Leni Gas & Oil PLC Is Up 10%: Is It The Perfect Partner For Royal Dutch Shell Plc In Your Portfolio?


2014 has been nothing short of superb for investors in Leni Gas & Oil (LSE: LGO), with shares in the AIM-listed company rising by 709% since the start of the year.

Indeed, sentiment appears to still be very buoyant, with shares in the oil and gas producer rising by 10% today after it announced positive news flow regarding its production levels. Leni has now passed through the 1,000 barrel per day of oil production threshold, with its Goudron field in Trinidad contributing 927 barrels per day and its non-core Spanish operations producing 153 barrels.

This is hugely encouraging news for Leni and shows that the company is making excellent progress, with the market reacting in a positive manner post-update.

Differing Risks

Of course, a small oil and gas producer such as Leni remains a high risk investment. As has been shown in 2014, the rewards can be significant, but it could be a prudent idea to match a high risk play like Leni with a more stable partner, such as Shell (LSE: RDSB).

Indeed, while Leni is yet to report a profit and continues to burn through cash, Shell is hugely profitable and has seen its cash flow improve in recent years. Furthermore, Shell’s new strategy of shrinking the business so as to make it more nimble, more efficient and, ultimately, more profitable seems to be paying off. Strong recent results provided evidence of this, as Shell increased profits by around a third in the first half of 2014.

In addition, Shell currently yields a highly impressive 4.7% and, with its cash flow continuing to improve, significant dividend per share increases could be on the cards. For example, dividends per share are expected to rise by 3.2% next year, which is well above the current rate of inflation. With Leni having no profit, never mind dividends, this could help investors to generate a decent income while interest rates are at historic lows.

Looking Ahead

Of course, Leni may continue to deliver strong production updates that send its share price much, much higher. It certainly has the potential to do so. However, the relative stability that Shell provides, through its strong cash flow, profitability and income potential, could prove useful if Leni’s numbers don’t quite hit the spot. As a result, Shell and Leni could prove to be a successful match moving forward.

Clearly, Leni has huge growth potential. Despite this, it narrowly missed out on being awarded the title of The Motley Fool’s Top Growth Share Of 2014-15.

That accolade went to this company, which offers a potent combination of exciting growth prospects and a super-attractive valuation. As a result, it could give your portfolio a boost and make 2014 and beyond an even more prosperous period for your investments.

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Peter Stephens owns shares in Shell.