optionplayer333
801 posts
msg #111804
- Ignore optionplayer333 |
2/26/2013 3:01:58 PM
Lncgy could be the richest and highest flying stock in the history of the stock market>
Linc Energy Might Have Just Won The Oil Lottery
January 28, 2013 | 4 commentsby: Tae Jo | about: LNCGY.PK, LNCYF.PK
Disclosure: I am long LNCGY.PK. (More...)
On January 23, 2013, Linc Energy (LNCGY.PK) confirmed the existence of a potentially massive shale oil discovery in the Arckaringa Basin. Two reputable independent consulting firms have estimated these shale oil reservoirs to contain between 103 and 233 billion BOE (barrels of oil equivalent). Media outlets jumped on the story, heralding it as a $20 trillion find that will allow Australia to achieve energy independence and become a net exporter of oil, thereby transforming the entire economy of the country. Peter Bond, the CEO of Linc Energy, cautioned against extreme optimism and offered a "worst case scenario" in which the discovery would yield 3.5 billion BOE. He expects early well production by the end of 2014.
Whether we're talking about $20 trillion or several billion dollars worth of oil, that's still a significant amount of value for a company which at the time of this writing has a market cap of less than $1.5 billion.
A Closer Look
In order to understand what this discovery is worth, we need to examine the information presented in the prospective research reports by the consulting firms. Let's choose DeGolyer and MacNaughton (D&M)'s report, because it provides the lower estimate of 103 billion BOE. This estimate classifies the asset as an "unrisked prospective resource" - the lowest category of certainty. As such, it carries the burden of three major categories of risk - recoverability, discovery, and commercial viability. Recoverability refers to the technical capacity to extract the oil, discovery refers to actually finding the oil, and commercial viability refers to whether a firm can make a profit from selling the oil after the cost of discovery, development, production, and transport, are factored in.
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