22Feb 2016

Place your bets on the LGO roulette table

LGO Energy

The ball has been spun and the dealer is about to call last bets. February is coming to an end and many invested in LGO will be hoping for a more pleasant climate soon.

At the end of November the company announced that it had reached an agreement with BNP Paribas for a holiday period in making full debt payments. This has allowed the company to continue in its pursuit of a new finance deal or alternative options through the Offer Period. With the doors held firmly closed on releasing news, the CEO, Neil Ritson knows that the company will need to change that soon. Wellford and Height were brought in to help look at different funding options the company have available to them. The success of this strategy will soon be known.

If there has been a new finance deal, then the company has been crafty in leaving it to the last minute to maximise as much production profit that can be taken in before entering a different repayment scheme. It would also be welcome news for its investors and brings confidence that the company will survive the storm of low oil prices and maintain its ambition to be a key player in Trinidad.

Given the scenario that a finance deal has been agreed, the next question would be how soon could they start drilling again? The company already owns a rig it could utilise to target the Goudron Sandstone. Results from the GY-678 well revealed it to it be the best C-sand discovery in the field to date before the problem occurred. There was a concerted effort previously to return to the thicker reservoir and there will be an incentive to look at the options available to revisit where they left off with GY-678. The only missing ingredient is money.

Without a new finance deal in place, it wouldn’t be game over yet. For the last three months the company would have been able to place money aside to keep the lights on for a while longer even with the full BNPP payments being made. The share price will suffer but those saved funds might be useful in allowing the company another spin of the roulette wheel. The Goudron field has routinely been broadcast as a low cost producer which will help ease the burden but not solve it.

Another possibility is that the company has been courting potential buyers or merger opportunities. Being a leap year, traditionally February 29th is a day where gender roles can be reversed and a woman can propose to a man. The question is, will LGO be receiving any proposals?

The only certainty there is that news can’t be far off. Positive news could help the share price move back to levels it sustained before the company ran into problems with the last well.



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