LNC - Linc Energy

[notting]

Winners can laugh

Sure can.
Especially when they have cashed in!
Shorted and won three times so far.

What is your cost price for LNC $5, 4$ $3, $2.
At what point would you think you will turn it into a win or loss?

The figures from the company suggest about 15% oil, 35% condensate (which can be considered as oil) and 50% sales gas (natural gas) for the risk adjusted scenario of 3.5 billion barrels of oil equivalent. So that's about 1.75 billion barrels of oil and condensate which is the most valuable stuff.

I'd be very careful about accepting even that much.
So far they got nothing other than speculative guesstimates.
One sales trick it to make a massive price as a first pitch to make the lowest price seem feesable. It isn't, and is unlikely to be looking at the history and character peddling the story.

 

[Mickel]

I just can't see how management could possibly be properly focused on so many different things at once. Each one of them is a difficult challenge in itself, and it's not as though Linc has the resources of someone like BHP or Wesfarmers and can divide itself into multiple units each focused on a specific business.


I continue to hold a small investment in Linc.

Smurf, You haven't kept up to date and have omitted some basic history of LNC.

Firstly, they HAVE split into 4 units that are individually managed- Please refer to 2012 AGM.

Secondly, I thought you would remember that their initial plans to produce UCG and GTL at Chinchilla were restricted by the then Qld Govt who would not give them a commercial license in 2008/9.

Some of their coal exploration tenements (where they were looking for deep underground coal for UCG) revealed valuable mineable coal which they sold/have on market.

When one (Galilee/Carmichael) sold for $500M plus a royalty, they looked for a business with cashflow (and probable benefits for CO2 extracted from UCG).This led to the purchase of US oil fields. Another tenement (Teresa) was apparently close to being sold a number of times but with the GFC and then the fall of coal prices hasn't to date.

Sapex in Sth Aust was bought mainly for UCG which hasn't worked out to date in the Walloway Basin. It has some oil prospects and drilling them has lead to the current shale oil find.

The US oil fields have had some problems but the Announcement on Jan 8 2013 together with earlier speculation of what the Billionaire Roman Abramovich was discussing with Peter Bond in Brisbane and Chinchilla, has propelled the LNC S/P from around 70c to $1.80 approx. All this before the latest Shale Oil announcement.

One other point. What LNC has been doing (in trials at least) is world leading practice and their market is not just in Australia, it is world wide. So "stunts" ,as you call the Diesel Dash, are meant for a world wide audience, and I'm sure that there has been more than one Billionaire who has taken note of LNCs achievements.

Perhaps if you had kept up to date with all this, you would now have a larger holding than you do. Then again, perhaps not.

Good luck.

 

[brty]

Smurf,

You need to remember that many people, including those that have invested their hard earned, do not understand the difference between shale oil and oil shale, and thus use the terms as if they were the one and the same.

Oil shale being a rock known as kerogen, while shale oil being 'real' oil contained in the pores of the shale material.

Looking at some details we see that over the 64,000 sq km? area we could have a resource of 3b BOE, possibly a lot higher. I'm sure that there are many here that don't understand that BOE (Barrels of Oil Equivalent) often means a lot of gas and less liquids, you have already covered this. Another part of the statement is the word Resource. Again many believe this is the same as Reserves, and nothing could be further from the truth.

Many oil resevoirs around the world have quite a low figure for recoverable reserves compared to the resource, often a low percentage as much of the oil is bound to the rock strata and just does not flow to the wells drilled, even with fracking, water injection, CO2 injection or nitrogen injection.

They will not be able to estimate the reserves until there has been a massive amount of drilling and flow of oil. If the resource is only the 3b BOE and half of that gas, even a 30% reserves estimate, which would be high, brings the whole area back into the 100's MBO. If the area needs to be fracked and hundreds or thousands of wells drilled, then the economics start to look poor. The whole basin is a long way from nowhere in terms of the infrastructure needed to access this oil. Nothing like the Bakken or Eagleford shales in that respect.

Think of how much fracked well will cost if you have to truck the fracking fluids from hundreds of kilometers away, think of the expense of trucking out the oil, or building a pipeline. Wells in the Bakken or Eagleford shale areas cost upwards of $8m, with lots of misses amongst the successful wells. I have seen estimates of $70-80/bbl for the price of oil needed for these shale oil wells to be economic. In the Arkaringa, the price needed is likely to be much higher, which becomes a catch 22 as the costs of producing in the middle of nowhere goes up with the price of oil.

No wonder LNC is looking for partners to pay the cost of drilling. If it was really as exciting as some portray, then why would you farm out the prospect?

LNC was my biggest loss in years, because I failed to follow my investment guidlines, fell for the story, and naturally bailed at precisely the wrong time in 2011.

 

[Tezzad]

I cannot believe that some are unable to see the blatant use of the media for what it is. LNC, as far as all the hippie types are concerned, is one of the big bad FRACKING destroyers of the forests, farm land, water table, air quality and anything that has ever gone wrong in the world. All of which should be band, wound up, and done away with. Although LNC's technology is different it has been placed on the same side of the argument, regardless of the facts.

How does a company right this thinking? Engage in a good news media campaign of there own! Stunts and Gimmicks and HELLOOOO positive news exposure left right and center. Give a nice rounded figure and let the media run with it, heralding it as the coming of the next era . As far as I'm concerned I fined the recent positive news exposure as fighting fire with fire. Personal I have far more faith in someone who knows the ways of the world and is willing to get down and get dirty for the company. Never let to many facts get in the way of a good story. I'd rather see actual tankers carting loads off to the service stations right around the nation. But for now I've bought the dream (1.25-1.14-.75 -.65 -.62 -.57 and .69 on the way up) my retirement depends on it.

That said, if i see the head kahuna selling off any of his tidy little nest egg I might start questioning his motives! Until then I'll remain a L/T shareholder.

 

[surrogate]

So they are saying there is shale oil and not oil shale?.. I'm hearing different things... Also what do you guys make of this article saying that they found conventional oil?

http://seekingalpha.com/article/113...e-just-won-the-oil-lottery?source=google_news

 

[dogeatdog]

So they are saying there is shale oil and not oil shale?.. I'm hearing different things... Also what do you guys make of this article saying that they found conventional oil?

http://seekingalpha.com/article/113...e-just-won-the-oil-lottery?source=google_news

Hello surrogate. No idea what "different things" your hearing, but this was part of PB's news release on the 23rd.
"Gustavson has also conducted a preliminary assessment of resource potential in
conventional reservoirs in portions of the Arckaringa Basin, amounting to a separate
125 billion BOE on an unrisked basis • Linc Energy holds a 100% interest in licences and applications covering approx.
65,000 contiguous square kilometres (16 million contiguous acres) in the Arckaringa
Basin"

The first half an hours volatility today, has been wonderful in both directions for day trading.

 

[Smurf1976]

A bit of terminology in "layman's terms" might be helpful here I think.

"Resources" - that's the mineral in the ground, taking no account of economic or even technical viability of getting it out. It's just how much of the stuff you have down there.

"Reserves" - that's the amount you can actually get out of the ground, at break even cost or better, using technology that is available and today's prices. Reserves can never be larger than resources, and is usually considerably smaller.

"Prospective resources" or any other term like that means resources they haven't actually found yet but, based on whatever arguments they are providing, they think they might find. It's like saying that a top athlete is a prospective gold medal winner - indeed they are a prospective winner, but it only really counts if they actually do win the medal.

"Oil or Crude Oil" - the stuff that most people think of when they think of oil. A liquid that is pumped or flows out of the ground and is processed at refineries to produce petrol, diesel etc.

"Gas liquids / Condensate" - this is liquid fuels that aren't oil as such from a chemistry perspective. But they're of comparable value and therefore can be considered as oil. Depending on the exact liquids in question, it's either sold as LPG or goes into a refinery along with the oil to produce petrol etc. Note that this is entirely different to LNG, which is the man-made liquefaction of methane (natural gas).

"Natural gas" - in chemical terms it's mostly methane. Also known as sales gas, it's the stuff that goes into pipelines and ends up in kitchens, factories etc as fuel. It is far less valuable than liquid fuels, largely due to greater abundance and the greater difficulty of using it (need for pipelines versus the ease of transporting liquid fuels).

"Shale oil" - that's liquid, pumpable oil that came from shale. There are some differences in the production process, but once its' out of the ground then for practical purposes it's the same as other oil. It goes into a refinery to produce petrol etc.

"Oil shale" - this is rocks which contain kerogen, a precursor of oil. Conventionally, to use it means mining the rock in the normal manner of mining. Options then are to either burn it "as is" as boiler fuel (to produce electricity) or process it to extract liquid oil (which can then be sent to a refinery). Estonia gets most of its' electricity from shale, the only country to do so, but a few others use it on a smaller scale.

In terms of extracting liquids from it, suffice to say that's something that many have tried and failed at. Firstly it's expensive, secondly the very nature of the process lends itself toward massive pollution of the surrounding environment on a scale that makes brown coal, paper mills or just about any other polluting industry look decidedly "green" in comparison. In simple terms, the issue relates to what happens when you vapourise huge amounts of oil (to get it out of the shale) then somehow it manages to escape rather than being condensed as was intended. Suffice to say it will come down at some point, and that's not much good for the ecosystem that's for sure. Australia has seen a number of oil shale "boom" companies in the past, none of which succeeded. Overseas, Mobil famously spent a huge sum of money on it in the US before walking away many years ago. The problems all come back to the same thing - too expensive and it's rather hard, in practice, to not end up oiling the surrounding environment.

"Barrels of Oil Equivalent (BOE)" - this is simply a way of converting non-oil flammable materials into a common unit of measurement based on their energy content (not physical volume). Most commonly it applies to natural gas and condensate, but in theory you could say that a tonne of dry firewood is 2.5 barrels of oil equivalent.

Another way to understand is to use an analogy. Suppose that you categorised all alcohol into "shots of vodka equivalent" based on the alcohol content. It sounds good, until you realise that buying a few bottles of metho will get the numbers up much more quickly than if you bought decent wine instead. It's a chemical-based measurement which takes no account of any other factors.

It's the same with BOE. Sales gas (natural gas) is a lot less valuable than actual oil, but you could find a field that is 100% gas (no oil at all) and express that number as "barrels of oil equivalent" if you wanted to. Just because you have lots of BOE doesn't necessarily mean you have any actual oil at all. Just like having a drum full of metho out the back doesn't mean you've got any vodka or wine even though the metho is most certainly a form of alcohol.

 

[basilio]

Thanks for the overview Smurf. It does put all the terminology into clearer,simpler language.

And it highlights some of the verbal sleight of hand used by companies to puff their prospects.

 

[Mickel]

How does a company right this thinking? Engage in a good news media campaign of there own! Stunts and Gimmicks and HELLOOOO positive news exposure left right and center. Give a nice rounded figure and let the media run with it, heralding it as the coming of the next era . As far as I'm concerned I fined the recent positive news exposure as fighting fire with fire. Personal I have far more faith in someone who knows the ways of the world and is willing to get down and get dirty for the company. Never let to many facts get in the way of a good story. I'd rather see actual tankers carting loads off to the service stations right around the nation. But for now I've bought the dream (1.25-1.14-.75 -.65 -.62 -.57 and .69 on the way up) my retirement depends on it.

That said, if i see the head kahuna selling off any of his tidy little nest egg I might start questioning his motives! Until then I'll remain a L/T shareholder.

Tezzad, we can see by your purchases that you are excited by all the rampant news. However don't confuse the "$20 Trillion" headlines with anything the Company said.

Also, far from selling any of his shares PB bought 500,000 in Dec 2012.

http://www.lincenergy.com/data/asxpdf/ASX-LNC-453.pdf

Great post, Smurf.

 

[notting]

Great post, Smurf.

Yep!
And thanks BRTY too for genuinly sound comments.
Gap and round number support at around $2 take it and see if it breaks down again.

 

[skc]

A bit of terminology in "layman's terms" might be helpful here I think.

Great post Smurf... Thanks for the time and effort.

Another way to understand is to use an analogy. Suppose that you categorised all alcohol into "shots of vodka equivalent" based on the alcohol content. It sounds good, until you realise that buying a few bottles of metho will get the numbers up much more quickly than if you bought decent wine instead. It's a chemical-based measurement which takes no account of any other factors.

Great analogy. Also important to note that BOE (from gas or whatever) certainly doesn't have the same price as actual oil. Just like your 3 bottles of metho may be equivalent to 10 bottles of Penfold Grange in alcohol content. but the price would be slightly different.

 

[Tyler Durden]

Already back down to $2.15. I'm willing to bet a few mums and dads who bought based on the newspaper headlines have lost a bit now.

 

[Smurf1976]

Great analogy. Also important to note that BOE (from gas or whatever) certainly doesn't have the same price as actual oil. Just like your 3 bottles of metho may be equivalent to 10 bottles of Penfold Grange in alcohol content. but the price would be slightly different.

Here's some current price figures. All are expressed as price on a "barrel of oil equivalent" basis. So the price for gas, is the price for 1 BOE of gas.

Actual oil or condensate is worth about $111 per BOE in this part of the world (there are countries, notably the US, where the price tends to be lower and prices there are often quoted in Australian media).

Propane and Butane are worth about $114 per BOE at present. Typically there is a difference in price for those two gases, but at the moment they are coincidentally priced the same.

Propane - that's the stuff in cylinders used to run BBQ's and for gas supply to households, businesses and industry where mains gas isn't available. It also has uses in the manufacture of plastics and various chemicals. In common language in Australia, it's LPG or LP Gas. Americans just call it propane.

Butane - this is mixed with propane in Autogas (automotive LPG). It is also the main contents of those aerosol-type camping gas cylinders and is the fuel in disposable cigarette lighters. In some countries it is used in the same way we use propane here as "bottled gas" for cooking, hot water etc. It also has petrochemical uses.

Natural gas is different in that most of it is sold under long term (in some cases very long term - several decades) contracts rather than on a spot price or shorter term contract basis as is the case with the other liquids and gases. That means there is no one price, and contract prices do vary quite a lot in Australia. But depending what assumptions you make about quantity, duration of contract etc it's worth $20 to $50 per BOE. A complicating factor is that the cost of delivery can be substantial, and depending on circumstances may be either a cost incurred by the customer or alternatively reflected in lower pricing to the supplier (the latter would apply where there is competition from other sources of gas closer to the point of use).

So overall:

Oil = $111 or thereabouts with the price constantly changing.

Propane and Butane = $114, also subject to change (Saudi Aramco dominates pricing and they set prices monthly)

Natural gas = $20 to $50 assuming they can find a market. Potentially a lot less if there's a need to build new pipes to get it to a customer. If there's only a small deposit, its' value might be literally zero since it's not worth the cost of a pipeline.

In terms of the value of any production Linc might bring about, it's the oil, condensate and LPG that has definite value and a definite ability to sell it (since it's easily transported and sold on the open market). Natural gas is more problematic, more uncertain and less valuable.

 

[Gringotts Bank]

Low of $1.795 is close to the 50% Fib retrace at $1.76 (approx).

 

[Mr Z]

By my weekly chart there is longer term support in the 1.72 to 1.96 range. The mid point being 1.84 and often the focal point. Closing above 1.84 on a weekly basis would be desirable here, buying should emerge at these levels if history is any guide.

 

[basilio]

I think LNC is roughly where it should be right now. The big surge on the back of the shale oil announcement was , IMO, a puff job.

There are certainly some good things happening and hopefully more news in the near future. So we should see a steady revaluing of the share based on more realistic announcements. I believe the wild swings of the past couple of weeks have probably been more damaging than helpful to investors views on the stability of the company. It has looked more like a market for fast players and spivs.

 

[notting]

I think LNC is roughly where it should be right now. The big surge on the back of the shale oil announcement was , IMO, a puff job.

"Comapany Insights" certainly do better for the share price than "Company Reports"

Not sure if I want to go again, but probably will.

 

[Tyler Durden]

$2.05 today.

I know I called a retrace, but even I did not think it would be this big. I was gonna buy in at $2 but seeing this, I'm staying on the sidelines

 

[Mr Z]

It needs to bounce around the high 1's say ~ $2 for a while until the crowd get used to the altitude. We ran WAY to hard, this thing needs to get its breath back. There should be reasonable opportunity to buy in the support range and at a level that offers a tight and logical stoploss price.

 

[notting]

Tried to go short again at 2.15 but missed it.
Would have had the stop quickly in at 2.14 had I got it simply because the upside volatility is still very possible amidst all the hyped up believers, especially as it has got its leg back over 2.
But as I write I still think it's a joke.
It actually had quite a strong day today given most of the sector was down and it started up!
"Company Insight" announcement that seemed more like a stop loss attempt may have helped.
Onward and downward.