Lucas Oil
Via our previous article:
Lucas Energy, Inc. (NYSE: LEI) shares traded higher by 500 percent at one point on Thursday after beginning the day below $2 per share.
In a press release, the company said it has signed a purchase agreement for undeveloped properties from 21 different entities, including two blocks of land in the Mid-Continent region.
The issue, which has traded a combined 30k for the first three days of the week, has traded 7 million shares with over four hours remaining in the session.
After ending Wednesday’s session at $1.65, it bottomed at $1.85 off it opening print and began to scream higher.
So far, it has reached $10.66 and continues to make new highs for the session.
This marks the first time the issue has traded over $10 since February when it peaked at $11.25. Its low for the year was made in July at $1.41 and traded as low as $1.57 only on December 8 and $1.59 in Wednesday’s session.
OG Market Insight
Lucas Oil announced the acquisition of over 40,000 acres of land in the prospective Hunton formation. The Hunton has significant amounts of water that is produced with the oil and it has one of the lowest development costs of any unconventional liquids-rich reserve in the United States with wells running around $3.5MM. The key to making the Hunton work with horizontal wells is to find areas that produce higher oil water ratios and that have existing water-handling infrastructure. The Mississippi Lime east of the Nemaha Ridge is a close cousin lying just above the Hunton. Like the Hunton, the reserves in the Mississippi Lime are a result of a breached giant anticline that has subsequently been flushed with water. The remaining oil is present in structural and stratigraphic traps. Like the Hunton, the Mississippi Lime produces large amounts of water and requires substantial water handling infrastructure. In Northern Oklahoma, the Mississippi Lime is much shallower than the Hunton, and development costs are even less. Moreover, like the Hunton area, the Mississippi Lime area has the potential for vertical development with stacked pay–e.g. multiple formations that can be produced together in a conventional vertical well.
If Lucas Oil’s asset is good, PetroRiver’s 100,000 acres of land in Osage County has the potential to be better. There is substantial existing water handling infrastructure, development costs are dirt cheap, and the decades of experience that PetroRiver has in the area allow it to better target these structural and stratigraphic traps that contain higher percentages of oil. Moreover Petro has existing 3D seismic data which has identified numerous locations for conventional wells which can be completed in multiple zones for very low cost.
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