Sunday, 17 April 2016

Linc Energy: from "20 Trillion" to Administration in 3 years time

Linc Energy was once the darling of the speculators. When the company was still listed on the ASX, valuations of 20 Trillion were mentioned.

.... two independent consultants estimated there was an ‘‘unrisked prospective resource’’ of up to 223 billion barrels of oil equivalent in three shale formations within its 100 per cent-held Arckaringa exploration permits.

Media outlets including the Adelaide Advertiser appear to have multiplied the resource estimate by the prevailing oil price - above $US95 a barrel - to arrive at the $20 trillion figure.

Even for Linc Energy, that sounded a "bit" too rich, so they added:

‘‘It’s a multi-billion barrel opportunity, and that’s a good news story. OK it’s not $20 trillion. But 3, 4, 5 billion barrel resources are virtually unheard of these days, so even stressing this number down to the minimum number the experts stress it down to, it’s still a big story.’’

The company subsequently dumped the ASX for the SGX.

Quite a scoop for the latter, but if they are still happy with their "catch" remains doubtful, since Linc Energy went into voluntarily administration last week:

Linc, which once boasted a market value of $2 billion when listed in Australia, was worth $US15 million when its Singapore-listed shares last traded on March 24. Former Australian listed market darling Linc Energy has entered voluntary administration with the oil- and gas-focused company buckling under an ongoing debt restructure and recapitalisation.

The above story shows the danger of those "consultants", especially the kind who come up with rosy valuations, without putting in one cent of their own money. Even Genting apparently believed in the story, they owned 10% of the shares of Linc. It also shows how quickly the fortunes of highly indebted commodity companies can change.

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