Linc Energy: Strong Growth Likely From Rich Assets
Jun. 28, 2014 7:47 PM ET | About: Linc Energy, Ltd. ADR (LNCGY)
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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Summary
Linc Energy has game changing assets, which will boost production over the next 2-3 years.
The company has divestment plans for 2014, which will boost the company's financial muscles.
The massive shale potential is still untapped and can provide strong upside to valuations in the long-term.
Thesis Summary
Linc Energy (OTCQX:LNCGY), a diversified energy company, has immense growth potential in the next few years. The company's production rate has increased by 84% in the last two years and this is just the beginning of the production bump-up. This coverage discusses the company's prized assets, their development and the expected growth trend over the next two years. The coverage conclusion is that Linc Energy is a "Strong Buy" at current levels of $9.45 with a minimum two year investment horizon.
Company And Assets Overview
Linc Energy is a diversified energy company with a significant portfolio of conventional and unconventional oil, gas and coal assets and proven UCG technology ready for commercialisation.
Linc Energy's conventional oil & gas portfolio is in the US Gulf Coast, Wyoming and Alaska.
The company's Linc Energy's Gulf Coast assets include 13 producing oil fields located in Texas and Louisiana. Since acquiring the assets in 2011, Linc Energy has more than doubled production to almost 5,000bopd (gross), with a target 10,000bopd in 2014. As of June 2014, the Gulf Coast asset had reported 1P reserves of 11.6mmboe.
Linc Energy's Wyoming assets are located in the Powder River Basin and include the Big Muddy, South Glenrock B and South Cole Creek units. According to the company's the asset has 80 million barrels of recoverable oil.
The company's Alaska asset (Umiat) has 2P reserves of 154.6mmboe and 3P reserves of 194.1mmboe. I will discuss this asset later in details.
Among the company's unconventional oil & gas assets is the underground coal gasification project, which is currently underway in South Africa. For UCG, the company has strategic JVs in South Africa, Russia and Ukraine.
Among another prized asset for the company, is the shale asset in Australia. The asset is expected to have 103-233 billion barrels of oil equivalent. This asset might not have an immediate impact on the valuations as production is still years away.
Apart from the company's conventional and unconventional oil & gas assets, Linc Energy also has coal assets and the company plans to monetise the coal assets in 2014 and beyond. The key growth and stock upside driver will remain the oil & gas assets and the coverage will focus on those assets.
LNC Price at posting:
99.5¢ Sentiment: None Disclosure: Unspecified
