Isopatch: RE: the outstanding features that make Lundin Oil (LOILY) an attractive investment
The reserve base has grown to about 300 mmboe from 0 mmboe since 1994, mainly through exploration success. The equity market valuation at $1.10-1.20 per barrel is the lowest of its entire international peer group.
The company has a core asset value of more than $4 per share, based on a future oil price of $17.50, according to Morgan Stanley Dean Witter. Last trade today $2 1/4...
It's currently trading at 4X cash flow and 9X earnings. In March next year LOILY's production more than doubles when it's Libya discovery comes onstream, bringing p/cf down to 2 and p/e 4.5 (with more improvement if oil prices stay up. Brent hedges at $18.58 a barrel comes off at the end of the year).
Explosive growth comes from the Phase II development in Malaysia, once that goes onstream Q3 2003 it will add about 35-40.000 bopd (LOILY's current production is 14.600 bopd).
In the near term there are several catalysts that could move the share price ahead, including two back to back exploration wells in Libya, the first one spudded 4 days ago (it's a large structure, potential 200 million barrels). Several other large prospects have yet to be tested.
The reserve base excludes any upside from Lundin's discovery in the Sudan. If it proves to be a commercial discovery, that could add about 100 million barrels. I believe it's the first discovery of many to be made in that area, the exploration upside is significant.
Lundin Oil does not include any reserves attributable to the Papua New Guinea gas field in its disclosed reserve figures. The field contains approximately 1.6 trillion cubic feet of proved plus probable gas reserves. Lundin Oil holds a 48% interest.
The economic viability of the field depends on the proposed pipeline from Papua New Guinea to Queensland, Australia, which is currently being promoted by Chevron and Exxon. The project is at an advanced stage, the final decision to go ahead is not far away.
And last but not least, the company has two little known blocks in Somaliland's most prospective basin, several well defined prospects are ready to drill. Surface oil seeps confirm its potential. Lately, due to a significant improvement in the country's unrest and much improved political environment, Lundin Oil is attempting to re-activate the existing concessions. |
