Why I brought LGO at 2.5p

I am sure we’ve all heard the saying, don’t buy on a spike…..well I did today and I am very happy thank you.

Firstly a bit of background. LGO is an oil producer with various assets, that specialises in the underdeveloped Trinidad oil fields. These oil fields are historically low volume producers and quite old. They are shallow in nature. Previously LGO concentrated on workovers i.e trying various techniques to try and up the older existing holes from 1 BOPD to maybe 5 or so….. Big Deal.

I can remember saying on the LGO board when this was started that I thought it a total waste of time and money and that I wanted to see the drilling of the deeper targets. To be fair to LGO it was always in the plan to do this.

Fast forward and LGO are now drilling the deeper targets  of the Lower Cruse, whilst also encountering 270ft of net pay oil in the shallower targets. Improved extraction and filtering techniques should give a sensible production already from GY-665. Drilling into the Lower Cruse should enhance that BOPD production to similar levels if not higher than GY-664. GY 664 was drilled last month and was already confirmed as a 240 bopd producer under restricted flow and above 300, if some of the restrictions are removed.

The plan is to drill 4 holes from the GY-665 drill pad at various angles.

LGO currently at 2.5p as an MCAP of around 60m, so what is it worth ?

LGO has planning permission to drill 30 new holes, although atm not the finance, so lets leave that aside for now. If we just focused on the near term i.e next couple of months, we have 5 holes in total.

664 = 240BOPD

665 = likely 250BOPD

666,667,668 all from the same pad and likely to be similar to 665.

This gives us an easy 1200BOPD in the near term. At $50 a barrel profit, that’s $60,000 a day in profit. For 300 days a year we get $18m a year profit from just these 5 wells. At a multiple of 10 times profit that’s £110m a year MCAP so a doubling of where we are now with minimal risk. Throw in the exists assets and the other drills planned for later in the year and its quite likely LGO will start to see an MCAP of £150-200m by the end of year.

Sounds far fetched, but all LGO needs to do continue drilling how its drilling.

Well done to those that brought and held at .7 or .8. Focus on the figures and the SP will take care of its self over time….