The importance of Trinidad for Range(RRL) and Lenigas(LGO).

 I made the call on twitter to buy LGO at 2.5 and RRL at 1.2, some found this strange given the recent rise of LGO. Off the back of the LGO rise to 2.5 once I had invested in there I did the obvious and looked around for similar companies that might make the same leap forward…

The question though is why did LGO leap forward and why was it still under valued at 2.5 ?

Well I am pretty sure its got sod all to do with Mr Lenigas. In truth they were looking for 60bopd from the well which would have been nice and sustained a 1.5 to 2.0p share price. However what they actually found was 240(300+ unrestricted), high pressure, top quality heavy oil.

More importantly to the markets this was drilled, assessed and into production in just over one month. This is an incredible achievement and will add directly to this year’s bottom line.

So the key factor was the quality of the field and the ease of the asset into production. For me this led immediately to the other owner of the key resource targets Range Resources(RRL).

RRL at the time had risen upto 1.2 but hadn’t really taken off as it still had a market cap below that of LGO.

RRL has far more assets than LGO both within Trinidad and around the world. With well timed news that the company is now virtually debt free, with the bulk of the assets intact a significant recovery play could well be on the cards.

For RRL, if it can replicate the drill success of LGO with a single drill it will bring a level of surety to its recovery back to a mid player.

As most know, the problems at RRL really stem from the awful decisions of PL. His failure to implement a successful plan for Trinidad, failed exploration around the world, woeful control of costs and one of the final acts; the developed of a crap team of drillers and drill equipment to support in house drilling at Trinidad. Thankfully new management have been addressing this by employing more experienced drills, better training, refitting the rigs and actually ensuring that the in house team is at last fit more purpose.

LGO have shown what can be achieved if the drilling and exploration is done well, this won’t be lost on RRL and I would expect RRL to capitalise on this in the coming week, they no doubt thought to drill in peace and quiet and then surprise the market, but this isn’t the correct strategy now.

So for me the potential of Trinidad is pretty clear it can support a couple of 500m Mcap companies each producing say 10K BOPD in time quite easily. The chances are that one of the companies at least will achieve this over time, so an investment in both at the current low levels would both increase my chances of a significant win and the potential reward…