DeepValue Signals

$LCX.v #energy $CL $XLE #oil If you like special situations + aligned management + oily beta… this one deserves a look before and after November 20th. Why November 20th? Because you literally get C$0.90 per share handed to you. What matters is the stub you’re left with after the cheque clears. Lycos Energy came public through a 2022 RTO (Samoth Oilfield + Chronos Resources + a privateco) and actually started executing. 2023 was the tell: production up triple-digits year-on-year, reserves up >130%, NAV per share up ~40%, and a clean, focused heavy-oil footprint built across central Alberta. Fast-forward to late 2025: they sold a C$60m asset package, return C$47.9m to shareholders (the C$0.90), and move into “Lycos 2.0”: a smaller but much cleaner heavy-oil growth platform with real runway. Why I like this one? 1) A lean heavy-oil producer + a C$0.90 return of capital + due-bill trading into November 28 + true ex-div only on December 1 means there’s a decent chance the stub is mispriced once the fast money exits. 2) Record date is November 20, the payment goes out on November 28, and due bills drop on December 1. If you buy any time up to the payment date, you still get the C$0.90. It creates a short window where you’re essentially buying both the cash and the future stub at the same time. 3) This is not a wind-down. You still own producing heavy-oil assets at West Lindbergh and Moose Lake, and there’s a multi-year drilling runway on those core areas. The plan is to restart drilling in January 2026, funded by a mix of sale proceeds and operating cash flow. 4) The RTO created the platform. 2023 proved they can execute rather than just “own assets.” They’ve grown reserves, increased NAV per share, expanded the land base, and recycled assets through acquisitions and dispositions. This isn’t a single-hole discovery story; it’s a proper operate-and-optimize model. 5) Lycos is basically pure Canadian heavy oil in central Alberta. If you like the long-term setup in WCS and heavy oil, this is a clean way to get that exposure without gas/NGLs muddying the picture. 6) CEO Dave Burton and COO Kyle Boon both come out of Wild Stream / Raging River. Same basins, same “build -> grow -> monetize” playbook they’ve run before. You’re backing people who have already done this in Western Canada. 7) Burton owns roughly 2.9% of the company and the team holds meaningful equity overall. It’s not ultra-high insider ownership, but it’s enough to ensure management participates if the share price works. 8) At the end of Q3 2025, exit net debt was about C$11.8m (0.3× annualized AFFO). After the C$60m North Disposition, roughly C$9m went to debt reduction and C$47.9m is being returned to shareholders as the C$0.90 ROC. Net result: they enter 2026 with very low net debt and a C$50m credit facility available. In simple terms: almost debt-free and still flexible. 9) They have a normal course issuer bid in place. In a ~C$70–80m company, using free cash to retire shares genuinely moves per-share metrics. 10) Big-four auditor, NI 51-101 reserve reporting, full MD&A and regular newsflow. For a junior, it’s relatively transparent and straightforward to follow. Q3 2025 financial (released yesterday) | How did they actually do? Production in Q3 averaged 2,958 boe/d (99% oil), down 39% year-on-year. Current production post-sale sits around 1,700 boe/d. On the surface it looks like a steep drop, but it’s mainly a portfolio choice: they sold higher-cost barrels and deliberately kept capital spending low while reshaping the asset base. Adjusted funds flow came in at C$9.6m versus C$17.0m in Q3 last year. On a per-barrel basis, AFFO was C$35.12 versus C$38.22 (only about an 8% decline). Even though the company is smaller, cash generation per barrel remains strong. Net operating costs dropped to C$15.48/boe from C$22.08/boe last year (roughly a 30% improvement). Operating netback including hedges was C$40.67/boe versus C$42.11/boe. That’s exactly what you want to see in a “shrink to grow” reset: fewer barrels, better barrels, better margins. Balance sheet after the deal Q3 exit net debt was C$11.8m (0.3× annualized AFFO). From the C$60m disposition, C$9m was used to pay down debt and C$47.9m was allocated to the C$0.90/share ROC. After the payment goes out, they’re effectively running with minimal leverage and still have the undrawn C$50m facility they can use if needed. Risks - Commodity and differential risk: this is concentrated heavy oil, so WTI/WCS swings matter. - Single-region small-cap volatility: the stock can move around on modest volume. - Execution post-ROC: Lycos still has to prove Lycos 2.0 can grow and compound the remaining business after returning the C$0.90... Catalysts - Trading behaviour around November 20 (record date), November 28 (payment date), and December 1 (when due bills drop and it trades ex-ROC). - 2025–26 drilling results from West Lindbergh and Moose Lake once they restart the program in January 2026. - How aggressively they use the NCIB and whether they add any bolt-on deals on the new, cleaner base. So... If you like special situations + aligned management + oily beta, $LCX.v deserves a look. Before November 20 you’re effectively buying into a C$0.90/share cash return. After November 20, what you own is the stub; a cleaned-up, heavy-oil producer with low debt, real drilling inventory, and a management team that’s run this playbook before.