Concho Resources to buy Wolfberry Play, another solid comp for Lynden

Concho Resources Inc. announced today that they intend to buy Permian assets from Petroleum Development Inc. for $175 million. The Wolfberry Play acreage includes 10,200 net acres, 13 mmboe of proved reserves and 1,100 boe/d production. Valuation metrics for this transaction equal $17,157/acre, $13.46/boe proved, and $159,091 per flowing barrel.

Lynden Energy Corp.'s West Martin and Wind Farms Wolfberry Play lands has 3,841 net acres, 4.73 mmboe proved and 423 boe/d production. Using the above valuation metrics for just Lynden's West Martin and Wind Farms lands equates to $66 million based on net acreage, $64 million based upon proved reserves and $67 million based upon production. These are consistent metrics demonstrating Lynden's core producing Wolfberry lands equal to about $0.70/share. Adding in Tubb and Mitchell Ranch adds considerably to the upside.

Lynden releases Annual Report and MD&A

Lynden Energy Corp. released their 2011 Annual Report and MD&A for the quarter ending 9/30/11.  Several items are worth noting: 

-          Gross producing wells expected to be 22 by 12/31/11 and 51 by 12/31/12. 

-          Net producing wells expected to be 9.44 by 12/31/11 and 21.79 by 12/31/12.

-          Average production of 448 boe/d for three month period ending 9/30/11.

-          Average selling price of natural gas, $8.82/mcf!  This is a great number indicating the presence of liquids.

-          Earnings per share for the quarter ending 9/30/11 are $0.05/share!

-          Revenues have increased from $668,862 (12/31/10) to $1,481,204 (3/31/11) to $1,869,753 (6/30/11) to $3,136,991 (9/30/11).  This is an increase of 369% since 12/31/10.

With the rapid development program on schedule for 2012, we should see revenues increase even more.

Colin Watt, President and CEO of the company had these comments:

-          "We see potential to expand our Wolfberry Project by upgrading the reserves through successful develoment drilling."

-          "Our rapid oil and gas development program is ongoing.  Current plans call for 31 gross Wolfberry Project wells to spud in 2012.  This pace of development drilling will result in significant increases in production rates in 2012."

Lynden is anticipating an exciting 2012 with significant growth and their enthusiasm permeates throughout their comments.

Lynden's partner at Mitchell Ranch

Through research of public records, we have confirmed that Chesapeake Energy is indeed the company that Lynden Energy Corp. and Crownquest leased a portion of the Mitchell Ranch to.  Chesapeake applied and received permits for two vertical wells and three horizontal wells on their leased land.  Recently, Chesapeake obtained a permit for a horizontal sidetrack well bore at the S250H location.  It appears that Chesapeake is actively drilling and spending a large sum on their wells at Mitchell Ranch!

Laredo Petroleum IPO valued at $2.4 billion

Laredo Petroleum, an independent energy company active in the Permian Basin and mid-continent, was taken public on December 15.  Based upon Friday's close, the company has a market cap of $2.4 billion.  Laredo has production of 22,842 boe/d and 324,000 net acres resulting in a valuation of $105,070 per flowing barrell and $7,407/net acre.

Tax Loss Selling Makes Lynden a Buy

Tax loss selling appears to be dragging Lynden Energy Corp. down.  Shares are trading in the $0.40 range giving the company a market cap below $40 million. 

A $40 million market cap values the 3,841 acres that Lynden has at their West Martin and Wind Farms projects at $10,000/acre.  The market cap does not reflect any value for the Tubb and Mitchell Ranch prospect areas.  The West Martin and Wind Farms areas include 9.8 mmboe of proved and possible reserves for the company and is in an area where Wolfberry land is selling for up to $35,000/acre.

Given the proposed NCIB buyback that will be taking place shortly, current drilling of their West Martin and Wind Farms area, forthcoming results from their first Tubb well and exploration by Chesapeake Energy at Mitchell Ranch, Lynden's price appears ready to bounce.  Now seems like the time to take advantage of tax loss selling and represents a tremendous buying opportunity!

Lynden proposes Normal Course Issuer Bid

Lynden Energy announced today that it intends to buy back shares through a Normal Course Issuer Bid.  Management is of the opinion that the stock is "significantly undervalued". 

This stock has tremendous upside potential as demonstrated in the October 31 post.  It's good to see that management is acting to shore up the stock price.

Comstock acquires Wolfcamp property

Comstock Resources announced a deal to acquire prospective Wolfcamp land for $332.7 million. The deal includes 44,000 net acres, 1,400 boe/d and 23.2 mmboe proved. Metrics for this deal are $7,561/acre and $14.34/boe proved.

These comparables further validate the analysis completed in the October 31 post.