Everyone wants the next big oil company such as the likes of Exxon Mobil (XOM), ConocoPhillips (COP), Royal Dutch Shell (RDS.A), or BP (BP). When looking for the next big stock play it may end up finding you. That is the case I had with Linc Energy (OTC:LNCYF).
This article will not to look into the fundamentals of Linc that will be done in a later article, but to announce to the common trader of a huge opportunity. Linc is a company that is engaged in oil and gas exploration and production, exploration and development of conventional coal resources, and development and commercialization of Coal-to-Liquids.
Linc was a company on the rise, producing over 6,000 barrels of oil per day as of the end of 2012. When compared to the 12 months trailing that was a 300% increase. This minor production allowed Linc to pay its debt obligations while continuing exploration activities. This alone allowed Linc's stock price to more than double over the last 6 months. This was due to the realization that Linc could pay its debt obligations in the future but that not the reason I am writing this article, it is to only show you that Linc can survive until it can handle its new, and possibly historic, oil find.
Linc has announced, through two different independent assessments, that its Arckaringa Basin in South Australia has anywhere from 133 billion to 233 billion barrels of oil. It has not been mentioned how difficult it would be to reach these reserves and that will be the telling part of this story in the future. Many experts anticipate that there are just 3.5 billion barrels that will be extracted out of that total. Based on today's current oil price that represents a value of nearly $359 billion dollars.
It is also worth noting that even after this announcement, and at the time of writing this article, the stock price of Linc was $2.67 which gives Linc a market cap of $1.37 billion. Assuming that the estimates are correct and that Linc outsources or sells the claim to another larger company with Linc netting 5% of the value gives a market value based on the Arckaringa Basin alone makes the company worth almost $18 billion dollars. Some experts have put the value of Arckaringa Basin north of trillions of dollars, and please be aware of the 's' behind trillion.
With that said, it appears Linc is not going anywhere with respect to the Arckaringa Basin. Chief Executive Peter Bond said:
Either way, it's massive… In four or five years you can have a big commercial operation… Once you prove these things up and they start to flow oil, it truly flows like it's hard to imagine.
Linc has started operations that allow it to cover its debt obligations while continuing to work on exploration, a key in any micro oil company. Additionally, Linc has essentially gotten lucky. No matter what their expectations were for the Arckaringa Basin they did not anticipate oil reserves that would challenge Saudi Arabia's historic concentrations. In my mind this stock has nowhere to go but up and increasing energy prices 4-5 years from now will only help Linc in the future.
Whether you believe in this stock or not, you would be insane to not add it to your weekly newsletter and at least keep your eye on it for the years to come. A future article will look deeper into Linc's fundamentals.