Penny shares and oil explorers — they’re two of the biggest risks in stockmarket investing, aren’t they?
But if you’d put some money into Leni Gas & Oil (LSE: LGO) 12 months ago at under a penny a share, you’d be sitting on close to a six-bagger today after the price has soared to a 52-week high of 5.36p.
Once in a lifetime!
As with all penny stocks, there’ll be a wider spread than most to deal with — but hey, that’s still the kind of result that most investors are happy to see just once in a lifetime!
So what’s the story?
Well, Leni shares have been extremely volatile over the past five years, and actually reached today’s price levels back in late 2010 before a prolonged slump.
But in recent months, the company has been reporting some very exciting discoveries from its Goudron field in Trinidad. The latest, on 17 September, updated us on early flow tests from the company’s GY-665 well — there’s an estimated flow rate of around 700 barrels of oil per day.
Chief executive Neil Ritson sounded relatively restrained when he told us that “The second of our new wells is now on stream at a very encouraging initial production rate and flowing pressures. The remaining three wells drilled from this pad will be placed on production shortly“.
Cash please!
It bodes very well for cashflow, too, with Leni going on to tell us that “Fiscalisation of the oil from these tests is immediate with the well flowing directly to the field’s oil sales system, and by pipeline to the Petrotrin Point-a-Pierre refinery“. (And as an aside, I think I’ll make “fiscalisation” my word of the day — isn’t it wonderful?)
Prior to that, on 1 September we heard that Leni’s GY-668 well in the same Goudron field had successfully reached a total depth of 3,026 feet and had been logged. Based on analysis of the logging, Leni estimated 254 feet of net oil pay from the primary Gros Morne Sandstones target of the well, with a further 191 feet from a secondary Goudron Sandstones target.
This was the fifth new well in the field to be drilled, and there’s a total of 30 planned — so it’s easy to see why investors are excited by the results so far.
Is Leni a good investment now?
Exciting times
That’s hard to say, because it really is a very high-risk business to be involved in, and we really have no idea yet how far the firm’s discoveries will extend into the rest of the Goudron field.
In the coming months, Leni will be moving its drillpad on to the next four wells in its exploration plan, cunningly numbered GY-669 to GY-672.
It’s still very risky, but there could be exciting times ahead!
