I am sure you are all aware that Leed have consistently been rising since they announced an increase in production.
Brewin Dolphin have a price target of 12p.
"The increase in group production from 958 boepd in Q3 to 2,065 boepd is a big positive and should go some way to increase operating cash flow and the borrowing base if these levels can be sustained and even improved upon," says Brewin Dolphin analyst Tracy Mackenzie.
The brokerage has a "buy" rating and a price target of 12 pence on the stock.
Well for a tiddler in the oil E+P game this increase is quite remarkable and i can now reveal that the whisper here is that this may very well increase yet again over the coming months. But remember this company are mired in debt. So dip in at your peril.
Certainly one stock to watch but not an investment.
News is due here.
Daniel
These used to trade at above 70p before production problems and the effects of heavy dilution. Along with falling gas prices and the effects of tropical storms, cashflow etc, we had an sp sitting at just above 2p.
Now they’ve renogotiated what would’ve been a ‘technical’ default on debt repayments rather than a short term cash shortfall, they’re better prepared to start capitalising on expected near term increases in production.
They’ve a NAV of around 15p and an increase in production to 2000boepd should see them able to develop 74% of their proven and probable reserves.
They also have the option of either joint venture or farm out arrangements to reduce capex for those developments.
12p is a reasonable short term target for the SP but could easily rise above 20p with a slightly longer timescale and the expected appreciation in energy prices.
Very near term production increases with sorrento dome 14-1 and Main Pass coming back on line.
This news is over 2 months old and skirts around the major problems surrounding this company.
At the start of this year production had dropped to around 1000 boepd, a huge drop from 3000 a year earlier and 1500 last Summer so its been a steady decline, reflected in a bombed out share price.
The increase from 1000 to 2000 is far from remarkable and is solely due to a new well coming online in May (the first new well in over a year). The CEO had said this well would “more than double production” so the increase was expected. New wells in the GoM have significant decline curves so this figure is likely to be a lot lower by the next set of results.
With 2/3rds of Leed’s output now coming from 1 well this is as far from a de-risked portforlio as you can get, especially entering hurricane season. If at any time the well has to be shut-in for maintenance then that’s 2/3rds of the revenue stream cut off in one go.
A 2nd well was planned for September but barring a cash call they do not have the funds to drill it. Just £5m cash remaining and a £6.5m budget for the well.
Leed made an estimated net loss of £6m in H1 2010 on top of a £5m net loss in H2 2009. When you consider the funds they have left its self evident they do not have enough to get through 2010.
Lenders are cutting the credit facility in bi-yearly installments down to zero by 2014. A default on Leed’s near £20m debt was avoided last month by agreeing to stricter lending conditions and a higher interest rate. The next payment is due in September.
With all this in mind a discounted placing in the next few months looks a certainty. As I understand it one of the lenders conditions is they must ensure a certain amount of cash in hand so the placing could come sooner rather than later.
£20m was raised last November by issuing 400 million shares at a 50% discount. There were 275m shares in issue beforehand so it was a major dilution. It goes without saying that £20m did not last long at all. As for the debt, paying it off seems to be Leed’s reason d’etre. They came to AIM with $80 million debt already accumulated, 90% of the IPO funds were used to repay this down to zero, then they borrowed another $50m from new lenders so they could do the whole thing all over again. Debt and share dilution come as standard for this sorry bunch.
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P urchase
Great news danny they are bouncing up again.
Thanks for the info.
bought at 2,95 only stook 5k in but am already in profit.
thanks mate.
aNOTHER GOOD READ ON THE bLOG.
hOW HIGH DO YOU THINK THEY’LL GO dAN?
GOT THEM THIS MORNING AT 3.32.
SHOULD I SELL NOW AND TAKE PROFIT OR HOLD TILL THEY BREAK 4P AGAIN TRIED TO SELL WHEN THEY GOT TO 4P BUT THEY WERE ONLY OFFERING 3.85 ON MY FOREX ACCOUNT. CHEATING SODS.
WELL DONE DAN
the declining sp value reflected the issues brought up by posters. However, there’s obviously positive sentiment returning here. As is the norm with aim stocks, we’re looking at a much higher speculative component associated with any given share – some much higher than others.
The recent rise reflects pi sentiment for increased production off near term developments expected in the next few days/weeks. Let’s see where that takes us but higher risk/higher reward as they say.