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By HotStockRockets | Tuesday 11 July 2017
Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. 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.
Shares are valued on the basis of what is to come. that is to say future earnings ( or lack of them). Not historic losses, profits or performance. But shares in Columbus (CERP), the former LGO Energy have been marked a tad lower after an operational update as punters looked in the rear view mirror. Their error = your opportunity.
So what is the bad news?
Firstly. The Mayaro sand infill programme is now on hold; well decline data indicates that without pressure support any new well will decline rapidly and not deliver on earlier expectation. In a sense it is good that no more cash will be spunked on this. But the profligacy of the ancien regime is revealed.
Secondly, average production from Trinidad in Q2 2017 was 327 BOPD, with production at the end of the quarter significantly affected by Tropical Storm Bret, the worst storm to hit Trinidad in over 10 years. Operations at the field have re-commenced and production has subsequently returned to pre-storm levels of between 380-420 BOPD. that is a piss poor Q2 number and even current output is not that good. But that is where the bad news ends.
Now for the good news. As a starter new boss Leo Koot has closed the company's luxurious head office and moved to far cheaper premises. We flagged up the disgraceful spend on the old place HERE and this is a good sign.
Then out in Trinidad a number of actions are being taken which will see the group cash flow positive by Q4 2017. That is not discounted. Specifically, and this can all be funded from existing cash resources, we will see:
*The fast-tracked implementation of a simultaneous multi-pilot and multi interval approach to Goudron Field water-injection, commencing Q3 2017, as opposed to the previously announced single pilot water-flood strategy which targeted just one reservoir interval
* A new Goudron Field well stimulation programme, targeting currently producing wells along existing mapped faults in the Goudron Mayaro reservoir
* The installation of smart pumping systems using downhole sensors, firstly on well GY-664
* Well interventions in the existing Bonasse field wells to re-activate continuous oil production aimed at increased production in Q4 2017
Leo Koot has been in charge for two months and by the end of the year using what cash Columbus has he will have a leaner company that - even at current oil prices - is generating cash. And that platform can be used to expand in Trinidad and elsewhere to make this a material player.
That is far from discounted at a 2.65p mid ( market cap £14.3 million). The stance remains a strong buy at up to 2.65p with a target to sell of 3.5p+ which will be hit during this summer as Leo continues to deliver.
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