UK 17:58 Friday, 23 October 2026
Breaking news and expert analysis on fast-moving AIM and LSE listed shares
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Every time I look at LGO Energy (LGO) I wonder if I am missing something in terms of its value – currently £94 million. To me it currently looks incredibly expensive when compared to other oil producers, some of whom are at a far more advanced stage and with an awful lot more in the way of both production and reserves.
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Comments
wildrides
As usual you dont name these other companies you claim offer better value . Priced into LGO is the certainty that more drills are planned / being executed and must have a near 100% COS . If your so confident then do us a little table like the Horse Hill saga produced here to prove what you are saying . I am happy to accept your argument if you back it up with some comparative analysis proof. You must have worked the numbers to make these claims so publish or be dammed . It just far to anecdotal .
dcgc
Having made a statement saying how expensive they look you then list a number of facts about the company which in my mind substantiates the current price.Their drilling success ratio is way ahead of the norm and their production forecast for the current Goudron drilling programme greatly exceeds their original estimate.The current low oil price won`t be here for ever which when it returns to a more reasonable price will make them very profitable.The time to buy these shares is now not when the oil price has increased.I agree with you on most things but I think you have underestimated this company. PS I thank you for your advice on NBU which I sold for 70p when you first highlighted them.
Ian lilley
You do talk absolute rubbish at times Tom. How do you really see this as “way” overvalued. Hopefully you’ve got a bit more to add than the mundane guess work you’ve posted above. Seriously stick to rubbishing quindell because at the moment even thats going against you and you im sure even you realise that if all comes good with qpp, share prophets will have a readership of zip.
Mark
Gary
LGO Energy is unlike a number of oil plays on AIM. It is actually producing thousands of barrels per day already and will be quickly cash revenue positive. OK, with the world oil price decline the amount of profit made will be reduced, but that’s the same for all players.
Compared to its peers, it is a lean and well managed operation with flexibility to adapt as circumstances change or new opportunities arise. It operates in a politically stable environment and has a ready customer. Oh and its still early on in the Goudron play before the far bigger plays like CEDROS come along 2016 and on.
Now compare that to the O&G AIM train wrecks that zapped a lot of investors hard earned cash last year, on false dawns and dusters all round.
And compare that to companies that you have touted in 2014 – eg. Hurricane Energy. HUR is presently capitalised at MORE than LGO, even after its SP has capitulated and even though it is many many months away from actually getting anything out of the ground. HUR BoD have challenges that are a light year away from those faced by the LGO BoD.
When you think that mid 2014 HUR had a MCAP at around £300m you do start to wonder, where as an investor would you rather be invested? Well I did anyway, I sold my six figure holding in HUR and bought into LGO.
Lets swap notes in 12 months time – 2015 will be a very interesting ride.
Tom Winnifrith
Ian Lilley
FFS are you the most stupid motherfucker in Christendom? Look at the author. It is not me. Jeepers you are a cretin – with an IQ of minus 160.
As for QPP: Its chairman & founder has quit in disgrace and is being investigated by the FCA for insider dealing. Its shares are off by 85% and it exists only on the support of its banks and you think my credibiliity as the leading bear is zip?
When did you get your lobotomy?
Tom
Oil man
Great article, I’ve been thinking it for a while. LGO is way overvalued and the hype created by countless RNS releases is what keeps it’s share price high. It’s wells are depleting rapidly and people will start to realise this, I have a geoscience background and from what I can see their well and production management is awful. Their just keeping production high ATM but it cannot be sustained. No one has EVER drilled an onshore well in Trinidad at over 1,000 bopd and kept it there, I don’t think anyone has even drilled a well at over 1,000 bopd anyway. I hope the thousands of pi’s get their money out before the markets realise how overvalued this is, lock in your profits!
Mark
OilMan
With your qualifications I would suggest you go pick holes in the train wrecks and jam tomorrow AIM oilies out there?
Plenty more carrion to short if that is what you are into.
The 2015 O&G AIM space is about those who are producing and preferably at some kind of profit.
Anything else, regardless of the potential is going to be sat in the pit lane, burning cash as expensive directors take their salaries and nothing gets done for the next 12+ months.
LGO are lean, mean and productive. 2014 is testament to that.
And 2014 was just the warm up.
Gary Newman
Wildrides,
The piece was about LGO, hence not going into details on other companies – but two that immediately spring to mind with market caps of around double that of LGO are a couple of North Sea producers. IAE with 11600bopd, 1/2 hedged to June 2016 at $102. ENQ with over 26000bopd currently around £200 million and just left FTSE250, again with hedges until the end of 2015 at over $90. There are many other producers. As for Horse Hill, the only time I’ve ever written about that was saying that I thought it would be a flop and all the companies were over-valued, and subsequently they have dropped an awful lot since (only one that hasn’t is SOLO which i mentioned at the time as being the only one I’d consider due to its other assets – it is now double the SP it was then). PMO, TLW, VED and a whole host of other larger companies also look seriously undervalued and will see good recoveries if oil prices recover.
Mark,
I wasn’t comparing it with oil explorers when i said it looked expensive – they are almost entirely based on hype and expectation – but with other producers (such as I’ve mentioned in this post). I first tipped HUR at around 28p and it doubled (at which point i posted a sell on here with a re-buy in the mid-30s) – okay it has dropped a lot lower than that but oil was over $100 per barrel at the time. I just think it looks expensive compared to what else is on the market with oil prices at this level – obviously assuming that oil recovers to some extent.
Obviously it has been a bad six months for oil and many of those that I tipped were based on the oil price at the time – in the same way that brokers/analysts etc valued them at the time based on the same assumption of much higher oil prices than we’re seeing currently.
I certainly won’t dispute that there are a lot of bad ones on AIM and lot that will be seriously screwed with these low oil prices. It is just my personal opinion that LGO is expensive compared to some of the main market producers that have been hit very hard.
DCGC,
I have highlighted what is keeping the price up at the moment – obviously I’ve also pointed out the depletion side of things, and that they’re using equity to fund any work that they do.
I’ve never covered NBU and know absolutely nothing about them?
Oil Man,
That was exactly my thinking – it is the stream of RNSs that have kept the price up and were it not for those it would now be lower. The depletion side of things was a major factor as well – from the figures i mentioned (i notice no one is arguing with those) depletion could be as high as 350bopd for December alone.
Also worth remembering that share price is based on people’s opinion of value at that point in time – otherwise companies would trade at NAV…
Mark
Gary
I’ve just looked back at a couple of your 2014 tips on here. HUR down what 60% since when tipped? ENQ tipped recently at 40p? Down 25%?
Where’s Zak Mir when you need a real chartists view?
Would it not be prudent to keep away from tipping these AIM O&G plays until world oil prices start to re-surface?
Might save a little face.
Mark
Gary,
I re-state, with the state of play viz a viz world oil prices, 2015 is the year of revenue / move to profit. If companies are sat waiting for takeover / finance / lets have another couple of years on backburner eg. HUR Trice @ 500k pa salary?? No thanks.
LGO are early stage and AHEAD of the curve. Goudron is JUST the starter.
Perhaps take a closer look at LGO in the way you did not at HUR? Because that recommendation is not down just on the current oil price.
Mark
Gary
A lot of the AIM O&G plays you refer to will be screwed full stop because they produce …ZERO.
They are in the pits, the so called expert BoDs are sat back taking the LARGE salaries, while they await a take over or farm in or.. Frankly who cares – because they don’t.
Thats not LGO.
Gary Newman
Mark,
HUR did rise 100% after i first tipped it (and did a follow up advising banking profit after it rose) but has obviously fallen since my last piece on it. If you looked back at anyone’s oil tips or even analyst views and the like that were made back when oil was at $100 then they’d be performing badly! Same goes for anyone who tipped shares in 2008 prior to the crash i would imagine.
You also have to remember that I don’t tip shares for a quick trade (can’t see much point given the majority of people looking for tips won’t be traders), they are based on long term value – lets see where ENQ is if and when the oil price recovers as I still believe that 40p will turn out to be a good price. Also, not being picky but ENQ was FTSE250 until very recently, not AIM!
I actually see the current low prices as a good opportunity to buy for the long time whilst some are at crazy prices and last time there was a similar opportunity was back in 2008/09.
In terms of LGO, it will be interesting what the next financials show in terms of earnings per share and how that PE ratio compares to other producers.
I’m not disputing that many AIM oil companies will be screwed if oil stayed at this price, but I also see a chance that some with proven and appraised fields will be bought out and we’ll see increased M&A activity. It is now cheaper to buy these companies or their assets than it is to spend hundreds of millions on risky exploration and appraisal drilling – upstream investment of some sort is still needed to replenish reserves.
I wasn’t actually that negative about LGO anyway, just my opinion that in the current market it is overpriced compared to some of its peers (I’m obviously talking producers and not comparing it to explorers with no production, as that wouldn’t exactly be a comparison!).
Mark
Gary,
Thank you for your reply.
And for completeness, which companies are you comparing LGO to when you suggest they are overpriced?
I guess you are have discounted the trainwrecks / jam tomorrow, but maybe not.
So, for the record. – compared to which AIM O&G producers are you suggesting LGO is overpriced?
I look forward to your response.
Enjoy your weekend.
Oil man
Mark,
Trinity a Trinidad peer of LGO’s has a mkt cap of £19m has 2P of 87mmbo, production of close to 4,000 bopd. It does need funding but when that is sorted and they turn the taps on for their new gas asset then they will be in the 10,000 boepd-12,000. Tell me how LGO can justify a market cap of 5x theirs?
wildrides
Oil man …………… you know jack shit about the oil game . You cant expect an oil company to drill a hole , hit oil , complete the well , test production and put into production without issuing an RNS of these events . For a start it is a regulatory requirement of AIM and all other markets . You cant hide market moving events .
Gary Newman should know this to …….. probably too busy listening to his old hits . Hurricane etc are not releasing a string of RNS because they have Jack shit news . Simples.
Gary Newman
Mark,
I’m not comparing it to those sort of companies that you mention. Often it would be easy to pick one of those small cap, illiquid oil or mining companies that is about to get a pump and dump (Twitter is often a good indication!) and then claim how great I am when it rises 100 per cent in a few days, but that would also mean lots of PIs locked in and never likely to get their money back, so I avoid those type of companies! If you are recommending a company as an investment and basing that on seeing value in the assets at current market valuation, then you should be taking a 3-5 year view, or certainly at least a year.
It isn’t just AIM producers i was comparing it to but main market producers, some of which could easily double in SP in a short space of time as and when oil shows signs of recovery (some have had 30-40% swings recently just on the oil price recovering a bit or even showing signs of stopping falling!).
I wasn’t having a go at LGO as a company per se – in fact a fair bit of what i wrote was positive and it is far removed than where it was a couple of years back, as i also mentioned – it was more a comment on the current market valuation in light of the wider economic factors (oil price) and when compared to other producers I still think it looks expensive (there are others that also look expensive as well obviously).
Oil Man mentioned TRIN (I have a very small holding there myself bought at current SP), but obviously funding is a big issue with that one, and even more so at low oil prices. But it was more some of the others I’ve already mentioned, such as ENQ (not that alone obviously and only mention it as have already given it as an example in reply to another poster) that i was comparing it to.
There’s nothing to say that LGO won’t actually go up from here, I just think that others in the sector have potential to rise by a lot more though.
In terms of predicting oil prices and the like – which have obviously had a big impact on most of my tips as oil is my main area of interest (I’ve been investing my own money in AIM oil shares since late 2009) – pretty much everyone got that wrong. In fact i remember LGO founder David Lenigas talking about the oil price at the UK Investor Show on a panel alongside other CEOs, and they all predicted oil to go up (sure David mentioned $180, but certainly over $150 – I think there is probably a recording of that forum somewhere on this site).
You also have to remember that if it wasn’t for the fact that we all have opposing views on value of companies, to a greater or lesser degree, there wouldn’t be a market in the first place, as it is that which creates one.
Nice to have been able to discuss this with you in a civil way when so many just resort to personal abuse!
Have a good weekend.
Jason
LGO on the surface looks a good share (it’s certainly a day-traders dream) but for all the million and 1 positive RNS the picture being presented lacks information on production life & rates & well cost & payback. If you add all the flow rates for the latest 8 wells and existing production from both Spanish and Trinidad assets how was production “only” 1685bopd for Dec (c2000 for last 10 days 23/12-1/1). GY-670 has averaged 1000+bopd which means the other 6 wells (GY-669 not being completed at 6/1) in this campaign+ all other production are producing 1000bopd between them which is c250 less than that reported on 4th Dec. In fact make that c450bopd less as GY-671 has flowed at c200 bopd since 17th Dec too.
On 4th Dec production was 1250bopd with 800bopd coming from GY664-GY668, the other 450bopd from Spanish and other Trinidad wells. Pumps had had to be added already to GY-666 & GY-668. On 24th Nov LGO had reported 580bopd from pad 2 GY-665-GY-688 with GY-666 & GY-668 not fully optimised. GY-664 previously having been reported as stable on restricted choke at 240bopd (2nd Jun). So optimiisation of GY-666 & 668 has added little or been offset with diminishing production from the other well. I can’t find latest production rates for GY-666 & 668 but initial restricted rates for GY-667 (350 24/11), GY-665 (415 17/9) & GY-664 (240 2/6) exceed 800bopd without GY-666 & 668.
Incidentally pressures experienced whilst drilling GY-666 & GY-668 led to NR stating in RNS: “The pressures we have experienced during the drilling of these wells gives us considerable confidence that we will have excellent production rates.”, “The log characteristics and pressures encountered while drilling indicate that well GY-666 should be another excellent Gros Morne producer and we look forward to completing it…” & “The drilling campaign remains on course and continues to give encouraging results. Below the Goudron sands in GY-666 we have encountered gas shows and pressures similar to those seen in the recent GY-665 well at Gros Morne level…”. With these wells having to be subsequently artificially pumped what does this say about the other wells?
LGO have come on in leaps and bounds but are we being just being fed the positive newsflow?
Gary Newman
Jason,
The depletion side of things was one of my points (only had space to go into so much detail though in my piece but pointed to the depletion during December alone), plus of course it is widely known that it is a major factor for all onshore Trinidad producers.
I knew that the piece wouldn’t make me popular on some of the forums, even though it wasn’t exactly that negative (was hardly saying it was a load of rubbish and the SP was going to tank – which you could say about some on AIM), yet most comments that I’ve seen are more focused on attacking me or ShareProphets than actually discussing depletion or anything else!
I’ll freely admit that a lot of my tips are down as i mainly write about oil shares and the oil price has halved in recent months, but still think that on a 3-5 year basis many of them will do well (which is the timeframe you should be looking at as an investment anyway).
I also saw a link posted on one forum to a site that compares share tips and it was pointed out how badly some of mine were performing according to that – but a quick glance revealed a number of errors in their info (both the recommended buy prices – one was over £2 higher than the level i tipped it at! – and ignoring subsequent ‘bank profits’ pieces on others). Given that the majority were oil or mining I wouldn’t be expecting them to be doing that well based on current SPs (although AMC went up over 200% and MSMN over 400%, so people had plenty of chance to bank profits!) – although all that really matters is the SP when people sell in a few years time!
wildrides
Gary says “I wasn’t having a go at LGO as a company per se”
Gary is havin a laarph !
A comparative analysis table showing the competition and LGO for Key financial and physical indicators is whats needed . Other wise the article is just a red rag to a bull ( or several bulls )
Gary Newman
Wildrides,
By that i mean that i haven’t said the company is a load of rubbish or going broke, just that in my opinion it is over-valued at the current market cap in the current market conditions. Whether you choose to agree with that opinion or not is entirely up to you!
With regards the financials – if we were to take the most recent confirmed figures for LGO that would be the interims which i think would be somewhat unfair on the company given that production at that point was around 650bopd! I did point out in the piece that a lot will have changed since that point in time!
We obviously aren’t going to agree on this one as I’m guessing you’re invested because you think it offers good value, I’m not invested as i think there are better opportunities out there in other producers – but as i pointed out to another poster on here, if we did all agree, all of the time on fair valuation then there would be no market in the first place.
Hope it comes good for you anyway and you’ll notice that i haven’t gone shouting on any forums about how I was right as my view is based over a period of months not just a mornings trading, but you can bet your life that had it risen 5% this morning there would have been all sorts of posters going on about how ShareProphets got it wrong again etc as most seem to view longer term these days as holding over the weekend!
wildrides
Clarification …………. My position for LGO is currently OUT
My last position was 3 weeks ago and was a trading position .
It is my intention to enter again LONG when the oil price stops falling or news of increased production is announced .
Gary Newman
Wildrides,
No problem, just assumed you were currently in.
I tend to agree with you with regards the oil price, especially if you’re taking positions for the shorter term (not much I’d touch at the moment if taking a shorter term view rather than as an investment) – if you’re taking a 3-5 year view though and as long as oil does recover to a reasonable level (even if not $100) then scaling in even now (and before now) should yield some good returns in my opinion. As we saw in 2009/10 with the banks, miners and financials, you didn’t even need to be in at the bottom to still make a good return when they recovered.
It is still my view that if and when oil reverses trend there will be some quite large producers that will offer a lot of upside, even in a short space of time, as some have had 75% or more wiped off of their value (you could easily argue justifiably so with oil at these lows and finance worries). Personally I’d be looking at ones that weren’t too highly geared (obviously most will have fairly large levels of debt due to upfront cost of going into production) and whose debt isn’t due until well into the future – those with debt due will face much higher interest rates in it if they have to renegotiate it now or issue new retail bonds to cover it.
I’ll be interested in 6-12 months time where LGO is in terms of daily production and also level of profitability.
ATB
DaGulf
Excellent calls here
http://www.shareprophets.com/EPIC?epic=lgo
Nice after hours announcement
http://www.investegate.co.uk/CompData.aspx?code=LGO&tab=announcements