Thursday, July 24, 2014

Lynden Energy Caught My Eye and Confused Me

Lynden Energy (LVL.V, LVLEF) is a Canadian company drilling for oil and gas in Texas.  It is very uncommon for a low-priced stock to have a positive P/E ratio.  I wonder what's going on with this company.  The management page does not list detailed bios at this time, so it's hard for me to judge their skill.

The company's projects page mentions two projects.  The Mitchell Ranch 50% working interest has little detail describing the project's status.  I find their Wolfberry project to be similarly confusing.  I honestly cannot tell what these land holdings are doing at this stage from reading these few paragraphs.

I had to check out their financial statements.  Their unaudited statements from March 31, 2014 show US$12.8M in cash on hand and positive net income, although their income is much lower than what they earned one year prior.  This continued profitability enables them to work down their accumulated retained earnings deficit, which is always good in any company.  They do admit in that document that access to capital impacts their future as a going concern and that they once took an impairment charge from writing off a bad investment in natural gas transmission operations.  I find it odd that they noted a disposal sale of some Wolfberry wells and leases for a one-time gain, in the same area they tout in their website's project listings.

The numbers look alright but I can't figure out from their publicly available material just how they're making this work.  Lynden should publish their properties' 51-101 reports on their website if they have competed versions.  They also need continued access to capital and to stay away from non-core operations like gas transmission.  I just don't know enough about their operations to figure out their chances for success, and that's why I can't expose my portfolio to this company.

Full disclosure:  No position in Lynden Energy at this time.