Lotus Creek

LTC released year-end reserves and showed PDP, 1P, and 2P NAVs of $2.26, $2.93, and $4.61 respectively. Operationally things are going well and the company has increased its 2026 average production guidance to 3,600–4,000 boepd. LTC has done well since our first mention and it is tracking well. With only 40 million shares out, there's a lot of per-share torque in this name. I think LTC has the ability to source and generate new, profitable, "bite-size" projects, so I'm content to own a piece – especially given what's going on with oil prices. I view LTC as a viable "up and comer" in the junior oil space that could see market interest grow as it executes.

LTC is a junior oil that we've discussed before with creative and nimble management that is developing a quality oil play at Wilson Creek in the Belly River formation. The company says that it has 30+ locations in the project and that it has run rate cash flow of something like $35-40 million per year. With a market cap of about $90 million and net debt of maybe $8-10 million, LTC trades at something like 2.5x 2026 EV/CF. That's certainly not expensive, but there is some risk that future Belly River wells could show more variability in flow rates (i.e., lower) than what has been seen thus far. LTC also maintains exposure to the Cold Lake heavy oil fairway in the background as a "free call option". I've owned LTC since the $1.35 range and I added to it recently around $2.20 which I view as a "fair" value at worst. I've chosen LCX as my "small/micro cap growth" story, but if I were to see LTC get a new asset or new play that I liked, I would take a hard look at adding further to my position in it. LTC and LCX have many parallels in terms of their tight share structures, entrepreneurial management, and clean balance sheets. I had a call with CEO Kevin Johnson late last year and I liked him and his approach and outlook enough to open a position, so this is definitely a name that I won't forget about. Should it get punished on one set of weak Belly River wells, if that ever happens, I might think about stepping into this one in greater size. LTC has just 40 million shares outstanding, so if the company can keep dilution to a minimum, the per-share leverage for shareholders could be significant if management adds more growth wedges (i.e., assets) to the company.

No change here. LTC continues to drill its Belly River play which gave it a huge production bump in 2025. The company releases monthly updates on its website that all shareholders should read and I don't see anything that I don't like. It's not a huge position for me, but I'm very happy to hold a small piece to see what LTC turns into – and so far I like their approach, and their results.

Lotus Creek continues to garner more attention with its top-quartile Belly River light oil play. Six wells are planned in 2026 with a projected Q4 2026 exit rate of 4,000 boepd (77% oil).

The stock is cheap and provides good leverage to oil prices with its tight capital structure. As small cap oil holdings go, I like what the company is doing and I like the team. LTC saw a step-change in production in 2025 and seems to be indicating that it can hang out at the 4,000 boepd level with modest capex.

I think this should be trading in the $2.00–2.50 range with a little more attention, so we'll see.

This is a small cap Alberta energy story that I own some of thanks to some smart friends of mine who pointed it out a while back. The initial well results from two wells into LTC's Belly River play at Wilson Creek, which offsets successful wells by Tourmaline, showed average per well productivity of 850 boepd (83% light oil and NGLs). Two more wells are planned into the play before year end, and these wells take less than ten days to drill. I expect some variability in the wells as LTC chews through perhaps as many as 40-60 locations, but this is going to be a nice piece of business for LTC given the range of expected flow rates and production mix. LTC is the stub of what was once Gear Energy. In its day, Gear was primarily a heavy oil play that just never really caught the markets interest after falling from grace some years ago. I had a call with LTC management earlier this year and was impressed by their professionalism, approach, and general philosophy of building value for shareholders by going after plays that are too big for the larger players — but just right for a minnow focused on growing free cash flow. I own some from the $1.35 level and there are only 40 million shares out, so at today's price, the market cap hasn't really moved much despite the news out of Wilson Creek. Guidance for Q4 2025 average production is 3,000-3,400 boepd and the production costs are good. LTC has net debt of $6.5 million as of the end of Q3 which I view as immaterial relative its current production. The exit rate for 2025 could easily be in the 4000 boepd range. At the current share price, the enterprise value is $56 million (the market cap) plus $6.5 million, (the net debt), for a total of $62 million. That is for what I said might be an exit rate of circa 4,000 boepd. That's $15,500 per flowing barrel. The average EV/boepd valuation for the non-oilsands group is about $30,000 per flowing barrel. That means LTC trades at half the average "ultimate ball parking" number, which means that an eyebrow must be raised by someone like me. Granted, I'm picking an exit rate, but remember that the exit rate is only after four wells into the development of this play. LTC should grow its cash flow quickly as it drills more wells, and I think that management is innovative enough to do the work to capture the pools that others are overlooking. Not a lot of teams do this kind of prospect generation work and the Western Canadian Sedimentary Basin is a big sandbox. For now, LTC can reinvest its cash flow into a very interesting development project and grow the free cash flow potential of the business. Reserves early next year should be interesting with the low share count and the new status of Wilson Creek as a discovery. At this kind of a discount, and with this tight capital structure, I have to have this foal in the stable and see how things develop.