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LGO - After the pump the inevitable dump

By Tom Winnifrith, The Sheriff of AIM | Tuesday 13 December 2016

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.

Having ramped its shares up to 0.15p by pretending that the refinacing of its bank debt was by anything other than a death spiral and with some huffy puffy claptrap about new drilling, LGO Energy (LGO) got back to what it does best today, a placing to dilute yet again.

It has raised £1.18 million by way of what it describes as an "oversubscribed stockbroker and company sponsored placement." Whatever. The issue price is 0.12p so one imagines the bucket shops forward sold most if not all of it yesterday.

LGO says the funds will be used to "accelerate the drilling of Mayaro Sandstone infill wells at the Company's 100% owned and operated Goudron Field in Trinidad, and as working capital by the Company. Prior to the placement, the Company had access to the funds necessary to commit to the first well of the initial ten well Mayaro Sandstone infill program and expected to fund further wells from free-cash flow. With the increased flexibility provided by these new funds LGO can now commit to a more efficient program of multiple wells. Further updates on the drilling will be provided in due course."

But hang on did it not have the cash available from Lind under the death spiral drawdown? Yes it did. No doubt it will use that too and repay with yet more shares being issued. I just love the smell of freshly issued confetti in the morning.

Neil Ritson pretends that LGO must drill now to get cheap service provision before costs rise as the oil price races ahead. Bollocks. If the oil price races ahead there will be a lag of many months before that is reflected in provider costs. This is all about getting in more cash while LGO can.

LGO listed with c300 million shares in issue. There are now 8.3 billion shares in issue. And at 0.13p ever single one of them is overvalued as this company's assets are so poor that it will NEVER generate free cashflow after capex, PLC and financing costs. Never!

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