John Lovoi keeps buying Lynden Energy

John Lovoi continues to purchase shares of Lynden Energy Corp.  He now controls 14,007,100 shares as of 11/26/12.  It appears that another 1 million shares traded today in one transaction and could possibly be another insider purchase.  Given the recent activity around Mitchell Ranch by Firewheel Energy and around the Tubb area by various companies drilling in the Fusselman, Lynden's land is becoming more and more desirable.  Obviously, JVL Advisors is a believer. 

Here is an updated acreage/valuation analysis that shows the huge potential for Lynden!


                             Acreage       Low               Mid              High
West Martin/WF     4,108         $20k/acre       $27.5k/acre  $35k/acre
Tubb                      2,401         $30k/acre       $35k/acre     $40k/acre
Mitchell Ranch       34,150        $5k/acre         $7.5k/acre    $10k/acre

Total                                       $325 M             $453 M         $581 M

John Lovoi has extensive experience in research covering the oil industry as head of Morgan Stanley's Global Oil and Gas investment banking practice.  By these calculations, Lynden is worth several times its current market cap and could be worth $2 to $4/share.  Thhis may be the reason why John Lovoi is buying is such large quantities.

Lynden Update and Valuation

Lynden Energy Corp. has shown steady volume and an increase in their stock price culminating with a spike at the end of the day on Friday since news was released on their first Tubb well.  Success at Tubb has the ability to add considerable value to Lynden's reserves and market cap.  We have run an acreage valuation to demonstrate the huge upside potential in Lynden.

The current market cap of $45 million puts an average value of $1,112/acre over Lynden's West Martin, Wind Farms, Tubb and Mitchell Ranch land.  Assigning no value for Mitchell Ranch still values Lynden's Wolfberry acreage at only $7,132/acre.  Given that good Wolfberry land is selling for up to $35,000/acre and the developing land rush for acreage near Mitchell Ranch, we can calculate the tremendous upside in Lynden.  Looking at these valuations shows the huge potential in Lynden!


                             Acreage        Low            Mid               High
West Martin/WF     3,841           $20k/acre   $27.5k/acre   $35k/acre
Tubb                      2,469           $10k/acre   $20k/acre     $25k/acre
Mitchell Ranch      34,150           $2k/acre     $5k/acre       $10k/acre

Total                                         $170 M        $326 M          $538 M


Our low analysis shows a market cap 3.8 times the current market cap.  Our mid and high show 7.4 times and 12.0 times the current market cap.  Tubb's success gives Lynden a very real chance of seeing these increases in the market cap and we believe that once this company becomes better known by the market, Lynden has a chance to achieve these valuations!

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.

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.

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.

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!

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!

Energen and Linn Energy acquire $317 million in Wolfberry acreage, could this mean buying Lynden is like buying an oil field for free?

Energen Resources Corp. and Linn Energy plan to acquire Wolfberry packages totaling $317 million in the Permian Basin.

Energen announced that they will purchase two Wolfberry packages for a total of $211.9 million. The properties are located in Martin, Howard and Glasscock counties and include production of 1.5 mboe/d, proved reserves of 17.08 mmboe, and proved plus probable reserves of 24.24 mmboe. The metrics for this deal are $4/boe for probable reserves, $10.46/boe for proved reserves and $119,073 per boe/d according to Derrick Petroleum Services.

Linn Energy announced that they signed purchase agreements for two bolt-on acquisitions in the Wolfberry for $105 million including net production of 800 boe/d and proved reserves of 8.3 mmboe. Metrics for this deal are $12.65/boe for proved reserves and $131,250 per boe/d per Derrick Petroleum Services.

Here is what is interesting, comparing these deals/metrics with Lynden Energy Corp.'s latest news releases confirms Lynden's Wolfberry value and reveals its tremendous upside at their Tubb and Mitchell Ranch projects!

From Lynden’s news release on October 28:
- Proved plus Probable reserves are 6.77 million barrels of oil and 18.15 bcf of gas (9.8 mmboe) as of 6/30/11. These reserves are attributed to the West Martin and Wind Farms lands in Martin and Glasscock Counties.
- Proved reserves are 3.29 million barrels of oil and 8.63 bcf of gas (4.73 mmboe).

From Lynden’s news release on October 13:
- Daily production is 423 boe/day.

Using Energen deal metrics for Lynden’s reserves equates to $69.8 million (5.07 mmboe x $4/boe + 4.73 mmboe x $10.46/boe = $69.8 million). Using Energen’s production metrics for Lynden equates to $50.4 million (423 boe/d x $119,073 = $50.4 million).

Using Linn deal metrics results in Lynden proved reserves equal to $59.8 million (4.73 mmboe x $12.65/boe = $59.8 million) and based upon daily production equal to $55.5 million (423 boe/d x $131,250 = $55.5 million).

These two deals demonstrate valuation of Lynden’s West Martin and Wind Farms Wolfberry lands alone to be between $50.4 million and $69.8 million. These values are based upon reserves as of 6/30/11 and 423 boe/d production. Of course, as Lynden’s production grows towards 500 boe/d, these values increase even more.

Several points should be noted:
- These valuations are higher than Lynden’s current market cap but provide a reasonable value of their West Martin and Wind Farms Wolfberry Projects.
- West Martin and Wind Farms are located in the same counties as the Energen deal lands.
- Tubb property in Howard County and Mitchell Ranch do not have any reserves or production attributed to them in the above analysis

Adding in Lynden's other lands results in tremendous upside potential!

Lynden’s West Martin and Wind Farms net acreage equals 3,841 acres (43.75% x 5,488 + 30.625% x 1,127 + 43.75% x 2,503 = 3,841 acres).

Lynden’s Tubb net acreage equals 2,469 acres (35.5% x 6,956 = 2,469 acres).

Mitchell Ranch net acreage equals 34,150 acres (50% x 67,400 + 1.25% x 36,000 = 34,150 acres).

Using a valuation of $60 million for the West Martin and Wind Farms acreage, knowing that Tubb is likely to have Wolfberry success (conservatively estimating $10,000/acre valuation for Tubb lands), and assigning a valuation of $2,000/acre for Mitchell Ranch results in a potential value of over $150 million or three times the current market cap. Upside includes additional value to be realized at West Martin and Wind Farms, potential success at Tubb resulting in valuation up to $25,000/acre or more, and potential success by both Lynden in the Wolfcamp at Mitchell Ranch and Chesapeake in the Mississippian resulting in potential valuation of up to $10,000/acre. It’s clear to me that Lynden has huge potential! Approaching anything close to those valuations could mean that Lynden could eventually have a market cap worth several hundred million dollars.

What does this all mean? The opportunity is out there to buy an oil field in the exploding Permian Basin for FREE! How? Given the above mentioned valuations, it’s easy to see that the company is valued for its West Martin and Wind Farms Wolfberry assets alone. The valuations DO NOT take into account the Tubb or Mitchell Ranch areas. Buying this stock is like buying the company's developed assets which are worth the value of the stock alone - together with the Tubb and Mitchell Ranch project for FREE! There is tremendous upside potential in the Tubb Prospect Area which is a relatively low risk play in the Wolfberry and the Mitchell Ranch land which CHK paid a good amount for and is spending a large sum to determine the viability of development of the Mississippian zone.

Buying Lynden at its current valuation could be looked upon as buying their Tubb Prospect Area and Mitchell Ranch Project for free and Lynden could be a stock worth several dollars per share!


Just our opinion and please do your own due diligence.

Lynden Provides Update

Lynden Energy Group released an update on their Wolfberry and Mitchell Ranch projects yesterday. Highlights include:

- The Wolfberry Project now has 19 gross wells tied-in and producing.

- Lynden's share of production is 423 boe/day over the last 30 days, of which 72% is oil.

- Lynden's current Wolfberry development is primarily in Martin and Glasscock Counties and includes 3,841 net acres. Their Wolfberry development is low risk and they have had 100% success with their wells.

- Lynden also has 2,469 net acres in the Tubb Prospect Area in Howard County with their first well scheduled to spud in late October.

- Lynden has approximately 34,150 net acres at their Mitchell Ranch Project.

- Keith Schaefer from the Oil and Gas Investments Bulletin has stated that Lynden's JV partner at the Mitchell Ranch is Chesapeake Energy! This is extremely significant in that Chesapeake has been very active in accummulating Mississippian play acreage and is one of the largest E&P companies working in the area. Chesapeake has undertaken a "multi-well vertical/horizontal drill program" at Mitchell Ranch.

- Lynden has achieved success in three Wolfcamp intervals at their Spade 17 #1 well at Mitchell Ranch.

Lynden Energy up 18% today!

Lyden Energy Corp. traded up 18% today on above average volume.

With the recent release of encouraging results from Spade 17-1 and partnering with a large company to exercise the Mitchell Ranch, Lynden should be trading much higher. Maybe this is the beginning of Lynden finally attracting some market attention. We believe that Lynden has a lot of upside potential based upon its success in the Wolfberry and lease of the Mitchell Ranch.

Lynden converts Mitchell Ranch option into lease

Lynden Energy Corp. announced today that it has exercised its option on the Mitchell Ranch and converted it into a lease. They have also leased 35,000 acres to a large, independent eploration and production company.

This appears to be a very good deal for Lynden as they now own the lease for the Mitchell Ranch. They will also retain a 1.25% royalty interest. Also included is the return of the mineral rights above the base of the Strawn formation.

The most significant part of this deal is the sharing of technical information between the large company and Lynden. Because the large company is targeting the rights from the Strawn and below, they will be drilling through the Wolfcamp. Lynden and CrownQuest will be able to review the logs to gain further understanding of the Wolfcamp at the large company's expense. Also, a deal with a large company provides opportunities for a potential buyout in the future.

Lynden Energy Corp.

By our analysis based on the recent news release and articles by Canaccord Genuity and Keith Schaefer, Lynden Energy is significantly undervalued. The $0.50 current share price values the company at a $50 million market cap. The stock price should be trading much higher given the facts.

Here’s another way to look at Lynden’s assets: Canaccord Genuity’s Daily Letter assumes an average recovery of 190,000 barrels per well and 180 net drilling locations. This correlates well with 40 acre spacing and 6,000 net acres (150 net well locations). This equals 30 million barrels of oil ultimately recoverable. Using an industry standard potential transaction metric of $17/barrel if this oil were proven, Lynden’s Wolfberry could be worth over $500 million. If these are just probable/possible reserves, then they could be valued at $5/barrel. Even at $5/barrel, LVL’s 30 million barrels of oil are worth $150 million.

The Daily Letter further states that Lynden expects their Harrell 34 #1 well to ultimately recover 408,000 barrels of oil due to drilling down to the Mississippian limestone and production from the Atoka interval. Lynden and CrownQuest have shown to be innovative in their drilling approach by deepening their wells and are achieving some of the best results in the industry. Lynden’s association with CrownQuest gives them vast experience in the Wolfberry as CrownQuest has successfully drilled over 180 Wolfberry wells to date.

Recent Wolfberry land transactions have been reported to be anywhere from $20,000/acre to $40,000/acre. With $20,000/acre and 6,000 net acres, their land could be worth $120 million. This valuation provides another metric that validates Lynden’s potential.

Lynden’s Wolfberry land is in areas that are surrounded by proven Wolfberry wells. It appears that with the success they’ve had with their Wolfberry wells, their Wolfberry land is relatively low risk. This is evidenced by the Cawley reserve report released last year which stated that Lynden had 8.25 million barrels of proved plus probable reserves and this report covered only a portion of their Wolfberry lands.

Given the recent release of initial results from their Mitchell Ranch Spade 17 #1 well, there is now some valid evidence that this area could have productive Wolfcamp wells. With over 50,000 net acres in that area, even a valuation as low as $2,000/acre (the recent March University Land Sale netted an average of $2,400/acre demonstrating the confidence that Permian Basin oil and gas operators have in the basin) result in an additional value of $100 million for Lynden. With additional success at Mitchell Ranch, the stock price could be multiples of what it is currently trading at.

Given Lynden’s existing production in the low risk Wolfberry and the potential for the Mitchell Ranch lands to add SIGNIFICANT value, Lynden has a lot of value that is not currently recognized by the market. This is a great story and it’s only a matter of time before the market takes notice.

Lynden Energy releases encouraging results fom Mitchell Ranch Spade 17 #1 well

Lynden Energy Corp. today announced "significant results from an uphole Wolfcamp completion in the Spade 17 #1 well on the Mitchell Ranch Project." In the last eight days since oil production began, the well has averaged 84 barrels of oil from only the upper zone interval. This is SIGNIFICANT news in that the Mitchell Ranch is largely an unproven area and 84 barrels far exceeds expectations. Should these results be confirmed by additional wells, Lynden's 50% share of the over 100,000 acre Mitchell Ranch could be worth several hundred million dollars (i.e. 50,000 acres x $10,000/acre = $500 million!)

"Management is extremely encouraged by the intial production volumes from this recent completion." The well is still unloading frac water and further improvement in IP rates could still occur.

Currently, at a stock price of $0.48/share, it appears that the only value recognized by the market is a portion of Lynden's Wolfberry assets. We believe that the Wolfberry assets alone are worth over $1.00/share. Once value for the Mitchell Ranch is realized, Lynden's stock price could be (and should be) several times what it is currently trading at!

This news is the type of news that won't go unnoticed, even for a company as unknown as Lynden. We expect Lynden to start attracting much more market attention with this news. Lynden presented at the recent Permian Basin Field Trip held by Canaccord Genuity further demonstrating that people are starting to pay attention to this company.

Lynden announces update on Wolfberry and Mitchell Ranch projects

Lynden Energy Corp. (LVL) announced that they have tied three new Wolfberry wells into production for a total of eight gross wells. The first well is averaged 79 bo/d and 136 mcf/d over the first 32 days of production. The second well has averaged 49 bo/d and 71 mcf/d over the first 13 days. Lynden's third well is in the Wind Farms area and averaged 90 bo/d and 215 mcf/d over 22 days. Flow rates of all three wells appear to be improving with time. These three wells all appear to be successful and Lynden says that "initial results from the wells are very encouraging."

Lynden expects to drill one new Wolfberry well each month this year and seven new wells are expected to be spud by the end of May. Lynden's success with developing their Wolfberry project continues to derisk their land and increases the company's value. Their recent results validate Keith Schaefer's (Oil and Gas Investments Bulleting) low end valuation of their Wolfberry lands at $0.97/share.

Lynden also announced that their first Mitchell Ranch "has been consistently producing oil and gas at rates that exceed the economic threshold." This is significant news as it's the first indication that the Mitchell Ranch could be a viable project. If they can continue this success with future wells, their valuation could be up to $20,000/acre for their Mitchell Ranch project ($20,000/acre x 50,000 acres = $1 billion).

Once the investment community finds out about Lynden, it's a good bet that their market cap will approach the numbers that others are getting for comparable land. This means that Lynden has the chance to increase by 10X!

Recent Deals Support Huge Potential for Lynden Energy Corp.

In the past two and a half months, there have been eight deals relevant to Lynden Energy Corp. (LVL) and the Wolfberry Trend. These deals range from $4,272/acre to $19,354/acre.

With LVL now having approximately 7,000 net acres in their Wolfberry core area and a 50% interest in the 101,495 acre Mitchell Ranch project, the math alone translates into a MUCH higher stock price! The reserves in LVL's Wolfberry play have been independently valued at $64 million (PV10) based upon $70/barrel oil. LVL's Wolfberry land may have more potential than neighboring land which was likely used for the PV10 valuation as LVL's announced flow rates show that their land is highly productive.

If LVL can get the results they are looking for in their Mitchell Ranch project, we could be looking at a company with a future market cap of $500 million or more!

Approach Resources Announces Wolffork Resource Play

Approach Resources announced that it is planning to drill and recomplete Wolffork wells in the Permian Basin. This clearly demonstrates that companies are realizing the huge potential of these zones. Success here could have huge implications for Lynden Energy Corp. (LVL) at their Mitchell Ranch project.

Several other deals have also been recently announced. They include a $285 million acquisition by Concho Resources, a $352.2 million Wolfberry acquisition by Linn Energy, and a $180 million acquisition by El Paso. The El Paso acquistion is interesting because it is for raw land only without any existing wells. El Paso is targeting the Wolfcamp formation.

Lynden Spuds First Mitchell Ranch Well, Thom Calandra Considering LVL for Ticker Trax Investment

Lynden Energy Corp. (LVL) and CrownRock have spud their first Mitchell Ranch well. They expect to spud their second well in early July. Excitement is building as Thom Calandra from Ticker Trax wrote an article today highlighting LVL and says that "the company has a shot at leveling the plains here and making a bundle for its investors."

Keith Schaefer of Oil & Gas Investments in Canada says that "the potential to create a lot of value quickly is there."

The article also mentions that Daniel Rice of BlackRock Energy & Resources Fund is a big supporter and large shareholder of LVL. BlackRock and Pinetree Capital are some of LVL's larger shareholders which adds credibility to this company.

Exciting news for this company!

Lynden Energy Corp. Options 101,495 Acres

Lynden Energy Corp. (LVL) has entered into an agreement to acquire a 50% interest in an option to acquire oil and gas leases on a 101,495 acre ranch in Coke, Mitchell and Sterling counties. This is a great opportunity for LVL to participate in a large scale oil project. Together with CrownRock, they are planning two wells to be spudded in June. Success in this play could return multiples to LVL's current stock price!