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LGO Energy (LSE: LGO) has become one of AIM’s most followed

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LGO Energy (LSE: LGO) has become one of AIM’s most followed

Post Thu Aug 13, 2015 5:17 pm

LGO Energy (LSE: LGO) has become one of AIM’s most followed companies over the past 12 months. Investors have been drawn in by LGO’s progress at its Goudron oil field in Trinidad, where production currently stands at around 1,000 barrels of oil per day (bopd).

However, despite an extensive drilling program, LGO’s oil production has hardly increased over the past year. At the end of September 2014, LGO’s management announced that the group’s oil production had reached a record 1,080 bopd, with

“… further increases expected in due course as new wells are drilled, completed and brought online as part of the Company’s development plans in Trinidad.“

But these increases have so far failed to materialize.

Steady production growth
At the end of last year production briefly surpassed 2,000 bopd and averaged 1,685 bopd for the month of December. However, current year-on-year production figures show only moderate growth, even after including potential production from new wells.

A recent press release from the company announced that group oil production averaged 951 bopd during the second quarter 2015. Still, this figure doesn’t fully reflect LGO’s current production. Production numbers from four additional wells only brought online at the end of the period were not included in the end-of-July update.

Management intends to update production guidance once all seven new wells completed during 2015 wells have been brought online. The four new wells, not included in current production figures, are labeled GY-672, 673 and 674. LGO’s 2015 drilling programme has been highly successful. All wells drilled have encountered hydrocarbons and LGO is nearing the end of its drilling programme with one well left to be drilled this year.

When tested, GY-674, in particular, delivered a natural flow rate of approximately 240 bopd, and LGO estimates that the well could achieve an absolute open-hole flow rate of approximately 500 bopd. Simply put, the additional production from these wells could increase overall group production by more than 25%.

Is LGO set for the big time?
The key question is, will LGO ever be able to make it to the big time? Well, the company has all of the tools needed to maintain growth at its disposal.

Management announced earlier this year that the estimated oil in place at the Goudron field in Trinidad has increased by over five-fold, to 805m barrels of oil after a new independent review was carried out. Moreover, group oil production is steady, and LGO has the finance in place to fund its development plans. Specifically, the company signed a $25m complex pre-paid swap facility with BNP Paribas during March.

$11.8m has already been drawn from this facility to fund the seven new Goudron wells and upgrade the field’s oil handling infrastructure, and $13.3m remains to fund LGO’s future development plans.
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Re: LGO Energy (LSE: LGO) has become one of AIM’s most follo

Post Thu Aug 13, 2015 8:34 pm

Gunvor Group Ltd., the commodities trader looking to shift away from Russian crude, is interested in the African assets of insolvent oil explorer Afren Plc.

Gunvor has until Aug. 17 to submit an offer for one or more assets, Blackstone Group LP, the financial adviser to Afren’s administrators, said in a letter addressed to the trading house obtained by Bloomberg News.

Afren, whose operations in Nigeria include the 28,000-barrel-a-day Ebok field, filed for bankruptcy last month after failing to restructure an outstanding $863 million of bonds. Gunvor, among global commodity traders snapping up physical assets to complement trading operations, is cutting back exposure to Russia following European and U.S. sanctions.

Seth Pietras, a spokesman at the trading house, declined to comment. New York-based Blackstone also declined to comment.

Based in Cyprus with major operations in Geneva and Singapore, Gunvor already owns two refineries in Europe and has said it’s seeking to purchase mines, oil fields, processing plants and pipelines on four continents.

The firm has been reorganizing since Gennady Timchenko sold his 44 percent stake to fellow co-founder Torbjorn Tornqvist a day before being sanctioned by the U.S. for his ties to Vladimir Putin. Gunvor has denied any links to the president of Russia, where it was once a dominant crude trader.

Tornqvist said in a 2013 interview that Gunvor was scouting for oil assets, including in Nigeria, as valuations dropped.

The slump in crude prices has piled pressure on exploration companies as cash dwindles. Afren’s troubles multiplied last year when it was forced to fire its chief executive officer and chief operating officer for gross misconduct following a probe into unauthorized payments.
The Sunday Times reported Aug. 9 that Blackstone was hoping to sell Afren’s biggest assets by the end of this month.
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Re: LGO Energy (LSE: LGO) has become one of AIM’s most follo

Post Thu Aug 13, 2015 8:35 pm

Sirius Minerals PLC Vs Rare Earth Minerals PLC: Which Is The Better Buy?

For investors in the mining sector, 2015 has been very challenging. Commodity price falls, a weak outlook for demand and declining consumer sentiment have combined to cause share price falls across the industry. As a result, many investors are understandably nervous about investing in the sector.

Add to this a fear regarding smaller mining stocks and their financial outlook and it is perhaps surprising, at first glance, that Sirius Minerals (LSE: SXX) and Rare Earth Minerals (LSE: REM) have been able to deliver a rise of 64% and a flat performance, respectively, since the turn of the year. After all, a number of smaller mining companies have come under intense scrutiny from investors who are concerned about the financial outlook while prices for most commodities remain relatively low.

Bright futures
However, in the case of Sirius Minerals, 2015 has been a superb year. It has gained approval for the potash mine near York and, while there is still a long way to go before it begins to generate revenue, its prospects remain bright. For starters, the crop studies which are being carried out on the polyhalite fertiliser that it hopes to sell are progressing well and, with the company sounding out potential buyers, it could experience strong demand in the medium to long term.

Similarly, Rare Earth Minerals also has a very bright future. Unlike Sirius Minerals, it has multiple locations and, as such, may offer greater diversity in case there is disappointment with one or more projects. And, with demand for lithium set to rise at a brisk pace over the long run as the world embraces more renewable forms of energy production, it appears to have excellent long term potential to post strong sales and profit growth.

Significant challenges
The challenges for both companies, though, remain significant. In the case of Sirius Minerals, it has not yet put in place financing for its potash project and, with investors becoming increasingly wary regarding the outlook for the wider mining sector, it could find it difficult to raise the £1bn+ that is estimated to be needed to developed the mine.

Similarly, Rare Earth Minerals has yet to fully complete its pre-feasibility studies at the crucial Sonora lithium project and, as a result, its appeal as an investment could be subject to major change in the short run if news flow disappoints.

High risk, high rewards
Clearly, both companies are towards the extreme end of the risk scale. However, they both offer high potential rewards, too. And, while the outlook for both companies can quickly change, at the present time Sirius Minerals seems to be the more appealing opportunity. That’s because obtaining finance for a project with such strong future potential should be achievable. Certainly, it may not be easy, but it appears to be unlikely that a lack of finance will hold it back and, with demand for potash being high and crop study results being impressive, the path to profitability may prove to be relatively smooth.

And, while Rare Earth Minerals also has huge potential, its short term outlook is highly dependent upon news flow regarding the aforementioned pre-feasibility study, which is very much a known unknown and could be positive or negative. Therefore, while very risky, Sirius Minerals may prove to be the stronger performer of the two.
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