Saturday, August 25, 2007 6:03:54 PM
.<font color=platinum>LCOL - DD sypnosis
For the new investors/traders that just got on board ;)
The Play
LCOL is an O&G play located in Alberta, the world 2nd largest oil deposit. LCOL owns properties in the Peace River area. Peace River is known to be one of the three RICHEST oil sands deposit in Alberta. LCOL owns about 100,000 acres, they have 8 producing wells, 10 new wells to be drilled in the fall and have secured financing of about 12 million dollar to develop their properties. The company is currently working with Trans Canada to access their infrastructures. Encana and Husky have also been mentioned on their website , but it has not been confirmed yet that they are working with LCOL..a potential J/V could develop in in the near future. We also know that LCOL has several KEY relationships with the First Nations which according to IR is the envy of the industry and certainly the key to LCOL's long term success.
It is also important to note that the company has on board some very big players in the oil sands market for instance, Mr. Soltis has done work with Shell, Chevron, and Esso. Mr. Parry has worked for Canadian Natural Ressources Limited...that is just a few of the many big players on the LCOL team.
Valuation
LCOL' short-term target is to produce about 2,000 BOE/day which could yield about 600,000 BOE/year. A quick valuation model shows that LCOL is undervalued given what we know:
600,000 x $30(net profit/barrel) = $18,000,000 net income
O/S 110 => EPS of about $.16
P/E of 10 gives us a PPS of about $1.60
That is the conservative projection.
But LCOL plans to develop 1543 gas wells and 267 oil wells. They
project Gross Profit for Dec 08 = $30,000,000 ($0.13 PS) and Net Income of $24,000,000 ($0.10 PS)
- Project Gross Profit for Dec 10 = $215,000,000 ($0.93 PS) and Net Income of $195,000,000 ($0.85)
- Multiple on Gross Profit 5X = $4.95 per share
- Multiple on Gross Profit 7X = $6.51 per share
- Multiple on Gross Profit 10X = $9.30 per share
That is the optimistic projection.
I have also used a valuation based on a comparable:
DWOG is another O&G company that have claims close to the Peace River area. Their market cap is around 33 million dollar. From what I know they do NOT have any exisiting wells. Their leases and permits cover 43,964 acres but they only have a 40% interest in those acres.
When we look at LCOL, the current market cap is around 18 million dollar. With about 7 exisitng wells, and 100,000 acres of land, all with a 100% interest, we should be trading around 30-40 cents when compared to DWOG. One thing to consider also is that the success drilling rate in the area is 95%.So there can could be a premium for that too. We traded over 3 million shares this week alone and with a float of around 6 million the coming weeks could be very interesting. As we expect more buying pressure and news...This thing could move easily to 60-80 cents ++ in the short-term and reach dollars in the mid to long-term..
All IMHO..Please let me know what u guys think :) cheers!
For the new investors/traders that just got on board ;)
The Play
LCOL is an O&G play located in Alberta, the world 2nd largest oil deposit. LCOL owns properties in the Peace River area. Peace River is known to be one of the three RICHEST oil sands deposit in Alberta. LCOL owns about 100,000 acres, they have 8 producing wells, 10 new wells to be drilled in the fall and have secured financing of about 12 million dollar to develop their properties. The company is currently working with Trans Canada to access their infrastructures. Encana and Husky have also been mentioned on their website , but it has not been confirmed yet that they are working with LCOL..a potential J/V could develop in in the near future. We also know that LCOL has several KEY relationships with the First Nations which according to IR is the envy of the industry and certainly the key to LCOL's long term success.
It is also important to note that the company has on board some very big players in the oil sands market for instance, Mr. Soltis has done work with Shell, Chevron, and Esso. Mr. Parry has worked for Canadian Natural Ressources Limited...that is just a few of the many big players on the LCOL team.
Valuation
LCOL' short-term target is to produce about 2,000 BOE/day which could yield about 600,000 BOE/year. A quick valuation model shows that LCOL is undervalued given what we know:
600,000 x $30(net profit/barrel) = $18,000,000 net income
O/S 110 => EPS of about $.16
P/E of 10 gives us a PPS of about $1.60
That is the conservative projection.
But LCOL plans to develop 1543 gas wells and 267 oil wells. They
project Gross Profit for Dec 08 = $30,000,000 ($0.13 PS) and Net Income of $24,000,000 ($0.10 PS)
- Project Gross Profit for Dec 10 = $215,000,000 ($0.93 PS) and Net Income of $195,000,000 ($0.85)
- Multiple on Gross Profit 5X = $4.95 per share
- Multiple on Gross Profit 7X = $6.51 per share
- Multiple on Gross Profit 10X = $9.30 per share
That is the optimistic projection.
I have also used a valuation based on a comparable:
DWOG is another O&G company that have claims close to the Peace River area. Their market cap is around 33 million dollar. From what I know they do NOT have any exisiting wells. Their leases and permits cover 43,964 acres but they only have a 40% interest in those acres.
When we look at LCOL, the current market cap is around 18 million dollar. With about 7 exisitng wells, and 100,000 acres of land, all with a 100% interest, we should be trading around 30-40 cents when compared to DWOG. One thing to consider also is that the success drilling rate in the area is 95%.So there can could be a premium for that too. We traded over 3 million shares this week alone and with a float of around 6 million the coming weeks could be very interesting. As we expect more buying pressure and news...This thing could move easily to 60-80 cents ++ in the short-term and reach dollars in the mid to long-term..
All IMHO..Please let me know what u guys think :) cheers!
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