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Current LNREF Stock Info

Lonestar Resources (OTCQX: LNREF, ASX: LNR) is an oil and gas company in Fort Worth, Texas, focused on acquiring and exploiting the Eagle Ford Shale. The company has doubled its acreage on a compounded year-over-year basis since 2012 and is listed on both the Australian Stock Exchange (following a January 2013 merger with Amadeus Energy) and the U.S. based OTCQX since June 2014. The latest listing provided access for American stockholders to trade shares in American dollars.

Lonestar announced results from its two most recently completed laterals in the Eagle Ford in a company press release on September 30, 2014. The two wells in Brazos County of the Eastern Eagle Ford combined for 1,476 BOEPD, or 778 and 698 BOEPD, respectively. Lonestar holds 100% working interest in both wells with an average net revenue interest of 78.2%. Three additional wells in the region have been drilled to depths ranging from 13,060 feet to 14,346 feet and are awaiting hydraulic fracturing. Out of these five total wells, only one was listed as a proved undeveloped location in Lonestar’s 2013 year-end report.

“Accordingly, we believe that the 2014 Eastern Eagle Ford drilling program should have positive implications for Lonestar’s Proved Reserves base at year-end 2014,” said Frank Bracken III, Managing Director and Chief Executive Officer of Lonestar, in a company statement.

Lonestar’s Learning Curve

The two newest wells are higher than the rates on its western Eagle Ford acreage in Dimmit County, which included volumes of 507 BOEPD, 440 BOEPD and 333 BOEPD in its Q2’14 release. Three additional wells in the region produced an average of 379 BOEPD. Management referred to its Central Eagle Ford locations as “1,000 barrel per day territory” in the company’s Q2’14 conference call.

The three wells awaiting frac stimulation in the Eastern EF are expected to come online in November 2014 and will contribute to volumes in the current fiscal year. The two Brazos County wells reached total drilling depth of 14,000 feet in an average of eight days. The latest press release said, “These results provide confidence in the Company’s forecasted 2014 exit rate of 6,500 to 7,000 BOEPD.”

Gathering Acreage

Lonestar is maintaining its $135 million target in capital expenditures for the drilling program, which aims to drill 21 wells per year. Its acreage position, on the other hand, continues to expand.

Lonestar held roughly 23,000 net Eagle Ford acres at the end of May 2014 and has added to its position through a handful of small acquisitions throughout its three identified Eagle Ford areas. That number grew to 25,497 net acres by July 31, 2014, and surpassed the 30,000 acre mark in August – its most recent update. Management’s plan is to “build out these positions to a significant mass and scale,” as said in its Q1’14 conference call.

Management’s comments have also changed quarter over quarter. In Q1’14, Bracken said: “I think 40,000 acres is a number that yields real materiality to the market. This is a reminder it has always been a goal to build a company of consequence. But don’t think the transactions of that size will interfere with our strategy.”

That number was nudged upwards in its Q2’14 call. “Our view is that between 40,000 and 50,000 acres gives you the best of both worlds,” said Bracken. “It allows you to be big enough to attract a new basin entrant and also not so big that an existing player couldn’t tuck you in as an acquisition.”

Results from Neighbors

Apache Corporation (ticker: APA) is the largest E&P with significant acreage in Brazos County, nearby Lonestar’s Eastern acreage. Apache referred to the region as an emerging play in its latest earnings call and had spud 26 wells to date. The wells are beginning to come online, with 24-hour IP rates registering 987, 906 and 1,220 BOEPD among three completed wells. More results are expected at the time of its third quarter earnings release.

Apache management said the company will increase its rig count to ten in the area as a result of the “strong results and tremendous land position,” which spreads across 200,000 net acres.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.