Lonestar Resources Update - June 5

[dan_s]

If you own LONE, go here: https://oilprice.com/Energy/Crude-Oil/I ... rtage.html# and look closely at the top of the page.

LONE sells all of its oil under a marketing agreement at LLS ("Louisiana Light Sweet") prices. Note that there is a SIGNIFICANT premium for LLS to WTI.

Also, all of LONE's hedges are tied to WTI prices. Hedges are "paper contracts" that are settled outside of the physical market.

What this means is that Lonestar's realized oil prices will be much higher than WTI. Definitely over $60/bbl in Q2.

Plus, LONE's "Reported Net Income" for Q2 will include a BIG mark-to-market gain on their hedges.

[mkarpoff]

That is nice to hear as I am long Lone, but can it realistically ever get back to $9 or more? If so, what needs to happen in the mkt? Thx.

[dan_s]

LONE should report significant increases in production over the next three quarters just because of their well completion schedule.
What really needs to happen is for WTI oil price to rebound. OPEC+ extending their production cuts on June 25 should help. Strong demand for transportation fuels this summer should also help.
Trump getting a trade deal done with China will REALLY HELP.

Fed interest rate cut would really help the overall market.

Carrizo Oil & Gas (CRZO) is another Eagle Ford company trading at an unbelievable price today ($9.90/share). Like Lonestar, Carrizo gets a premium for their Eagle Ford oil.
First Call's operating cash flow per share estimates for 2019 and 2020 - which are very close to my forecast - are:
2018A = $6.93
2019E = $7.22 (actual was $1.45/share in Q1)
2020E = $8.15

CRZO will be funding 100% of this year's capex budget with cash flow from operations even if WTI averages $50/bbl for the rest of the year AND IT HAS DOUBLE DIGIT PRODUCTION GROWTH LOCKED IN.

[dig4value]

Hi Dan,
I thought I bought LONE LoneStar Res. Super Cheap at 2.57/share a couple of days ago... but today (2 days later) it trades at 2.27.. I am wondering if something went wrong with any of their new wells, or if there is any storm damage from the recent storms in Texas ?
I am assuming things are still on track for a good quarter and have added to my position right now at 2.27.... this does seem to be a Crazy cheap price considering the Proven reserves and Cash flow LONE has. At this price, I can wait quite a while.

Just wondering if you have anything more to add other than your recent update.

Thank you,

dig4value

[cmm3rd]

COO Schneider just filed a Form 4 reporting purchase of 4,000 shares in the open market today at $2.42/ sh.

http://archive.fast-edgar.com/20190606/ ... 2CZ26H6MB2

[dig4value]

So did I. at 2.27.

d4v

[dig4value]

Hi Dan,

Just wondering if you have any words of wisdom about Lonestar LONE... it is down to $2.05 and I am scratching my head... just added at 2.05.
Seems like it is in a bad spiral, but if it actually even makes last years CF its an insane value here... lots of debt, I get that, but not terrible and managable.

Any thoughts?

thanks

dig4value