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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (42132)	4/3/2011 5:00:02 PM
From: E_K_S	Read Replies (1) of 78519

Re: Lucas Energy, Inc. Common Stock (AMEX: LEI ) - A simple back of the envelope analysis. Here is an edit to my earlier post regarding LEI's JV deal w/ MRO. My take away from the Little Tom Field Analysis: eagleford.com 1) On pg-17- :"...The 5,237 acres within the Dyami Little Tom reported leasehold has an Eagle Ford Shale oil resource potential of 8 million barrels based on reported parameters from EOG (130 acre spacing unit) and Petrohawk (200,000 barrel oil recovery per well) as discussed earlier in this report..." They concluded that their 5,237 acres parcel had an Eagle Ford Shale oil reserve of 8 million barrels. This implies that LEI's 1,000 acres could contain as much as 1.5 million barrels. (They are similar formations and geographic locations) A 50% interest would net them 750K barrels of possible field reserves. 2) The report (pg-37-) calculates a recovery cost for Eagle Ford shale of between $32.27/barrel & $38.56/barrel. For this analysis I will assume $35.00/barrel. If you assume $80.00/barrel avg price, LEI could net $45.00/barrel on their share of oil produced over the life of the field. Therefore the total Net value of their share of probable reserves (ie 750K barrels) could be worth as much as $33.75 million or about $2.03/share. Depending on the specific terms of the MRO JV deal and how their "actual" developmental and production expenses are shared, LEI could receive additional recovery cost credits from MRO for the 50% interest consideration already received. Therefore, my WAG of $33.75 million (or $2.03/share) is at the low end estimate of possible value(s). ----------------------------------------------------------------------- The stock was up $0.46/share on the news Friday (inter day as high as $1.05/share). The MRO JV deal could be worth as much as $2.03/share and much more if Oil stays above $80/barrel. As a result LEI's shares s/b valued between $5.50-$6.00 and IMO remains 35%-50% undervalued. The company has other ongoing JV deals and additional acreage that can also be developed in the future which could add further value to the shares. EKS

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