Linc Energy

[Boon]

Linc Energy launches IPO ahead of ASX de-listing
12 Dec 2013 The Straits Times
By RACHAEL BOON

AN OIL and gas producer that is de-listing in Australia is seeking a mainboard listing on the Singapore Exchange (SGX) as it steps up plans to meet energy resource demand in Asia.

Linc Energy launched its initial public offering (IPO) yesterday with the stock priced at $1.20 per share. Its de-listing from the Australian Securities Exchange (ASX) will coincide with the SGX listing on Wednesday at 2pm.

Linc Energy expects to raise net proceeds of about $47.9 million through the sale of 47.85 million shares, according to the prospectus lodged with the Monetary Authority of Singapore yesterday.

Investors, including institutions, have been allocated 47.35 million shares with 500,000 shares available to the public. The firm has a global portfolio of oil, gas and coal assets in areas including the United States’ Gulf Coast region and Wyoming.

It had a market capitalisation of A$520.5 million (S$595 million) as at Nov 15 on the ASX. Based on total issued and paid-up share capital of about 571 million shares immediately after the IPO, and at $1.20 per share, it will have a market capitalisation of about $685 million.

The investment arm of Kuala Lumpur-listed Genting is a strategic investor in Linc Energy. Genting has been involved in oil and gas exploration and production through its Genting Oil & Gas unit since 1996. Linc Energy has given Genting the option to subscribe for up to 10.75 million shares at the offer price during a six-month period from the listing date.

“The company is significantly subscribed; we’ve had strong interest for the float,” said Linc Energy chief executive Peter Bond at the IPO launch yesterday.

“As a business, we have a lot of assets – coal, oil, shale oil. One of the problems we had was getting that value recognised on the ASX.”

One of the firm’s issues with being listed on the ASX was that its stock price was subject to announcements and non-fundamental issues.
“The growth of the company has been significant over the last few years, so if I’m going to sit and work through what I’m going to do in Australia, it might take two years to do that,” said Mr Bond.

“Imagine how much growth we can have here in two years... but it was a difficult decision (to move).”

The company plans to use the IPO’s net proceeds in various ways. About $18.8 million will be used for the conventional oil and gas business, which includes developing the Umiat field in Alaska.

It has earmarked about $23.5 million for its clean energy business, which includes work on underground coal gasification (UCG) projects.

The balance will be used to fund working capital and other corporate uses. Linc Energy has 475 employees around the world and has invested around A$210 million in developing its UCG technology in the past nine years.

Its gross profit more than doubled to A$65 million for its financial year ended June 30.

Mr Bond believes that if Linc Energy succeeds here, more firms will come to Singapore, which is in line with the SGX’s moves to attract more energy and metals explorers.

“We’re a well-known energy company in Australia, which sets the standard,” said Mr Bond. “If we come to Singapore and are successful, people are going to want to repeat that. So it’s a good thing for Singapore.”

The SGX introduced new measures for the mineral, oil and gas industry in September. One allows such firms to list on the mainboard even before they reach the production stage.

The public offer opened yesterday and closes at noon on Monday. Trading is expected to commence on Wednesday at 2pm.

http://www.pressdisplay.com/pressdisplay/viewer.aspx

http://masnet.mas.gov.sg/opera/sdrprosp....s?OpenView

[Boon]

Why Linc Energy is being crushed
By Mike King - October 8, 2013

Linc Energy (ASX: LNC) has seen its shares slammed down more than 30% over the past five business days, after the company announced that it was proposing to delist from the ASX and list on the Singapore Exchange (SGX).

It seems investors aren’t keen on the move by the company and owning shares in a company listed on a foreign exchange. Linc says it believes a listing on the SGX will help to unlock the value of the company’s conventional and unconventional oil, gas and coal assets and its underground coal gasification (UCG) technology. The company says it wants to broaden its investor base and improve access to international oil, gas and energy investors, as well as improve access to capital markets.

But there could be other reasons contributing to Linc’s shares getting smashed, including an announcement that it is considering offering shares to new investors. That move is likely to dilute existing Australian shareholders, devaluing their shares and pushing the share price down.

Despite investing around $200 million to develop UCG and gas to liquids (GTL) technologies, the company has yet to establish a commercially profitable operation, and generates little in the way of revenues for the company.

But perhaps the biggest reason for the company’s low share price is that very few investors understand the company’s strategy and despite all the hype around UCG and GTL technologies, Linc has yet to post a profit, while raising large amounts of capital from shareholders and debt from its lenders.

As an example of a confusing strategy, Linc has built a portfolio of coal assets around the world, and recently announcing that Linc was going to purchase Rio Tinto’s (ASX: RIO) Blair Athol coal mine. But Linc and Mr Bond have repeatedly said the company wants to offload its coal assets, and was not a buyer.

Interestingly, Rio estimates that Blair Athol has around 10 million tonnes of coal remaining. Linc subsidiary New Emerald Coal wants to produce up to 3 million tonnes of coal a year, suggesting the mine has a life of just over 3 years – not much, and there is also the question of who will bear the rehabilitation costs of the mine once it does close. Rio currently has a $64 million bond lodged with the Queensland government to cover the rehabilitation, which is estimated to take around 5 years.

Cynics might also suggest the company has no focus and is too complicated, with diverse operations in the US, Poland, Uzbekistan, Australia, the UK and South Africa, with plenty of potential but many as yet unprofitable. Until Linc can generate a profit or positive operating cash flows, there will always be a question mark over the company’s assets, and maybe that should be the priority of the company, rather than moving to a different exchange.

Foolish takeaway

There are plenty of other companies listed on the ASX for Foolish investors looking for exposure to oil, gas or coal, including the likes of Woodside Petroleum (ASX: WPL) and BHP Billiton (ASX: BHP). Both companies offer a much better chance of sustained profits than Linc.

http://www.fool.com.au/2013/10/08/why-li...g-crushed/

[greengiraffe]

Linc to push Alaskan project as tests yield sweet crude
SARAH-JANE TASKER THE AUSTRALIAN MARCH 31, 2014 12:00AM

LINC Energy has completed drilling at one of its wells at its Alaskan project, which is the first time crude oil has flowed in Umiat, a frontier oil lease in the northern part of the state, since 1952.

Chief executive Peter Bond said Linc was now moving forward to complete environmental studies and conduct engineering of the surface facilities for the Umiat commercial operation, including finalising the best routes for the Umiat pipeline and road.

Linc Energy’s drilling program marks not only the first drilling at Umiat since the late 1970s, but the company says it is the first time modern Arctic drilling techniques have been applied to the reservoirs. Marking the milestone, Mr Bond met Alaskan governor Sean Parnell to show him a sample of the oil produced from the Umiat well and to discuss how Linc and the state of Alaska could work together in finalising the permitting process to take Umiat into full commercial production.

The oil would be pumped into the Trans-Alaskan Pipeline (TAPS). Linc, which has delisted from the Australian market and relisted in Singapore, noted that TAPS urgently required more oil.

Linc’s Umiat oilfield comprises 7800ha over three leases and is ­located in the western province of the North Slope Foothills of ­Alaska.

Mr Bond said the company had now proved that oil flowed easily from the Umiat reservoir with very good permeability. “I was fortunate enough to be on site at Umiat during the oil flow and was very impressed with how easy the well came in (flowed) and the quality of the oil, which is light sweet crude,” he said.

The Umiat reservoirs were discovered by the US Navy in the mid-1940s as a part of the exploration of the National Petroleum Reserve. “I’d read stories of how the US Navy was known to put the Umiat crude oil straight from the well head into their trucks and drill rigs,” Mr Bond said.

“And after seeing and experiencing the oil for myself I can see why they would do this, as the Umiat oil looks like and has the consistency of diesel fuel, just ­fantastic quality oil that did not change throughout the flow test.”

Linc expects peak production could be approximately 50,000 barrels of oil per day.

[Louhan]

Genting Bhd exercised the options at $1.20 per Linc share. Does Genting Bhd see good value in Linc that others don't see?

[Boon]

Genting Bhd exercised the options at $1.20 per Linc share. Does Genting Bhd see good value in Linc that others don't see?

Linc Energy was IPOed and first listed on the ASX back in May 2006

In December 2013, it was listed on SGX after being de-listed from the ASX.

It has been slightly over 6 months since its SGX listing.

Linc suffered a net loss of AUD 63.8m in FY2013 (ended June).

For 9MFY14 (ended March 2014) it suffered a further loss of AUD 158 million

Despite of its huge losses, it is interesting to note that, during these 6 months, Genting Strategic Investment, a wholly-owned subsidiary of Genting Berhad, has been raising its stake in Linc. To date Genting owns a total number of 94,656,000 shares or 16.10% in Linc.

Genting Strategic’s stake in Linc Energy:
47,850,000 (IPO Subscription in Dec 2013, at SGD 1.20 per share))
36,056,000 (Open market purchase over 6 months; price range from SGD 1.22 to 1.52 per share)
10,750,000 (exercise of call option in June 2014, at SGD 1.20 per share)
94,656,000 = total shares owned = (16.10%)

SSH owns 65.96% of Linc
Peter Bond owns 202,621,028 shares (34.47%)
Genting Strategic owns 94,656,000 shares (16.10%)
Credit Suisse AG owns 87,793,800 shares (14.94%）

There have always been question marks over the company’s assets – many critics believe, until Linc can generate a profit or positive operating cash flows – these question marks will remain.

Since its SGX listing, share price of Linc had fallen from its peak in Dec 2013 (SGD 1.585) to SGD1.19 yesterday.

Genting Strategic seems to see values in Linc Energy – it certainly warrants value hunter to take a closer look at this counter that many Aussie investors had abandoned.

(not vested – on watch list)

[propertyinvestor]

Linc Energy may be sitting on a TRILLION dollar gold mine. If they can successfully extract the oil out, this will make it the first stock in SGX to hit $100

[Boon]

Linc Energy may be sitting on a TRILLION dollar gold mine. If they can successfully extract the oil out, this will make it the first stock in SGX to hit $100

$20 trillion ... not: reality check for Linc oil find

January 24, 2013, Paddy Manning

Linc Energy is distancing itself from estimates in today’s media that it may be sitting on $20 trillion worth of oil in South Australia’s Arckaringa Basin.

Linc’s shares rocketed more than 30 per cent to an 18-month high of $2.82 today after it told the stock exchange yesterday that two independent consultants estimated there was an ‘‘unrisked prospective resource’’ of up to 223 billion barrels of oil equivalent in three shale formations within its 100 per cent-held Arckaringa exploration permits.

Media outlets including the Adelaide Advertiser appear to have multiplied the resource estimate by the prevailing oil price - above $US95 a barrel - to arrive at the $20 trillion figure.

But Linc chief executive Peter Bond told BusinessDay: ‘‘That’s not our valution. I don’t know who did that but someone’s got a calculator out and come up with that number ... but we wouldn’t put a valuation on it at this stage. It’s too hard.

‘‘Obviously if you want to stand up there and come up with $US100 times 100 billion barrels, you’ll come up with a big number. That’s not how you value oil resources anyway.’’

Petroleum resources are classified into booked reserves - proven, probable and possible - or resources which may be contingent or prospective.

The estimates released by Linc on Wednesday were classified by the consultants as unrisked prospective resources - the lowest category of certainty - because of their ‘‘lack of commerciality or sufficient drilling’’.

As the consultants wrote: ‘‘There is no certainty that any portion of the prospective resources estimated herein will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.’’

Mr Bond explained that industry rules of thumb guided valuation of reserves, with good quality 2P (proven or probable) or 3P (proven, probable or possible) reserves valued at between $US1-$US2 a barrel.

‘‘Once you get to 1P (proven reserves) you get to $US10/barrel, or $US100,000 per flowing barrel.’’

Shale plays tended to be valued on an acreage rate, ranging from $US1000-$US2000 an acre at the low end, to $US20,000 an acre at the high-end.

But Mr Bond did not walk away from the potential of the shale play at Arckaringa, where Linc has 16 million acres of which 2-3 million acres could be ‘‘sweet spot’’ territory.

‘‘No matter how you look at it, it’s big,’’ he said.

Mr Bond said Linc paid $104 million for its exploration acreage at Arckaringa four years ago, and spent $30 million on drilling 15-16 holes, of which half targetted shales, and 1000 kilometres of 3D seismic.

But Linc is now looking for a ‘‘farm-in’’ partner to spend up to $300 million to develop the resource and prove up reserves.

Mr Bond said Linc’s consultants estimated there was a minimum of 3.5 billion barrels of oil equivalent at Arckaringa.

‘‘It’s a multi-billion barrel opportunity, and that’s a good news story. OK it’s not $20 trillion. But 3, 4, 5 billion barrel resources are virtually unheard of these days, so even stressing this number down to the minimum number the experts stress it down to, it’s still a big story.’’

http://www.smh.com.au/business/20-trilli...2d8zf.html

[Boon]

Linc Energy Might Be A Positive Black Swan

Dec. 25, 2013 , Stan Holland

Linc Energy (OTCQX:LNCGY) offers amazing oil exploration possibilities in a first world country with reasonable downside protection if held in a diversified portfolio. In his book The Black Swan, Nassim Nicholas Taleb proposes a barbell portfolio with 85% to 90% in extremely safe instruments (like U.S. Treasuries) and 10% to 15% in low probability, high impact Positive Black Swan Stocks. Linc Energy belongs in Taleb's barbell portfolio.

Linc Energy currently has an Enterprise Value (market cap + debt - cash) of nearly USD$1 billion with the following assets:

Gulf Coast

On October 13, 2011 Linc announced the closing of the acquisition of the Gulf Coast assets consisting of 13 producing oil fields located in Texas and Louisiana. All of the fields are associated with salt domes or are salt-related structures. The geology is characterized by multi-stacked pay zones with significant reserve potential up-hole and in deeper, unexplored areas. With a proven PV10 value of $601 million and lots of upside via an aggressive drilling program utilizing directional drilling combined with 3-D seismic not exploited by previous operators, the Gulf Coast assets go a long ways toward providing downside protection for the stock.

Umiat

The Umiat field in Alaska has a 2P PV10 value of $2.4 billion, but page 12 of the 2013 annual report states that "Wood Mackenzie has estimated the sale value of Umiat as between $100 and $200 million in its current undeveloped state."

Wyoming

Linc's oil assets in Wyoming have a 3P PV10 value of $1.1 billion. Virtually all of the reserves are in the possible category. Oil volumes have been classified as "possible" under SPE-PRMS guidelines because of several factors including the fact that there is no current production in the Linc fields under the planned CO2 recovery and no pilots have been implemented to prove the process. However, the historical waterflood performance is a predictor of sweep efficiency, and I believe that the CO2 floods will be successful.

Anyone wishing to dive deeper into the oil & gas properties in the Gulf Coast, Umiat, or Wyoming an excellent read is located here.

UCG

Underground Coal Gasification (UCG) is the process of gasifying coal in-situ to produce syngas, which includes hydrogen, carbon monoxide, methane and other gases. This process enables Linc Energy to access "stranded" coal and eliminates the need for conventional mining and processing through a surface gasification plant.

I am not going to hazard a guess as to what UCG is worth other than to say that I believe that the value is much greater than zero. UCG is a major focus of the company, and Linc Energy has invested approximately $200 million into UCG over the last nine years.

New Emerald Coal

Linc Energy assembled a collection of coal assets for the purposes of UCG. Certain coal assets that were decided to be better developed utilizing conventional mining were moved into NEC to be divested/de-merged. The two main properties have the following Mineral Asset Valuation:

PROJECT: Low (AUD Million) / High (AUD Million) / Preferred (AUD Million)
Blair Athol: 121.0 / 238.0 / 181.0
Teresa: 59.0 / 479.0 / 259.0
TOTALS: 180.0 / 717.0 / 440.0

Anyone wishing to dive deeper into New Emerald Coal, an excellent read is located here.

Arckaringa Basin

The resource potential of the Arckaringa Basin is summarized in this press release. Page 4 of the press release compares the Arckaringa Basin Shale to the Bakken and the Eagle Ford. Note that the Arckaringa Basin Shale is much thicker. Linc Energy does not have the resources to chase the Arckaringa Basin Shale on its own and will eventually bring in a joint venture partner, pending results from next year's drilling program. In this video, CEO Peter Bond makes the following statement about the Arckaringa Basin:

"We have had a lot of early discussions with some large partners. We will be doing...there's no doubt that we will be doing some deals going forward, but essentially its all about getting the best deal for your shareholders, and if we can take this resource to the next level, we can get a number of relatively cost effective holes in there, so another six or so wells, probably do some degree of fraccing, get the resource moved up to a 3P recognized resource and really take the whole asset to another level. Then obviously sitting down with whatever partner you work with going forward is much easier and puts you in a stronger position."

I believe that the best the best way to think of the prospective unconventional reservoirs of the Arckaringa Basin is as a call option on a piece of the next Eagle Ford or the next Bakken and to not get overly excited about the 233 billion barrels of oil equivalent of unrisked mean prospective resources. It might not work. The nut has not yet been cracked in the Monterey shale in California or the Alberta Bakken in Montana. The Niobrara shale has not lived up to expectations either. Even if the Arckaringa Basin Shale does work it is unlikely to be a fast road to riches in my opinion.

What really intrigues me is the unrisked prospective resources in conventional traps in the Arckaringa Basin.

Linc has three conventional leads with best estimate prospective resources of 18 to 22 billion barrels each! How much could 20 billion barrels be worth? At $5 per barrel of oil in the ground (this is probably conservative, but these locations are very remote) then each prospect, if successful, would be worth $100 billion or 100x the current enterprise value of the company! Sounds impossible? Consider that Exxon Mobil has 'only' 25.2 billion barrels of oil equivalent of proven reserves.

If that isn't enough, there are three Pre-Permain Structural Leads which have best estimates of 'only' 1.4 to 7.6 billion barrels as well as many leads for low-stand valley fill traps.

Now that I have you all worked up about the possibilities I want to remind you that these are leads. By definition, leads do not have enough information to make a decision on whether or not to drill. Furthermore, leads can not be assigned a chance of success greater than 5%.

Catalysts

From the SGX prospectus dated 11 December 2013:

"With regard to our Australian shale oil and gas position in the Arckaringa Basin, we intend to enter into joint venture with a strategic partner at the appropriate time when we believe we can receive the full value of our Australian shale oil and gas position. We intend to further appraise the unconventional oil resources as well as conduct further exploration of the deeper conventional oil potential."

"We have been working on detailed plans for the next phase of field work, which will focus on identifying the most favorable parts of the Arckaringa Basin for commercial development of unconventional oil. Drilling, core sampling, and seismic work are planned for FY2014 field season. Production testing will also be carried out on all zones where moveable hydrocarbons are encountered."

I can't wait for the results of the 2014 drilling campaign!

Conclusion

Linc Energy is not a stock for everyone. I have even advised my own father not to buy this stock. However, for those of you willing to accept moderate risk in a diversified portfolio, Linc Energy offers an asymmetric opportunity with enormous potential.

http://seekingalpha.com/article/1915611-...black-swan
________________________________________________________________________________________________________________

Linc Energy: Strong Growth Likely From Rich Assets

Jun. 28, 2014,

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.

Production And Financial Overview

From a production rate of 151boepd in 2011, Linc Energy has ramped-up production to 3,803boepd in YTD14 (financial year ending June). This production has been driven by Linc Energy's Gulf Coast assets and Linc Energy still has the potential to double production from the asset.

In terms of revenue, Linc Energy's growth has been equally robust from $2 million in 2011 to $121 million in 2013. For the nine months of 2014, the company has recorded revenue of $100 million, which translates into annualized revenue of $133 million. The company's EBITDAX has also increased to $78.4 million in 2013 from $26 million in 2012.

Linc Energy has therefore been growing at a fairly robust pace. I must mention here that the company's growth has not been as strong as expected. For the same reason, the company's stock has declined from a high of $18.8 in July 2013 to current levels of $9.45.

The stock has been trading sideways for the last few months suggesting that the negativity of lower production estimates is already discounted in the stock. The current price is therefore a good long-term entry point as the company continues to make progress on its game changing assets.

From 4,500 to 70,000

Linc Energy had clocked a gross production of 4,474boepd for the quarter ended March 31, 2014. The company's production for the quarter was impacted by harsh winter weather. However, the company's press release anticipates strong increases in oil and gas production by year's end and this is likely to be a near-term stock upside trigger.

Linc Energy has however provided a long-term production outlook and the company has an ambitious plan to ramp-up production from current levels of 4,500boepd to 70,000boepd by 2020. I will discuss how the company plans to ramp-up production to these levels.

Increasing Gulf Coast Production - For March 2014, Linc Energy's Gulf Coast production was 4,291boepd with the asset having 11.6mmboe of 1P reserves. The company has the intention of ramping up production in the asset to 10,000boepd and this looks likely with the current drilling program. The new Cedar Point / Atkinson Island drilling program targets a larger reservoir as compared to Linc Energy's historically productive drilling in the Barbers Hill field. Through 2014, Linc Energy plans to drill 5 wells in Cedar Point, recomplete two existing wells and also drill two wells in the adjacent Atkinson island Field. While the company had the target of ramping up production to 10,000boepd in 2014, I believe that the production upside will come in the end of 2014 or early 2015, as indicated by the management.

Wyoming Production - The Company's Wyoming asset had a production of just 182boepd for the quarter ended March 2014. From the company's perspective, there are two options at this point of time. First, the company develops the assets and this should result in a production of 10,000boepd. Second, Linc Energy is evaluating the sale of the asset by the end of 2014. The primary objective would be to have greater financial flexibility to develop the game changing Alaska asset. Therefore, the production from this field remains doubtful. However, the company will reap benefits from production or from asset sale.

Alaska (Umiat Asset) - The Umiat asset will be a big game changer for Linc Energy over the next few years. As of June 2014, the asset has 2P reserves of 154.6mmboe, 3P reserves of 194.1mmboe and an anticipated peak production level of 50,000boepd. With this asset and a peak production by 2020, Linc Energy plans the overall production ramp-up to 70,000boepd by 2020.

In the near-term, this is the biggest stock upside trigger along with production ramp-up in the Gulf Coast. In terms of progress, Linc Energy has already drilled and flow tested one horizontal well, which had a peak floe of 800boepd with excellent quality of oil at 38.5 API. After the successful drilling of this well (23H), the company plans to drill another horizontal well 25H in the near-term. Therefore, the progress is steady in terms of drilling and success. Considering an optimistic scenario, Linc Energy plans to drill another well in 2014, taking the total number of horizontal wells to three for the year.

While the company has not given a timeline for first oil, I believe that 2015 end or 2016 might be a realistic target considering the fact that Linc Energy expects to reach peak production by 2020. The recent success in the horizontal well is just a step closer to production and as more wells are drilled, higher flow rates will also trigger stock upside.

In a conclusion to this section, the company has the potential to ramp-up production from 4,500boepd to 70,000boepd over the next six years from these three assets. Even if delays are considered, the production upside will be strong from current levels given the potential the Umiat asset holds.

Revenue Outlook For 2015

The company's financial year end is June and therefore the outlook discussed will be from June 2014 to June 2015.

With a relatively conservative outlook, I am assuming the production to remain at an average rate of 5,000boepd from June 2014 to December 2014. I do believe that the company will be increasing production from the Gulf Coast by the end of 2014.

However, a higher production is considered only from 2015 in the estimates. While the production can potentially double to 10,000boepd by January 2015, I have assumed that production remains at 7,500boepd for the first quarter of calendar year 2015 and the production is ramped up to 10,000boepd only in the second quarter of calendar year 2015. In other words, a production of 10,000boepd is estimates for the company's fourth quarter.

The company had an average selling price of oil at $96 per barrel for YTD14; my assumption for the next year is marginally higher at $100 per barrel considering higher oil prices on global geo-political tensions.

With these assumptions, the company's revenue for 2015 works out to $248 million. This will be significant revenue bump-up as compared to 2014s expected revenue of $133 million. Further, considering an EBITDAX margin of 67% (as guided by company at $100 per barrel oil), the company's EBITDAX for 2015 comes to a robust $166 million.

Revenue Outlook For 2016

For the period June 2015 to June 2016, I expect the production growth to be ramped-up further. The key point here is that the company still needs to clarity on the status of the Wyoming asset. There is an intention to sell the asset and the clarification is expected by the end of 2014.

For now, I will assume upside from first oil from Umiat asset in 2016. This assumption means that any potential production plan from the Wyoming asset will add to the production and revenue upside.

For the first half of 2016, I have assumed the production to be stable as 4Q15. In other words, the production rate from June 2015 to December 2015 is assumed at 10,000boepd.

While the production from Umiat asset is expected to be ramped up to 50,000boepd per day by 2020, I have assumed a moderate start to production in 2016 at 3,000boepd. With one well having a peak production of 800boepd and with two more wells to be drilled in 2014, the initial oil can be in the range of 3,000boepd to 5,000boepd. I have assumed the lower end of the initial production to keep my estimates conservative.

In terms of oil price, a 10% rise in oil prices is assumed and the average oil price for 2016 is estimated at $110 per barrel.

With these estimates, the revenue for 2016 is likely to be $455 million with $59.4 million revenue contribution from the Umiat asset. In terms of EBITDAX, a $10 increase in oil prices is likely to result in an EBITDAX of 70% from the Gulf Coast asset.

Linc Energy has still not provided any guidance on the likely EBITDAX from the Umiat field, but the EBITDAX is likely to be robust considering the fact that nearly 65% of the cost of development of the Umiat field will be paid by state incentive programs. According to Peter Bond, Linc Energy's CEO -

"I'd like to particularly thank the State of Alaska for the assistance that Linc Energy receives via their various incentive oil development programs including SB 21 which is critical to the development of Alaskan Oil fields like Umiat, which becomes critical to building future oil flows, jobs and royalties for the State. As I said to Governor Sean Parnell, without these incentives it would not be possible for Linc Energy to drill and develop Umiat, and for me to be standing in front of you with a container of sweet light crude oil which has just flowed from the Umiat field. It may not be well known but approximately 65% of the cost of development of the Umiat oil field is paid for via these State incentive programs."

However, for conservative estimates, I have considered the EBITDAX margin for first oil to be 45%, which was the initial EBITDAX from the Gulf Coast asset as well. The EBITDAX for FY16 works out to $303 million considering the margins for both the fields individually.

The important point with these two years assumptions is that revenue and EBITDAX will continue to grow at a robust pace even with a conservative production profile. The conservative estimates serve as a good base case as the company has been behind their estimates in the past.

Potential Upside From Asset Divestment

As mentioned earlier, Linc Energy is contemplating selling the Wyoming asset and a firm decision is likely by the end of 2014. I believe that the decision to sell the asset will largely depend on the company's financial flexibility to fund the massive Umiat asset.

I do believe that selling the asset and focusing on the big asset might make sense. The important point is that any sale of the asset at attractive valuations will trigger stock upside as Linc Energy will gain more financial muscles for high-end projects.

In addition, another stock upside trigger can potentially by the company's divestment of select non-core Queensland coal assets by the end of 2014. This divestment is also in the company's agenda and can strengthen the company's financial ability further to focus on core assets.

I must mention here that Linc Energy is also exploring strategic partnerships to develop the Umiat field and it is possible that the company divests a part of its stake in the asset to a strategic partner. Potentially, there are more than one cash inflow options lined-up for 2014 and any of these events is likely to trigger stock upside.

Risk Factors

As mentioned in the thesis, the company's Umiat asset is likely to be a near-term game changer. The asset however has certain execution risks associated. The most important point is that the company asset is Alaska is subject to harsh weather conditions. This can potentially delay the first production and also negatively impact the company's production profile.

I believe that this factor is already discounted in the company's valuation and it is therefore not surprising to see the company trading at a market capitalization of $545 million when it has one asset with 2P reserves of 154mmboe.

Amidst the concerns, the biggest positive point here is that nearly 65% of the cost of development of the Umiat oil field is paid for via State incentive programs. This makes Linc Energy relatively insulated from a cost perspective. However, the company is still at a risk from production slowdown perspective in case of harsh weather conditions.

Another risk factor is related to the asset divestment. The company has two key asset divestment plans by the end of 2014 and is also looking for partners to develop the Umiat field.

A delay in these plans can hamper the company's growth prospects and the financial flexibility. This risk factor is partially offset by the fact that I have considered conservative production growth in my estimates.

Conclusion

Linc Energy has some high cash flow potential assets for the long-term. The company's growth in terms of production has just started and the next 2-3 years can be big as Linc Energy works on the production of its game changing asset. The company looks attractive at a market capitalization of $550 million.

It is important to note here that the company's stock price has declined from a peak of $18.76 in July 2013. The reason for the decline is a delay in attaining production target of 10,000boepd in FY14. With the company back on track to achieve the production by the end of 2014, the stock should trend higher over the next 12-18 months.

http://seekingalpha.com/article/2291063-...s?uprof=45

(not vested - on watch list)

[Boon]

Linc Energy’s major assets:

A) Conventional Oil & Gas Assets:
1) Gulf Coast (USA)
2) Alaska (USA)
3) Wyoming (USA)

B) Unconventional Oil & Gas Asset:
1) Proprietary technology underground coal gasification (“UCG”) business being progressively rolled out globally
2) Shale oil & gas (SAPEX - Arckaringa Basin of South Australia)

C) Corporate Asset:
1) Carmichael Royalty - Linc Energy will receive AUD 2.00 per tonne of coal produced, indexed to CPI, for the first 20 years of production at the Carmichael Project.

D) Coal Asset (Conventional Coal):
1) Blair Athol thermal coal mine.
2) Teresa thermal / PCI coal project
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Linc Energy certainly owns a substantial and diverse portfolio of energy assets and interests.

Among these is the outright title to a very large footprint of Arckaringa Basin acreage in South Australia (SAPEX project), recently assessed as holding a potential prospective resource of more than 100bnboe – the so called potential “billion if not trillion” dollar finding.

Despite of the extent of its asset suite and what presents as “deeply impressive growth prospects”, it is not an easy feat for investors in ascribing value to different parts of Linc’s business - as there are too many assets with high degree of uncertainties and risks – after all, the E&P of the O&G sector is founded on risk - many of Linc’s assets require extremely time- and cost-intensive programs to validate – “the de-risking process”.

That said. No matter how one look at them, Linc’s assets are almost certainly worth “something” – and the Management believes that that “something” is a lot more than its current share price.

So what is that “something” ? Potentially million, billion or trillion dollars or nothing? It is of anybody’s guess ! And the range of possible outcomes is huge.

Indeed, the two authors in my previous post had highlighted the risks and potential upsides of Linc’s assets but interestingly, intentionally or not, both of them seemed to have overlooked on one very valuable asset of Linc - the “Carmichael Royalty” – to me it is the easiest asset to understand and ascribe a value to.

Let’s look at the value of the “Carmichael Royalty”.

Linc Energy will receive AUD 2.00 per tonne of coal produced, indexed to CPI, for the first 20 years of production at the Carmichael Project.

Assume:
- Inflation at 2.5% pa
- Production commence in 2018 at 15 Mtpa and ramp up to 60Mtpa in 2021 and onwards
- Discount rate = 10% pa
- AUD/SGD = 1.15

Projected Cash flow for 20 years of “Carmichael Royalty”
YEAR (Production volume in million tonne per annum, royalty per tonne indexed to CPI of 2.5% pa) = royalty per year, pre-tax
2018 (15Mtpa, AUD 2.00/t) = AUD 30 million
2019 (30Mtpa, AUD 2.05/t) = AUD 62 million
2020 (45Mtpa, AUD 2.10125/t) = AUD 95 million
2021 (60Mtpa, AUD2.1538/t) = AUD 129 million
2022 (60Mtpa, AUD2.2076/t) = AUD 132 million
2023 …………………………………………………………………
…………………………………………………………………………
………………………………………………………………………….
2036 ………………………………………………………………….
2037 (60Mtpa, AUD 3.1973/t) = AUD 192 million

PV (10% discount rate) at today’s value of the “Carmichael Royalty” = AUD 1,054 million = SGD 2.06 per share. (pre-tax)

As always, an analysis is only as good as its underlying assumption – and of course, one could apply a higher discount rate in the valuation model to reflect the riskiness of the project which has recently just been approved by the Queensland state authority.

PV (15% discount rate) would give a value of SGD 1.41 per share. However, it is self-evident that the royalty agreement Linc Energy has with Adani would increasingly become more valuable the greater the progress being attained by its owner. With the passing of time, the income stream would be less distant away, certainty would increase, risk would decrease, and value would increase.

IMO, based on the fundamental value of the “Carmichael Royalty” alone, that “something” is unlikely to be worth less than Linc’s current share price of SGD 1.165 - the royalty income stream would likely be providing good support to the share price at current level.

(not vested – on watch list)
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9 May 2014

ADANI GALILEE COAL MINE APPROVAL PROFITS LINC ENERGY

Linc Energy (SGX: T16) is pleased to note that the Adani Group has obtained State Government approval for the US$15.5 billion Carmichael coal and rail project in the Galilee Basin in Queensland, Australia.

The mine is planned to produce up to 60 million tonnes per annum of thermal coal to be used in power stations. The project also includes a 189-kilometre rail line north-west of Clermont and has a potential 90 years of mine life.

Linc Energy holds a A$2.00 per tonne royalty for every tonne of coal mined and transported off site, which is tied to CPI (inflation) index. Subsequently, at face value, Adani's 60 million tonne per annum coal mine could generate approximately A$120million per annum in profits for Linc Energy. Linc Energy’s royalty entitlement is tradeable, making it potentially very valuable especially once the mine goes into production.

Queensland Deputy Premier and Minister for State Development, Infrastructure and Planning, Jeff Seeney, said, "This project has the potential to be the largest coal mine in Australia and one of the largest in the world."

Adani welcomed the approval and said it could now move to the next stage of the project. "We remain committed to delivering the multi-billion dollar project," Adani Chairman Gautam Adani said in a statement.

The Indian Group will use Abbot Point port, a port it already owns, to export 60 million tonnes of coal a year mined from Carmichael using a combination of open-cut and underground mining.
"The project has the potential to create up to 2500 construction and 3900 operational jobs," Mr Seeney said, adding, "jobs would be significant to the future economic prosperity of that region and to all of Queensland.”

"It also includes a 189 kilometre rail line, water supply infrastructure, coal handling and processing plant, and off-site infrastructure including workers' accommodation village and airport."

Peter Bond, CEO of Linc Energy, said, "It's wonderful to see the Adani Carmichael mine continue to make progress. I view our association with the creation of what could be one of the world’s largest black coal mining operations as one of Linc Energy's maturing and very valuable assets. With a potential profit of over $120 million per annum it's a great annuity for anyone to own. It is sometimes forgotten that Linc Energy discovered this multi- million tonne coal mine, and drilled it extensively to prove its significant value, which is similar to what Linc Energy is now doing to its its Sapex Shale oil assets in South Australia. I am very pleased to see Adani commit to this project and look forward to them breaking ground on construction of the coal mine and the rail soon."

http://lincenergy.listedcompany.com/news...BO4G.1.pdf

[Boon]

I think it is a good decision
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3 July 2014
Linc Energy to commence drilling 103 Billion BOE* Arckaringa Basin in South Australia
• Linc Energy commits to drilling three (3) new wells in 2014 to commence late July proving up deeper parts of the Arckaringa Basin to start the process of unlocking the potential 103 Billion Barrels of oil equivalent (BBOE)* in recoverable oil and gas reserves in this unique energy basin.
• The South Australian Arckaringa oil basin is going to be a key focus and company driver for Linc Energy going forward.

Linc Energy Ltd (SGX:TI6) (OTCQX: LNCGY) is pleased to announce plans to drill three (3) wells in the Arckaringa Basin in South Australia as part of the next phase of exploration and development of this significant asset.

Given the size of the potential resource the Board of Linc Energy has determined that the best option for shareholder value is for the Company to fund the targeted exploration program to better define this basin before the Company considers partnering for phase two or three of develpment...........................................

http://infopub.sgx.com/FileOpen/2014.07....eID=303992

(vested - I have initiated a position)