Lucas Energy (LEI:AMEX): Re-working the Prolific Texas Austin Chalk Oil Region
Re-working an older or underperforming oil well can make great economic sense with oil prices above $50 per barrel. As prices begin to rise, savvy oilmen are buying ‘shut-in’ wells, or plugged or abandoned wells, which might not have been economically feasible when oil was $10 per barrel. The advantage to these types of oil plays is that you know ahead of time what the original owner found ‘down hole’ and careful analysis of well logs, and other technical information, can yield potential zones that were never exploited.
Texas has produced more oil and natural gas than any other state. By reworking some of the older wells, oil flow rates can be restored to previous levels of production when the well was abandoned. Currently, Texas has 142,000 oil wells and 89,000 gas wells that are actively producing.
The Austin Chalk formation in Texas has played an important role in the history of Texas oil fields. This region covers a very large geographic area with over one million acres that have yet to be developed. The single most important factor which controls the total amount of oil to be found and produced from the Austin Chalk formation is related to the price levels of oil and gas.
Small oil companies have opportunities to acquire wells, and sometimes entire oil fields, which have been abandoned by major oil operators and larger independent companies. Larger oil companies cannot compete with the low overhead, small operators. In fact, the price of some of these oil properties is often so inexpensive that the operator can recoup his entire investment within 1 year after production begins.
Lucas Energy, Inc. (LEI:AMEX) is a Houston, Texas-based independent oil and gas company that identifies, evaluates and acquires leasehold property interests, primarily in the Austin Chalk formation of the middle Gulf Coast of Texas. The company seeks to acquire underperforming properties that have been ‘shut-in’ or ‘plugged and abandoned’. By applying efficient management models, Lucas Energy can re-work these old wells and recover additional reserves. The methodology can be as simple as re-entering the old well and replacing bad tubing or new lateral drilling.
Lucas has 2.2 million barrels of proven oil reserves as of 3/31/2009. The company has established a track record of finding reserves that have been abandoned, or overlooked, by former operators. Currently, Lucas operates 27 wells, all of which are located in the Austin Chalk trend. The majority of their properties are located in Gonzales, Wilson, and Karnes Counties, Texas.
The company has just over 10,000,000 shares outstanding and trades at $0.84 per share. Based on the current oil price and the proved reserves, the price per share should be considerably higher.
Lucas is an excellent value play. Once in awhile, value plays come with a bonus, and in the case of Lucas Energy – Significant Upside Potential. Lucas is a fully reporting company which trades on the American Stock Exchange. Although it’s priced in the range of other ‘penny stocks’, it has significantly less risk than the typical ‘penny stock’ plays.
Notice:
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