Monday, November 26, 2012

Looking for the Next Samson? Speculative Stocks Sitting on Large Resources

Samson (SSN) hit the jackpot with its Niobrara acreage. Samson's management states that its stock is a Ten Bagger. It could continue to have significant growth based on its Niobrara, and the Williston Basin leaseholds. On January 15th of this year, I believed Samson Oil & Gas was Currently Undervalued, Even in the Most Pessimistic Scenario. No one knew how good its acreage was until Samson received top dollar from Chesapeake. I admit it will be difficult to find a stock with this much upside, but I have compiled a list of speculative names that have a very good upside. This list has a reoccurring theme, which is a large acreage and small market cap. Remember, Samson still belongs on this list. Its recent announcement of a total possible acquisition of 90,000 net acres in the Williston Basin Montana Bakken. This list focuses on companies working United States plays.

Lynden Energy (LVLEF.PK) is a stock I currently own. This may be the most speculative of this group. Lynden is currently involved in three plays.

  • Mitchell Ranch
  • Wolfberry Project
  • Paradox Basin
  • Lynden has a single lease in Mitchell Ranch covering 103400 net acres. It has 50% working interest in 68400 net acres in Mitchell County with the remaining 35000 net acres farmed out to a large, independent oil company. This farmout is interesting, as Lynden receives a 1.25% overriding royalty interest and two years after the expiration of the farmout the mineral rights above the Strawn formation will be returned to Lynden and its partner. The large oil company will turn over specifics as to how the acreage was drilled and completed. Mitchell Ranch has seven pay zones. Six of these zones are conventional resource plays.

    • Mississippian Horizontal Play
    • Yates
    • Upper Wolfcamp
    • Lower Wolfcamp
    • Pennsylvanian (Jameson Sands)
    • Pennsylvanian (Carbonate)
    • Mississippian/Ellenburger

    Lynden's Wolfberry play includes 16,500 acres. It plans to drill 18 new wells here in 2011, with costs of approximately $18 million. The Wolfberry will have a large number of drilling locations as there are possible resource locations from the Mississippian to the Spraberry. Its Paradox Basin play consists of 85,000 net acres. This is mostly a gas play, and will not create much revenue at this time. It is expected Lynden with work this acreage when natural gas prices strengthen.
    In summary, this $70 million market cap company could have significant upside. Its very good results on the test well Mitchell Ranch Spade 17 #1 provides optimism going forward. Lynden's farm out of 35000 net acres in its Mitchell Ranch project supports the plays worthiness. I believe this company's upside outweighs possible downside.

    Primary Petroleum (PETEF.PK) has an $87 million market cap. It has 290,000 net acres in the Southern Alberta Basin Bakken and 20000 net acres in the Williston Basin Bakken. It has no debt and $15 million in working capital. Its S. Alberta Bakken acreage is just south of key industry players currently working the Blackfoot Indian reservation in Montana.

    • Rosetta Resources (ROSE)
    • Newfield (NFX)
    • Stone Energy (SGY)
    • Quicksilver Resources (KWK)
    • FX Energy (FXEN)

    Upcoming results from wells by Rosetta and Newfield will help to de-risk Primary's acreage and shed light on what its acreage holds. If the numbers are good, Primary should see a significant spike in market cap. Primary also plans to spend $4.5 to $5 million on seismic in its Southern Alberta lands.
    Primary's Williston Basin Bakken holdings could also have significant upside. It is located to the north and west of the Elm Coulee. There is risk here also, as it is at the cusp of the overpressured zone and since there has been no real drilling results, it is difficult to assess its value. Even so, there are several players moving into this area, so others must believe this area could be lucrative. If either of these two projects pan out, Primary's stock will see a very sharp increase in value.

    American Eagle Energy (AMZG.OB) has a market cap of $53 million. This company has acres in the Williston Basin Bakken, and the Alberta Basin Bakken. American Eagle has 8600 gross acres in Divide County, North Dakota. It has 50% working interest. This area is prospective of middle Bakken and Three Forks resource. It has 4640 acres in Southeast Saskatchewan, with 50% working interest. It has an additional 620 acres in Richland County, Montana and McKenzie County, North Dakota. It has 100% working interest in this play. Its last project in the Williston Basin is in Roosevelt County, Montana. American has 100% working interest in 840 acres. It also has 75,000 net acres in the Southern Alberta Basin. This lease ownership has working interest between 33% and 50%. American Eagle Energy has higher risk than Primary Petroleum, but if the Southern Alberta Bakken hits, it will grow at a higher rate. Depending on how the Rosetta and Newfield test wells perform, will have a significant effect on this stock.

    Mountainview Energy (MNVWF.PK) has a $30 million market cap. In March of this year, Mountainview was trading as high as $2.64/share. The stock has pulled back significantly and seems oversold. It has 60,000 net operated acres in the Alberta Basin Bakken. Mountainview plans to spend $400,000 in cap ex, drilling 2 vertical wells. It has 11,000 net acres in the Williston Basin Bakken for which most of the company cap ex will be spent. It encompasses these counties:

    • Sheridan (Montana)
    • Roosevelt (Montana)
    • Richland (Montana)
    • Divide (North Dakota)
    • Williams (North Dakota)

    Mountainview's recent decline in stock price began after a private placement worth up to $2.5 million. Management states current plans are to use this to purchase non-operated acres in the Bakken and Three Forks in the Williston Basin. Mountainview will also add to its Alberta Basin Bakken acreage. I am interested as to the non-operated acreage it will purchase in the Bakken/Three Forks. I like the purchase of non-operated acres, as it provides needed revenue to fund cap ex of operated acres.

    Lucas Energy (LEI) has a market cap of $48 million. It doesn't have a large acreage, but the possible total locations and resource could be significant. Since January of 2009 its share price has increased from $.44 share to $2.85. Volume has increased from 19000 shares/day to 2.1 million. Lucas has:

    • 33000 gross acres
    • 20000 gross acres in Texas
    • 4400 net acres in the Eagle Ford

    Lucas directly benefited from Marathon's (MRO) purchase of Hilcorp. Before this transaction Lucas had a JV with Marathon in 4900 gross acres in the oil window of Wilson County, Texas. Lucas had a JV with Hilcorp, so after its purchase the Marathon JV increased to 13,600 gross acres in Wilson and Gonzales Counties. Lucas can further benefit from development of other resource, such as the Austin Chalk.

    In summary, the listed oil and gas names could have a bright future. These companies are speculative as it is difficult to estimate recoverable resource. I still favor Triangle Petroleum (TPLM) and its 72,000 net acres in the Williston Basin Bakken, as I wrote in Ramp Up Growth With Small Producers in the North Dakota Bakken. Lynden's acreage is the most interesting and could provide the most upside, but also has the most subsequent risk.

    Disclosure: I am long SSN, TPLM, LVLEF.PK.

    No comments:

    Post a Comment