LGO - RESERVES UPGRADE

LGO just announced the CPR undertaken by Synergy Ltd.

1P reserves increased 110% from 0.7m barrels to 1.54m barrels
2P reserves increased 60% to 11.37m barrels
3P reserves flat at 23.58m barrels

What draws me to the report is the increase in oil in place, from 350m barrels to 800m barrels on a best estimate and 1.335b barrels on a high estimate. This is a massive upgrade in oil in place!

In the 2012 CPR report by Challenge Energy, it was estimated that a water flood will deliver 63.2m barrels or 18% of the oil in place total of 350m barrels. Although the report by Synergy did not mention any water flood, assuming the same delivery of 18% of 1.335b barrels, we would have the prospect of recovering 240.3m barrels of oil!

Also the 1P and 2P reserves are based on only 8 wells drilled in 2014. One is for certain though. The more wells drilled, the better will be the upgrade of reserves. LGO has another 22 wells to go and has meanwhile applied for additional permit to drill another 30 wells at least. So you can imagine the reserves upgrade that LGO will have as more wells are drilled.

Also in the same report, LGO announced that it will soon embark on extracting oil form the Goudron Sands in the short to medium term - and that means within a year's time. 

All this point to more oil being recovered from the Goudron Field and more revenue for LGO.

And by the way the CPR only covered the Goudron Field. we have not even touched on the Cedros Peninsula and Spain yet.

My disclosure: I am long LGO