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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (43451)	7/20/2011 3:07:11 PM
From: E_K_S	Respond to of 78462

Hi Paul - Lucas Energy, Inc. Common Stock (AMEX: LEI ) Not sure what to make of these warrants that were/are exercised per this announcement thus AM. Stock off 3.3% right around the exercise price of $2.86. Seems like a pretty good entry point if there is a sale or JV in the works for their Eagle Ford holdings. LUCAS ENERGY, INC. xml.10kwizard.com Relating to the Resale of up to 4,230,589 Shares of Common Stock, $0.001 Par Value Per Share, Comprised of: (i) up to 2,510,506 Shares of Common Stock Issuable upon Exercise of Outstanding Series B Warrants; (ii) up to 1,569,453 Shares of Common Stock Issuable upon Exercise of Outstanding Series C Warrants; and (iii) up to 150,630 Shares of Common Stock Issuable upon Exercise of Outstanding Warrants EKS

To: Paul Senior who wrote (43451)	7/20/2011 4:24:21 PM
From: Madharry	Respond to of 78462

thats a funny news release. i would think its a pretty big assumption to make that all acerage is equal in value. I dont see a good reason for such a release accept to garner attention for themselves prior to issuing more equity. im just skeptical on this one.

To: Paul Senior who wrote (43451)	7/21/2011 4:50:23 PM
From: E_K_S	Read Replies (2) \| Respond to of 78462

Re: Lucas Energy, Inc. Common Stock (AMEX: LEI) - increased by 50% Callon Petroleum Company Common (NYSE: CPE) - Closed position Triangle Petroleum Corporation (AMEX: TPLM) - Closed position A few changes to my E&P basket. The basket is now composed of 16 stocks. With oil touching $100/barrel, I closed out CPE (3.53% of basket) for a 4.08% gain and TPLM (2.15% of basket) for a 3.07% gain. The proceeds were invested into LEI (which now makes up 7% of my E&P basket). LEI owns parcels (approx 4,400 acres) located in the Eagle Ford shale region contiguous to Petrohawk Energy's land recently purchased by BHP for $22,000 per acre. Lucas is anticipating increasing operated gross production this year due to a new drilling program that includes the Rainey Unit No.1H well currently drilling as a new horizontal well in the Austin Chalk formation. The company is planning at least three new Austin Chalk horizontal wells, and three new Austin Chalk laterals from old well bores. The outside operated Eagle Ford program is anticipated to add another two to three wells. My only other sale in my E&P basket were some shares of LEI on 3/2/2011 for $3.66/share when the stock spiked up on news of a Joint Venture agreement with Marathon Oil (East Texas) LP for the development of the Eagle Ford and Buda formations in Wilson County ( Message 27278537 ). I should get more pop in the basket with BHP and MRO interests operating near LEI's Eagle Ford property. EKS

To: Paul Senior who wrote (43451)	8/21/2011 9:40:50 PM
From: E_K_S	Read Replies (2) \| Respond to of 78462

Lucas Energy, Inc. (LEI) Hi Paul - I have done more analysis on the valuation of LEI and have concluded that this stock is still quite undervalued at $1.86/share.. Your previous review looked at the valuation based on their Eagle Ford land holdings only. Your conclusion that the company was undervalued just on this basis. I have added a bit more clairity and added in the increased value based on actual BOPD production too. I have reviewed all of their property interests including both their (1) deep well mineral rights and (2) their two different JV agreements w Marathon and Hill Corp. They own a 4,400 net acreage interest in the Eagle Ford. (Note: Yor post on 7/20/2011 verified this as well). Recent sales have topped out at $21,400/acre. For this analysis I am assuming a fair value price of $11K/acre. 4,400 X $11K/22M shares Out = $2.42/share value. Here is the interesting "Value Added" based on current 2011 BOED and 2012 (forecast) BOED. Based on their June 2011 presentation: ( lucasenergy.com ) they state their BOPD production from (1) Operated and (2) Non Operated properties. On page 17 of the presentation: Operated Production 2011 - 200 BOPD Forcasted Production increase 2012: - 600 BOPD Total for 2012 Forcasted: 800 BOPD x 60,000/BOPD = $48M/20M share Out = $2.40/share (Note: $60,000/BOPD is the back of the envelope value drillers use when calculating a fair value for current BOPD production when they Buy E&P companies. This number can vary based on the price of Oil but is pretty accurate when you look at past sales). On page 18 of the presentation: Gross Non-Operated Production 2011 - 400 BOPD New Eagle Ford Wells to be completed in 2012 - 600 BOPD Total Non Operated Gross - 1000 BOPD x 32.5% = 325 BOPD X $60,000/BOPD= $18.5M/20M share Out= $1.05/share. (Note: Their new JV entitles them to 50% interest in their Marathon deal & 15% interest in their Hillcorp deal, their average vested interest in the non-operated acreage is 32.5%.) ------------------------------------------------------------------------------------------------------------------- Therefore, my low end valuation of LEI is $5.87/share. This is the price I would begin to peel off shares. You could justify up to $8.29/share based on the $24K/acre last sale price but that would be the high end. The key is how they meet their 2012 BOPD production targets especially with their operated wells. I feel quite comfortable with my most recent buys at $2,83/share on 7/21/2011 & 08/17/2011 @ $2.13/share. With the current market price at $1.86/share, I am tempted to buy more shares. LEI currently represents 8% of my E&P basket. I may go in for another Buy next week to bring it up to 10% of the E&P basket. EKS