Why invest with LGX Energy now?
LGX Energy ("LGX") is positioning to be the next big Illinois Basin oil and gas producer driven by the following:
- A 130 well drilling program is planned in a proven oil trend called the Terre Haute Reef Bank, using advanced 3D seismic to develop new oil fields.
- LGX has invested heavily in identifying with seismic data, over 60 miles of major faults known to be oil productive. LGX is the first company to deploy advanced 3D seismic ahead of drilling wells in this oil trend.
- LGX has proof of concept drilling on 3D confirmed oil prospects for lowering risk in finding large reserve oil deposits. A new 3D seismic field discovered by LGX in 2025 with 2 initial wells, is estimated to have 400,000 barrels of producible oil reserves from just one of several pay zones drilled. This field is the first of several new undeveloped oil fields identified with an initial 8 square miles of 3D seismic acquisitions in Clay County, Indiana.
- LGX is launching a large leasing, 3D seismic and drilling program targeting multiple large reserve oil formations. The results are expected to build cash flow and producing oil reserves quickly, aggressively growing the value of LGX shares and shareholder value.
- Across Clay County, Indiana, just one of 6 targeted counties where LGX holds strong, seismic based, drilling prospect inventory, there are 10 formations down to depths of 4000' prospective for large reserve oil production.
- Large, new reserve discoveries are expected to be common, with great potential to dramatically increase returns to shareholders beyond what is planned.
Why is now an optimal entry point at $1.50 per common share for Investors?
LGX shares are priced reasonably, given the projected rapid growth of the company and ownership of leasehold, minerals, and drilling prospects that are low risk in nature. LGX expects to deliver a strong increase in shareholder value in the next year.
Who qualifies to invest and how is this different from drilling fund investments?
Common shares at $1.50 per share are available to accredited investors only. LGX is a C-Corporation and as such shareholders are shielded from the liability in wells required for investors in drilling funds to receive tax write-off. Shareholders in LGX are expected to have great benefit in shares purchased from the rapid rise of earnings and proved reserves expected with LGX's Indiana drilling program.
With strong prospects for new fields and wells planned for drilling, LGX expects to soon be positioned for a public market with its stock at a strong premium to this price. What is the planned liquidity event and timeline?
LGX expects to be funding drilling completely from its production cash flow in 2027. And is planning for a clear path to liquidity in a public market for LGX shares within 3 years on the strength of its aggressive drilling program and anticipated, rapidly increasing cash flow.
What are alternative exit strategies for shareholders to an IPO?
Alternatives to an IPO event for shareholders include:
- Periodic distributions in the form of shareholder dividends from excess cash flow in the event a public market was not favorable to the company and its shareholders.
- Merger with a larger public company. LGX believes our large prospect inventory will be very attractive to existing public companies looking to expand their balance sheets.
- Strategic sale to Illinois Basin aggregator.
- PE recap or royalty monetization.
How is IPO valuation expected to be determined?
IPO valuation will be determined on a multiple to company earnings along with LGX's impressive drilling prospect inventory and other assets. There is an anticipation of large reserve discoveries in our drilling program (not modeled in pro formas) which will have potential to catapult LGX into public markets quickly.
What distinguishes LGX from other traditional operators in Indiana?
LGX brings to the Indiana oil fields an approach to drilling for oil that allows significant advantages over other Indiana operators. Below is a summary of these advantages:
- LGX is positioning itself to be a large operator of wells in Indiana. Most of the current operators are small, underfunded oil and gas companies. LGX is laying a foundation for becoming a major oil and gas company. This is demonstrated in LGX's approach with all aspects of selecting oil prospects to drill and the field operations. Below are some examples:
- LGX will not drill wells without 3D seismic data and is the first Indiana operator to drill only with 3D seismic. LGX is confident in a high success rate of drilling with 3D seismic.
- In 2021 LGX acquired more than 600 miles of 2D seismic data across 6 counties. This 2D data had been acquired prior to the collapse in the economy in 2008 and most of the prospects associated with the 2D seismic have not been drilled. Having a large inventory of drilling prospects at the ready, allows immediate implementation of 3D seismic acquisitions. The success of our geoscience team in reprocessing 2D seismic and identifying many undrilled oil prospects has immediately put LGX on the map as a larger operator with the ability to rapidly begin drilling activity.
- LGX intends to drill and develop all formations, shallow and deep, that have potential in our prospects. Typical Indiana operators tend to develop 2 or 3 of the first pay zones they encounter without drilling deeper. With 3D seismic, LGX can see the stacked pay zones and potential oil traps down to the basement, and will construct its drilling programs to favor aggressive development of the shallow oil pays, but to also drill and develop deeper horizons for oil as a part of its drilling programs.
- LGX has an experienced group of professional persons with a strong history together, to manage all phases of development, from accurate 3D seismic processing to land acquisitions to drilling and production of wells.
- LGX utilizes rigs and crews that follow high standards of drilling practice and primarily uses drilling companies like LWI Drilling (formerly Les Wilson Drilling) out of Illinois, which has larger rigs, 4 man crews and can operate 24 hours a day. Typical Indiana operators work with daylight only drilling rigs and smaller crews.
- LGX requires safety certifications from all persons working on our wells along with full insurance coverage. Our Field Supervisor, Dale Holland, is extensively OSHA trained, with much experience in working for major oil companies, including Marathon Oil Company, TransOcean, Chesapeake Energy and CountryMark in the Illinois Basin.
- LGX installs a vapor recovery system at its production facilities along with a gas combustion chamber. The facilities are designed so there are minimal odors and open flares.
- With production facilities, we use the higher priced fiberglass tanks and poly flow lines for all production lines incoming from wells. Our facilities are set up with a central master control center with remote access. For our disposal well systems we use fiberglass pipelines and a system that is rated for higher pressure.
- LGX favors new technology that is available with electrical submersible pumps and VFD controls, instead of the mechanical beam pumps. Submersible pumps are electronically controlled and able to be remotely monitored and have production advantages with automatic fluid level and pressure monitoring.
- LGX deploys on-site wireless telemetry to enable remote monitoring of all systems for pressure, production rates and well control.
How does 3D seismic reduce risk in drilling wells and increase the average oil production rates and reserves per well?
Advanced 3D seismic technology reduces exploration risk and increases production rates in several ways.
- Advanced recording technologies mean far less human errors in field operations.
- 3D provides high resolution accuracy and generation of clear images of pay horizons.
- Improved imaging of the reservoir reveals important reservoir characteristics such as porosity traps and orientation of faults.
- Drill sites can be positioned to penetrate the best portions of oil reservoirs.
- Drilling success is proven to be better with 3D, as the best reservoir characteristics can be targeted. Results include higher production rates and improved returns on investment.
In the Michigan Trenton oil play, which has yielded around 200 million barrels of oil to-date, 3D seismic dramatically increased success rates in drilling new Trenton oil wells. Indiana has the additional advantage of being in the Terre Haute Reef Bank, where stacked, multi-pay drilling prospects are common, and can be clearly seen with 3D.
LGX employs the latest acquisition technology along with in-house cutting-edge seismic processing and interpretation techniques. These all combine to cut costs, improve efficiency and provide the very best drill sites on a prospect.
LGX Energy utilized 3D seismic technology to make a new oil field discovery in 2025. What is the expectation for additional new oil field discoveries?
Success in drilling new oil fields is projected to be very high. LGX pro forma modeling projects a 65% success rate for the first well in new Devonian 3D prospects and 50% success rate for lower formations (Trenton/Black River/Knox). The risks in drilling are gauged to be very low, especially given the proof of concept demonstrated with LGX Energy drilling efforts in 2025. 3D seismic will help pinpoint the optimal locations to drill for oil and greatly reduce drilling of poor producing or non-productive wells. LGX expects to replicate the Fritz Field 3D success many times over, with most of its drilling program being development wells in newly discovered fields. The overall success rates projected for LGX's 130 well drilling program for shallow Devonian wells is 90%+ and overall lower formation drilling success projected at 80%+.
How does LGX reduce traditional "wildcat" risk?
- LGX does not consider any of its wells to be drilled in the proven oil trend of the Terre Haute Reef Bank to be wildcat wells.
- No drilling will be conducted in Indiana by LGX without 3D seismic.
- Based on 3D seismic data collected over producing oil fields, LGX will be drilling new fields that exhibit similar structural and reservoir seismic characteristics to producing oil field analogs.
- LGX will typically hold working interests in drilling prospects as follows:
- Shallow Devonian Oil Fields - up to 80% working interest funded by LGX.
- Deeper exploration wells - 25% to 40% working interest including carried working interest by outside funding partners participating at terms.
- Note that participation by outside funding partners will typically be in very limited areas of development, with LGX holding drilling rights to most of its targeted areas.
A typical new oil field discovery will give much opportunity for development well drilling. The proportion of development wells, to first exploration wells in an undrilled 3D seismic prospect, will be high as LGX will be drilling development wells aggressively to build cash flow and proven reserves.
There are several lower formations, when drilled with discoveries of oil, hold transformational potential for shareholders in LGX to increase shareholder value dramatically. LGX plans to combine some lower zone drilling with its aggressive shallow development well drilling program, beginning in 2026.
What drilling prospects have been de-risked and what remains as upside?
LGX has an inventory of 82 drilling prospects that have been de-risked with 2D and 3D seismic data. Confirmed 2D oil prospects are ready for 3D seismic over the prospect to pinpoint the best drilling locations. Confirmed 3D prospects are approved with the best drilling locations identified. Note that most of these 82 prospects have the potential for multiple wells and pay zones. Below is a summary of the prospects:
- Developmental 3D Seismic Prospects in Fritz Oil Field (3 prospects):
- In-fill drilling for North Vernon/Jeffersonville/Geneva formations - all of which are confirmed producing formations from initial 2 oil wells already drilled. At least 5 new oil wells are expected with infill drilling. A facility with a disposal well has been built to handle oil from all wells and pay formations associated with or near to the Fritz Field.
- Evident on 3D seismic, there are stacked pay zones below the Jeffersonville/Geneva that are highly prospective for oil and can be all tested with one well bore. Oil from these pay zones will be produced into the same facility. It is likely that several wells will be needed to produce from these pay zones.
- A shallow oil pay zone called the Carper Sand is present and will be drilled and developed separately from the Jeffersonville/Geneva formations after all other wells are drilled. These Carper Sand wells will be drilled offset to other wells drilled, where the porosity and reservoir characteristics are the best, according to electronic well logs. These will be very low risk oil wells at around 1200 feet of depth.
- Michigan Niagaran Oil Reef based on 3D Seismic Prospect:
- A projected 200,000 barrel oil reef in a prime producing in the southern Michigan Niagaran reef trend is slated for drilling in late summer of 2026. 3D seismic was conducted over this prospect and it is ready to drill.
- 28 additional undrilled 3D seismic oil prospects are confirmed and approved for drilling. Leasing and filing of permit applications are in the process as needed for drilling these 3D confirmed prospects.
- LGX has 7 Devonian prospects confirmed with 3D seismic with all the same oil pays present in the Fritz Field.
- Planned for drilling in 2026 is the first 3D Chimney prospect out of 20 top rated 3D Chimney oil prospects already identified.
- LGX has filed a permit application to drill a top-rated hydrothermal Trenton oil prospect confirmed from its first 3D data acquired - the Thomas 3D acquisition.
- LGX has a strong inventory of 50 undrilled oil prospects that have been de-risked with 2D seismic across 6 counties of Indiana, where 3D seismic acquisitions are approved for pinpointing the best oil pay locations.
- 27 of these prospects have 10+ potential pay zones from the Carper Sand at 1200' through the Devonian, Trenton, and Fort Knox pay zones down to 4,000'.
- Most of these prospects have Hydrothermal Trenton fault related and structural oil pay potential.
- Includes large Salem prospect offset to a Salem oil field that has produced over 8 million barrels of oil.
In spring of 2026, LGX is planning 40 miles of new confirmatory 2D seismic to confirm many other seismic prospect leads, prior to approving the next round of prospects slated for 3D seismic.
LGX management notes that less than half of our 2D seismic data inventory has been reprocessed and evaluated. LGX holds another 345 miles of 2D seismic data still to be reprocessed and evaluated for drilling prospects with today's technology.
Additionally, we will be aggressively conducting acquisitions of new 3D seismic data. With all new seismic acquisitions in Indiana, multiple new oil drilling prospects have been identified, thus drilling inventories are expected to increase rapidly as we continue to fund seismic operations. The ever-increasing inventory of drilling prospects is a large value driver for LGX.
All prospects are in a process of being prioritized for leasing, seismic and/or drilling locations. LGX management intends to always drill on wells on a priority basis, drilling primarily lowest risk oil prospects available. Once a new discovery is made, there are typically multiple formations and pay zones to drill and develop. Development wells around discovery wells will be aggressively drilled.
With the proven historical oil production in Indiana, why are so many of the oil reservoirs still undeveloped?
Oil in Indiana has been drilled historically with random well sites and no seismic data or limited 2D seismic. Only recent 3D seismic data, processed with advanced technology, has allowed undeveloped oil traps to be seen by LGX without drilling. Success rates are expected to be high in developing new oil fields with advanced 3D seismic data.
How has LGX Energy identified so many undrilled oil prospects?
LGX Energy has acquired over 600 miles of 2D seismic data across 6 counties. In reprocessing this extensive 2D seismic data, LGX Energy is keying on proven geophysical indicators of oil in the 2D seismic data and conducting new 3D seismic operations to pinpoint optimal drilling locations in the oil traps. Currently, in addition to 32 prospects confirmed by 3D seismic, LGX has 50 undrilled oil prospects that are de-risked by 2D seismic and prime for first-ever 3D seismic. Note in the targeted counties there are 25 shallow oil fields that have produced over 30 million barrels of oil. LGX Energy believes its current prospect inventory has the potential to match or exceed the historical oil production with new drilling.
What is the expected return on investment for wells drilled in Indiana?
- Shallow Devonian oil wells (900' to 1600')
- $425,000 to drill and complete
- ~$3 Million net revenue at $60 oil price
- ~7:1 multiple on invested capital (MOIC)
- ~7 month payout of invested capital
- ~400% IRR
- $1.4 Million NPV10
- Lower formation Trenton/Black River/Knox oil wells (2000' to 4000')
- $750,000 to drill and complete
- $5 to $12 Million net revenue at $60 oil price
- ~7:1 to 15:1 multiple on invested capital (MOIC)
- ~5-6 month payout of invested capital
- 1000+% IRR
- $6 to $8 Million NPV10
What is the projected breakeven oil price for developing a shallow Devonian oil field?
Including overhead and an estimated cost factor per well for production facilities and water disposal systems, the overall breakeven price for LGX's planned 130 well drilling program is around $30 per barrel of oil.
What is the IRR projected for the 130 well drilling program at various oil prices?
A pro forma* has been created by LGX for its 130 well drilling program with 10 development wells drilled in its newly discovered Fritz Oil Field, 82 new Devonian wells, 8 Carper Sand wells and 30 new lower formation wells (Trenton, Knox and Chimney wells). The following are the returns of this drilling program at various oil price levels with the cost of projected company overhead included:
$40 Oil Price - 108% Internal Rate of Return
$50 Oil Price - 171% Internal Rate of Return
$60 Oil Price** - 243% Internal Rate of Return
$70 Oil Price - 327% Internal Rate of Return
*Available upon request
**For modeling and planning LGX is using $60 average oil price
What is the equity capital projection required for this 130 well drilling program?
LGX management believes the equity capital raise of $15M, planned for 2026, will be more than sufficient with cash flow from producing wells, to fully drill and develop 130 wells, including overhead, and very robust leasing and seismic acquisitions.
How will the $15M be deployed?
Uses of Proceeds for the equity capital of $15M is allocated as follows:
- $6 Million for drilling of shallow 3D oil prospects (est. 90% success rate).
- $250,000 for drilling of first Chimney Oil Prospect (funded largely with outside partner funds to reduce risk).
- $250,000 for drilling lower potential pay zones in Fritz Field (funded largely with outside partner funds to reduce risk).
- $1,750,000 in leasehold acquisitions.
- $2,000,000 in new 2D and 3D seismic acquisitions.
- $650,000 infrastructure and ancillary equipment.
- $1,800,000 commissions, offering and marketing costs.
- $900,000 G&A.
- $1,400,000 working capital.
Cash flow will be rolled in with the equity capital for additional leasing, seismic and drilling of wells. Early capital tranches (first 6 months) are planned as follows:
- Stage 1: $3 million
- Overhead and corporate infrastructure
- Leasehold acquisition - priority tracts
- Phase 1 Devonian 3D seismic acquisition
- Drilling 3D well locations in Fritz Field
- Stage 2: $6 million
- First Black River Chimney test well
- Expanded 3D seismic over 3-5 new prospects
- Rig mobilization - second rig activated
- Reserve engineering / third party validation
- Ramp up of Devonian prospect drilling
- Stage 3: $10+ million
- Full Devonian & Trenton drilling campaign
- Expanded leasehold across 6 counties
- 3D seismic rollout across 80+ prospects
- IPO preparation: audit, reserves, roadshow
What is the estimated potential undeveloped oil reserves at full development in the 6 county area that LGX Energy is focused on developing?
Underlying the shallow oil fields are numerous lower horizons (down to 4000') known for oil production in the region, which have never been drilled in the LGX targeted areas. From its seismic data base, LGX Energy has mapped over 60 miles of major fault systems known for oil traps in hydrothermal dolomitic zones (encased in tight limestone and sealed by shales). LGX estimates the potential lower zone oil reserves to be over 100 million barrels of oil. These hydrothermal dolomitic oil traps and lower zones pay targets can only be seen with 3D seismic data and have never been drilled. LGX Energy plans to drill its first lower zone oil prospects in limited areas with outside partner funding in 2026.
What is the production vision for LGX?
LGX is targeting peak production from 130 wells in 3 years at over 6,500 barrels of net oil to LGX per day. Lower zone field discoveries would add to this projection significantly.
Historical oil fields in Indiana have yielded large reserves (average of 300,000 barrels per field) from shallow depths of 900' to 1600'. How can these shallow oil fields with low pressure yield such large oil reserves?
Recoverability of oil from shallow Indiana oil fields is excellent due to a bottom water drive. Water from below drives oil through porous rock formations to productive wells. This bottom water drive remains steady over long periods of time. Water drive production behind the oil is the reason for large producible reserves at shallow depths. There are oil fields in LGX Energy's targeted areas discovered in the 1950's that are still producing oil today.
What is the market for oil produced in Indiana?
Indiana and the Illinois Basin (Illinois, Kentucky and Indiana together) only produce a portion of the oil consumed locally. Oil must be imported to meet supply demand, thus the markets for oil are very strong. Local refineries produce local demand for diesel fuel and other products. LGX Energy sells its oil to the CountryMark refinery in Mount Vernon, Indiana, which purchases the oil on a local index posting which includes the cost of transporting the oil to the refinery. This index typically runs $6 to $7 below the West Texas Intermediate oil price. Contrary to many oil producing states in America, Indiana has a very low oil production tax at only 1%.
What is the potential for large oil reserve discoveries?
LGX Energy is pleased to announce the discovery with 3D seismic of several major oil plays in lower formations of its targeted area. There are three lower formation plays to highlight as having high potential.
- Chimney Oil Play (3,000') - 3D seismic conducted by LGX Energy in 2025 revealed numerous large potential "Chimney" oil traps forming at the base of the Black River formation. A typical Chimney reservoir with only 40 feet of oil pay is projected to yield 300,000 barrels of producible reserves from a single well. Along major faults already identified, LGX has identified the potential for hundreds of Chimney well locations. LGX plans to drill its first Chimney oil prospect in 2026.
- Stacked oil pays below shallow oil pays are easily identified from seismic data. Yet in the targeted area of Indiana, these stacked oil pays have not been drilled below 1600'. There are at least 6 pay zones prospective for oil pay below 1600', down to 4,000' in the Knox formation (a prolific oil producing formation in the region). There is large reserve potential in the Trenton, St. Peter and Knox formations along identifiable faults known to be migratory pathways for oil.
- Of major potential along more than 60 miles of major faults identified are hydrothermal dolomitic oil traps seen on seismic but never drilled. These oil traps are narrow, elongated, fault-related traps that can only be seen with seismic data. 3D seismic is planned over these massive potential oil traps, along with drilling of new wells drilled. With LGX evaluations of 2D seismic data, there are hundreds of potential drilling locations along these faults.
Additionally, LGX Energy has shallow (less than 1,000') Aux Vase and Salem formation oil prospects in inventory. These prospects will also be drilled. There are Salem fields in the target areas of Indiana at less than 1,000' which have produced millions of barrels of oil.
What is the meaning of "stacked oil pays"?
Every shallow oil field discovery is expected to have multiple oil productive formations at both shallow and at lower depths. Along major fault systems, uplifted fault blocks have created potential structural oil traps in at least 10 prospective pay zones. The same facilities and disposal wells for shallow oil production can be used for oil production from deeper pay horizons. LGX leasehold acquisitions allow for development of all potential oil reservoirs.
Who will operate wells funded by LGX in Indiana? And will LGX have control of rigs, crews and services?
LGX has a 100% owned operating company, Adler Energy, with a professional management team assembled for oil field development. The President of Adler Energy, Shane Miller, and our Field Supervisor, Dale Holland, have a combined 65 years of experience in drilling wells and building production facilities in the USA and overseas. Oversight for LGX of Adler Energy is by Executive VP, John Miller, who has 38 years of experience in oil and gas land acquisitions and funding the drilling of over 700 wells. Adler Energy is supported by a professional geoscience group with deep experience in 3D seismic and in Indiana, and a proven track record (see PPM for bios).
With the assembled geoscience and operations group, LGX is uniquely positioned to control and manage every aspect required for successful execution of its drilling program in Indiana. A field office has been built at LGX's Clay City oil field, which is the center of several counties and LGX's drilling prospects. Near to the field office, LGX has secured a 4-acre tract of land for staging drilling rigs, well service equipment and storing pipe and other equipment needed for drilling.
LGX makes it a practice to work with service companies on a competitive bid basis, with cost estimates and budgets required for approval by LGX in advance of all major operations. Drilling and production costs are expected to be lower than current cost estimates, with LGX's 3 year, 130 well, planned drilling program, as Adler Energy management is planning to secure bids for packages of wells and not well by well.
Can LGX Energy access the rigs and services needed for a large drilling program?
Ample oilfield services and rigs are available within a 3 hour radius of the targeted areas of Indiana. As LGX Energy ramps up our drilling program, more services will set up near to our drilling activities reducing mobilization costs. In our recent seismic and drilling activity of the past year, LGX Energy has established staging areas for drilling rigs and other services, to have equipment readily available as needed.
What are the main drivers for increasing shareholder value with oil drilling in Indiana?
- LGX Energy has the advantage of a large inventory of drilling prospects from its 2D seismic data base.
- In addition, LGX has identified and mapped from its extensive seismic data, major fault systems which hold the potential for hundreds of new well locations. In the newly discovered Chimney oil play (identified with 3D seismic at base of Black River formation), LGX geoscience group estimates a potential for 300 new well locations in Clay County only.
- 3D seismic is a key requirement for delivering projected success rates in drilling. LGX has working relationships with two readily available seismic service companies, for large scale 3D data acquisitions.
- LGX has assembled a dedicated, professional geosciences team able to quickly process 3D data to prepare for drilling.
- Access to capital ahead of the drilling program is critical and up to 3-month lead times with 3D acquisitions and permitting of prospects is needed. LGX has allowed plenty of ramp up time for drilling in its planning and already has identified drilling locations from its 2025 seismic acquisitions.
What are the primary risks to the investment?
In the view of management, below are primary risks to be evaluated:
- Demand for oil and price risk: LGX believes this is a low risk over the next decade. Demand for oil, month over month, continues to increase worldwide.
- Access to capital: LGX pro forma assumes a successful equity capital infusion of $15 million. If less than $15 million is raised or comes in slower than expected, it could slow the rate of drilling planned and lessen the overall expected rates of return.
- Acquisition of leasehold: LGX holds currently around 6,000 acres of active oil and gas leases over drilling prospects. Another 30,000 acres of leasehold or more is planned to achieve the goals of LGX of not just 3D seismic and drilling but securing long-term leasehold positions over all of LGX's undrilled prospects. In Indiana, leasehold acquisition is a time-consuming process as most land tracts are typically less than 160 acres with many small acreages, sometimes less than 20 acres, with lots for single family homes carved out of larger tracts. While drilling unit requirements in Indiana per well are favorable (5 to 10 acres per well with much flexibility in how these are created), the effort and cost of acquiring leases on smaller tracts and pooling lands in Indiana will be higher than other oil producing areas (like oil producing basins with large tracts/ranches). LGX has demonstrated an ability to acquire leasehold in Indiana at reasonable terms with a current budget of $50 per acre for lease payments and $50 per acre for land and title acquisition costs ($100 per acre total cost) and believes we will be successful in securing leasehold needed. There is an unknown risk in that as more successful wells are drilled the cost of purchasing leasehold could increase.
- Accessing drilling locations above optimal targets per 3D seismic: The advantages with 3D seismic is the ability to pinpoint exactly the best locations to drill wells into oil traps. However, not always are these locations in open fields for drilling. When a location is not accessible, LGX will be required to spend an additional estimated $75,000 per well to drill the well directionally from a surface location that is not directly above the bottom hole location in the pay zone. In the modeling, LGX has estimated the drilling and completion costs for a single Devonian well to be $425,000 per well with bid pricing for our multi-well packages. This cost estimate is believed to be high for our planned program drilling with multiple rigs and multi-well drilling packages. The targeted drilling and completion price for a single Devonian, straight-hole, well in Indiana is $350,000, and $425,000 should be a price that will hold also wells that need to be directionally drilled. Thus, we left the modeling at an average price of $425,000 for each Devonian well we drill. For lower formation wells LGX is estimating the price for our modeling at $750,000 per well as an average of both straight hole and directional wells.
- Drilling contingencies: LGX is drilling in geologically faulted areas which can cause disruption in drilling and cost overruns. This risk is always present in the drilling of oil wells, especially in and around faults. While LGX has a veteran team equipped with much experience to handle drilling through faults and other challenges that could arise, for drilling and cash flow budgets, LGX builds into the drilling and completion costs a contingency line item of up to 20% for cost overruns. These contingencies were not recognized in our modeling, as overall drilling risks are considered low for Indiana at less than 4,000 feet, and cost overruns are expected to have a very minimal impact on our planned 130 well program. Time in and out of the well bore to respond to issues that can occur, are typically and relatively quick, including for repairs to drilling equipment. However, actual cost overruns could be higher than we have estimated. This is an unknown risk factor that LGX primarily addresses by having a veteran, experienced management team on the ground, that know how to respond.
- Cost of materials and production equipment: There is a risk as to future costs of materials needed for drilling wells, including the price of steel for casing and fittings, along with the impact of inflation on the price of production equipment. LGX did not model any future increase in costs for our 3 year drilling program. The last well LGX drilled in Indiana was bid out as a single well and was drilled $100,000 under budget. And the budget included $30,000 of mobilization and de-mobilization costs that will not be required when LGX is program drilling and keeping rigs active. Our current modeling for Devonian wells at $425,000 and lower formation wells at $750,000 have room to absorb some increases in costs but future cost increases remain a risk factor to consider.
- New regulation: There are concerns in the industry over increasing costs due to new regulations focused on reducing carbon emissions and consumption of fossil fuels. Indiana is a business-friendly state and holds primacy over the EPA and the severance tax on oil is the lowest in the USA (1%). The current federal Administration is pro-oil drilling, however, LGX chooses to be pro-active with its operations to go above and beyond what is required. At our Clay City oil facility LGX has installed a vapor recovery system that capture 95% of all vapors/gas from oil production to be completely combusted and consumed (not vented). This will be standard for every oil facility LGX constructs. Additionally, LGX plans to capture any natural gas produced with oil and convert the natural gas to electricity at our facilities, with natural gas fired electric generators. Electricity can then be monetized for profit, selling electricity to local users or local utilities, or used for other on-site operations such as data storage facilities or cryptocurrency mining. In the targeted areas of Indiana there are ample electric interstate transmission lines for selling electricity, as well as two blanket shale gas formations that can be accessed for additional gas reserves in support of electric generation infrastructure if needed. If the quantity of natural gas produced with the oil is large enough, LGX will consider infrastructure to sell natural gas into available pipelines, or converting natural gas to LNG or ammonia to be trucked to a market. With new regulations, there are also opportunities to gain tax credits and/or profit from carbon sequestration opportunities which can be incorporated into LGX development plans in the future. All that aside, Indiana is as favorable of a business environment as you can find in USA, however, there is the potential for changing views towards oil and gas drilling, along with new regulations coming from both state and federal governments.
How do investors participate as a Shareholder of LGX?
A subscription document is required along with an Investor Suitability form, which are included with the Private Placement Memorandum. Funding can be by wire or check directly to LGX.
What is the minimum investment?
The minimum investment required is $30,000 for 20,000 shares of LGX common stock. LGX reserves the right to waive this requirement upon request.
What is the timeline established for funding?
10 million shares of common stock have been made available to accredited investors. The shares are available subject to prior sale. Upon the full funding of 10 million shares of common stock at $1.50 per share, the offering will be closed.
