
140,000 net acres = $50,700/acre
28 mboe/d = $250k/flowing barrel


Lynden Energy has 5,883 net acres in the same counties! 
5,883 net acres x $50,700/net acre = $300 million
w/ 143.4 million fully diluted shares and discounting 20% as Lynden is not an operator, this translates to a per share price of $1.67/share US$ not including any value for Lynden's 52,000 net acres at Mitchell Ranch.

New Lynden Corporate Presentation added to website

A new Corporate Presentation was added to Lynden Energy's website with a lot of new information(click here).

Parsley Energy announces deal for 5,472 net acres for $252 million

Parsley Energy just announced a deal for 5,472 net acres in Reagan County for $252 million.  The deal includes 1,800 boe/d.  Metrics work out to: $46k/net acre and $140k per flowing barrel (click here).

Lynden Energy gets another mention.

Looks like Lynden Energy got another mention, see this Stock Gumshoe piece (click here).

RSP Permian enters into agreements for 6,652 net acres for $259 million

RSP Permian entered into agreements to purchase 6,652 net acres in Glasscock County for $259 million (click here).  Valuation metrics are $39,000/acre and $234k/flowing barrel.

Diamondback announces deal to purchase Midland Basin interests for $538 million

Diamondback Energy announced a deal to purchase leasehold interests in the Midland Basin for $538 million (click here).  The acquisition includes 13,136 net acres, 2,173 boe/d and 94 net producing wells.  Valuation metrics for this deal are $40,956/net acre and $247,584/flowing barrel.


Applying these metrics to Lynden Energy Corp.'s Wolfberry assets are as follows:


$40,956/net acre x 5,883 net acres = $241 million US ($1.80/share CAD)
$247,584/flowing barrel x 1,250 boe/d = $310 million US ($2.32/share CAD)


LVL's metrics do not include any valuation for their 51,000 acres at Mitchell Ranch.

Antares Energy receives offer

Antares Energy received a $300m offer.  They have 4,697 net Wolfberry acres producing 1,204 boe/d from 48 wells at their Southern Star producing acreage.  Also 11,984 net acres producing 146 boe/d at Northern Star and 11,000 net undeveloped acres at Big Star.

New Mention of Lynden Energy

The Energy Report published an article today that mentions Lynden Energy (click here).  About 2/3 of the way into the article, Keith Schaefer mentions that Lynden has three big potential catalysts:
1. Lynden could sell its Wolfberry assets, he mentions a potential $130 million deal.
2. Fang is drilling a horizontal drill on Lynden's assets.
3. Lynden is drilling on Mitchell Ranch and if it hits, "it's a game changer for the company."

New Lynden Energy Corporate Presentation

Lynden Energy Corp. posted a new Investor Presentation to their website (click here).

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.

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.

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?  

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.

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.

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.