Stock Alert for Lucas Energy Inc. (LEI)
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    Top Energy Stock; Lucas Energy Dips 7% after Surging on Completion of the Second Eagle Ford Well

    Shares of Lucas Energy Inc. (AMEX: LEI) dropped 7% this morning after surging 79%  yesterday after the company announced the completion of the second Eagle Ford horizontal well in Gonzales County, Texas. The Hagen EF No.2H well is expected to be put on production in a few weeks and the company anticipates it to meet or exceed expectations of 500 barrels of oil per day (BOPD). By the end of the day nearly 21 million shares changed hands and the stock price hit $3.75; the 90-day average daily volume being 0.14 million shares.

    The company previously announced that its first Eagle Ford horizontal well, Hagen EF No.1H, has tested as much as 350 BOPD of light sweet crude during the flow back period. To date, the Hagen EF No.1H well has produced more than 2,600 bbls of oil. LEI holds a 15% working interest in the two Hagen Eagle Ford wells, operated by Hilcorp Energy Corp. If the two wells perform as anticipated, then the company’s net production would increase by approximately 150 BOPD before payment of royalty. That is LEI could more than double its current oil production rate.

    Besides the production hike, the company’s results are likely to get a boost from triple-digit oil prices. The political instability in Libya and the Middle East, as well as the concerns that turmoil may spread to Iran propelled the spot oil prices in New York to nearly $103 a barrel.  According to data from IHS Global Insight, West Texas Intermediate (WTI) spot oil prices could average $88 per barrel in 2011 and $95 in 2012, up from $79 in 2010. However, currently the market is viewing oil prices in the range of $95-$96 a barrel though the first half of 2011.

    LEI is an independent oil and gas company, with approximately 19,200 gross (14,200 net) acres of oil and gas leases, primarily in the Gonzales County and Wilson County, Texas. The company’s strategy is to acquire, revitalize and develop undervalued and underperforming oil and gas properties. LEI owns oil and gas interests in the Austin Chalk formation (proved and producing), Buda formation (proved and producing), and Eagle Ford Shale formation (proved and undeveloped).

    The company operates more than 50 producing wells that produced an average of 193 gross and 106 net BOPD during the nine months ended December 31, 2010. In total, LEI holds interests in more than 80 producing, shut-in, and previously plugged and abandoned wellbores.  The total proved oil reserves totaled 2.0 million, which included 73,010 barrels of developed producing reserves, 63,540 barrels of developed non-producing reserves and 1,833,680 barrels of proved undeveloped reserves. LEI also had 11.8 million cubic feet of developed producing gas reserves and 19.4 million cubic feet of developed non-producing gas reserves.

    Revenues for the first nine months of FY 2011 increased 65% t0 $2.2 million compared to $1.3 million in the prior year. The increase in oil volumes sold due to acquisition of seven wells along with production from eight successfully completed wells during the current fiscal year was responsible for the revenue spike. In addition, the company’s revenue was positively influenced by oil price growth in 2010.

    The company has also reported a net loss of $2.5 million ($0.19 a share) during the first nine months of fiscal 2011 versus a loss of $1.3 million ($0.12 a share) during the similar period of fiscal 2010.

    Going forward, the company is well positioned to capitalize on growing production, strong oil prices and accumulated acreage with solid proven oil and gas reserves. The company’s current agreement with Hilcorp Energy Corp., one of the largest privately owned oil and gas companies in the United States, allow for an accelerated development of its Gonzales county acreage without significant capital spending in exchange for cash consideration a 15% working interest. The first two wells have been already drilled and prepared to be put on artificial lift in the near future. Accordingly, the company reported that it would report greater revenue, cash flows and net proved producing reserves in the coming quarters.

    LEI has also received approximately $9 million in cash from Hilcorp Energy for the first two wells and plans to continue leveraging the joint venture mechanism as a way to reduce risk involved in well restoration and to raise capital without diluting shareholder equity.

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