By Thom Calandra
Energy investing ideas are occasionally my cup of coffee. Years ago, five or so years of my almost 30-year newspaper career was covering Chevron Corp., which was based in San Francisco. On the wire front, those who followed me at my MarketWatch.com got my takes on alternative energy, on Oklahoma natural gas and on other LNG (liquid natural gas) investments.
I know some of the new energy crowd, among them Ross Beaty of hydrothermal Alterra Energy, Robert Friedland of Ivanhoe Energy … a few uranium prospectors from Saskatchewan and Australia … and a collection of rock geologists who started their careers in petroleum. At Bloomberg in London, I was right around the corner from Royal Shell central. North Sea oil traders and shippers are thick as the trees in Sherwood Forest in the city of London.
The other day, looking at our roster of Torrey Hills Capital clients, I came across Lynden Energy (TSX-V: LVL; OTC: LVLEF). I did a double-take; about two years ago, I asked geologist Raul Madrid and a partner of his, Richard Andrews, over to breakfast to hear about their Texas lone star Lynden. (See Thom’s original article.)
Dr. Madrid I knew from his work as a structural geologist. He passed away in 2011. Raul was a pioneer in goldfields that cross Nevada, Colombia and, in this case, oil in Texas. I still criss-cross his trails when I am in Nevada along the Carlin Belt and in the nation of Colombia, primarily Antioquia.
Lynden Energy is an explorer of oil in tracts of producing oil fields across the Permian basin of west Texas.
Lynden is partnered with CrownRock Partners (a 50/50 JV between Houston based operator Crownquest and big-fund Limerock Partners of Connecticut) on two prospects: a Wolfberry gambit (producing from the Wolfcamp and Spraberry formations, roughly 7,000 net acres); and a contiguous acreage called Mitchell Ranch (103,000 acres gross, 33,800 acres net to Lynden after 1/3 of it went to a major oil company, said to be Chesapeake Energy, or CHK).
The stock is acting frisky today (Monday) and with a $50 million Canada market value, appears cheap. But then, so do three of every five energy prospectors I am reviewing right now.
Lynden is drilling 31 development wells this year with CrownRock. The idea is to exit 2012 at roughly 1,000 barrels per day production and have around 7,000 net acres in the Wolfberry. Comparable land sales in the region for Wolfberry make Lynden’s stake appear to be left in the cold, dry plains of west Texas with little or no price premium.
Keith Schaeffer, a newsletter writer whose analysis work is good, tells me, “Very slow drillers at Mitchell Ranch. They need to pick up the pace there a lot—drill a well a month.” He adds, “CHK needs to have success for this thing to really rock. That’s 3-4 months away at the earliest.” Keith publishes Oil & Gas Investments Bulletin and can be reached at
I talked to Richard Andrews,who calls the shots at Lynden. Mr. Andrews lives just up the freeway from our place here in northern California. “Mitchell Ranch is slow but that will change as soon as we get positive results. We are testing a re-entry well in the Upper Wolfcamp and should that be successful we plan to drill 2 or 3 more asap,” he says.
Richard is Lynden chairman and a big investor. He is also a work-a-holic. He acknowledges the company’s pace can be seen as slow.
My take, and I do not own the shares yet: 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. That will make most everyone happy, and I say that with the reminder that as a client of Torrey Hills, Lynden Energy some time ago granted stock options to the firm.
Mr. Andrews figures Lynden will double Wolfberry output this year. So: from 400 to 500 barrels to 800 to 1,000 per day. That’s small change. But it’s positive change. On the other property, it is about as speculative as punching holes in a basin can be. The Canada-traded shares rose 8 percent Monday.VANCOUVER: I’ll be speaking at Cambridge House’s January gathering of 500 hard asset companies in two weeks. See: www.cambridgehouse.com.
– Thom Calandra is a lifelong author whose work has appeared in dozens of newspapers, newsletters, magazines and across the Web. He is a founder of CBS MarketWatch, now Dow Jones MarketWatch. He is a member of Torrey Hills Capital. Lynden Energy is a client and provides stock options to Torrey Hills in return for investor outreach services. Your comments are welcome, but please, no foul language. (Photos — Thom Calandra) — babybulls.com