Don’t you just love it when a high-risk investment comes good? Especially when it’s a small oil exploration company in these difficult times? It’s not the stuff of which most long-term Foolish portfolios are made, but it cheers me to hear of success for those who take the occasional risk.
It’s early days, but Leni Gas & Oil (LSE: LGO) is looking like one of these success stories, after I reported only last week how its shares had stormed to a 52-week record. And since then, the shares have already gained some more — up to 5.81p apiece as I write, for a magnificent eight-bagger just since April.
The latest gusher
The latest good news, which added another 2% to the share price this morning, came in the form of a Trinidad drilling update.
The next well in the company’s Goudron Field out of the 30 planned, designated GY-669, has been spudded and is drilling ahead in the Goudron Sandstone formation. From the current drilling pad, Leni plans to drill four wells in total, and production should be on-stream by the end of the year — the reservoir the other three are targeted at has been described by Leni as “prolific” so far.
The newly spudded well should reach a depth of 3,935 feet and is expected to encounter net pay of 250-300 feet.
Tricky to value
With earlier wells having beaten expectations, chief executive Neil Ritson was understandably upbeat, saying “The drilling programme continues to advance at an excellent pace and we can look forward to a further rise in field production“.
What does this all mean for Foolish investors?
Well, there is a lot of optimism built into today’s share price, especially as we have no clue as to Leni’s ultimate profitability yet — and that makes it impossible to put any sort of rational valuation on the company based on the usual metrics.
And should the next drilling update fall a bit short of the better-than-expected results that people seem to expect, we could see the shares taking a bit of a dip.
Exciting prospects
But right now, I think longer-term optimism could turn out to be well placed.
And while I favour a long-term Buy and Hold strategy of investing in blue-chip shares, I also think it’s good to take a higher-risk punt with a small portion of your investment capital from time to time.
