The following are postings made by the attendees of LGO's recent AGM:
1) The CEO remained tight lipped on the prospect of production despite many asking how much oil LGO will produce going into 2016. He reiterated what had been publicly announced; ie: 2,000 bopd. Perhaps this was what caused the share price to decline as many expected an upgrade in the production.
From my standpoint, I understand that a CEO cannot divulge more than what have already been mentioned in official announcements. At the end we just have to look at the various fundamentals:
The site for the two 5,000 barrels sales tanks has been identified and the site cleared. The construction of the foundation and bund to hold the tanks are now in progress. The first tank should be operational around mid September. This will improve the sales tank capacity to 7,750 bopd and subsequently with the second sales tank in place in 2016, 12,750 bopd (FACT).
The 4" pipeline crossover is still pending. It seems Petrotrin has the approval to cross over one existing pipeline with another one to go. The enlarged pipeline together with the LACT meter can allow unrestricted flow of between 8,000 - 10,000 bopd to Petrotrin (FACT).
Current production is circa 2,000 bopd. We have Pad 4 (3 wells) and Pad 5 (4 wells) coming into production this year. The CEO would not upgrade so much infrastructure if he does not want to increase production. My guess is that he does not want to immediately trigger the US$2 million payment to the previous owner with bopd just surpassing the 2,000 mark. If any, I think his intention is to flood all the tanks once the infrastructure is ready so that the US$2 million payment can hardly impact upon's LGO's cash flow.
2) LGO has made an application to the Spanish authorities to renew the permit on a 10 + 10 year basis. The current permit expires in 2017. During its peak, the oil field in Spain could produce about 4,900 bopd. The development of the oil field in Spain will only add to LGO's growth and profitability.
3) Pad 6 and Pad 7 with 10 wells in total will likely be drilled in 2016. After the production on Pad 5 comes on line in September, LGO will start to drill the Goudron Sands (GS). The GS is shallower, thus to drill it would only require a few days (5 approx.). Since it is a shallow well, the production will be likely be below 100 bopd due to the absence of high pressure. The GS well will add on to the production incrementally. LGO has a series of wells in mind.
4) LGO is still pursuing acquisitions, but because oil price has dropped does not want to overpay for the assets.
5) The feedback from the attendees was that the BOD were upbeat on LGO's prospects but were unwilling to divulge more. When asked by an investor what will be the incentive for long term investors to continue holding onto the share well into 2016, this was the reply, "there will a substantial news in 6 months."
So my personal take? I believe the CEO will increase the production by mid September, otherwise why waste the money on developing the infrastructure when it is not needed? Definitely we will see significant upgrade in that sense which will impact the share price positively. And of course "what is that substantial news?" A takeover from Big Oil? An acquisition of another oil field? A farm in by a partner in Cedros? New licence granted by Petrotrin? We could only guess at this moment.
My disclosure: I am long LGO
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