LGX Oil + Gas Inc ROAOF

RBC Report - Some Bon Mots

[beckalodeon]

Most RBC clients don't have access to the full RBCCM analyst reports, so I'll post a few interesting points from the report out today that starts Oilexco as an Outperform. Here are the points, verbatim: ====================================== Above-Average Organic Growth Potential: We expect the company to produce an average of 36,500boe/d in 2008, up from a forecast average production of 16,600boe/d in 2007. Assuming continued strong oil prices in 2008 we calculate that Oilexco will generate cash flow from operations after interest and tax of some US$644 million (£322 million). This cashflow will likely be directed towards ongoing and new developments in the UK operations and a significant portion will be dedicated to the two fixed-term drilling vessel contracts that Oilexco has in place. ================================== If we were to assume US$70/bbl (long-term real) our NAV would leap to C$16.88/share (844p) – so it appears the stock is not reflecting the current high oil price. However, in the next 14 months we expect the drilling results, to have a more significant impact on the company’s share price than fluctuations in the oil price. ====================================== Exploration Upside: Oilexco is scheduled to drill more than 25 E&A wells in the next 14 months that could, on an unrisked basis, more than double our risked C$13.54/share (677p) NAV. ====================================== Upside: The company is progressing the development of a number of fields that it aims to have onstream in 2008 (Ptarmigan in Q1 and Shelley in Q3) and 2009 (Huntington, Kildare, Bugle and Black Horse). It is also exploring further in the Huntington block and the adjacent block, where it has a 72.7% equity stake and where it has identified a number of additional prospects. The unrisked upside has the potential to more than double our risked NAV. ====================================== Oilexco has set the scene (through the discovery of Huntington, the consolidation around the Balmoral area and by securing two long-term drilling vessels) for fairly constant growth in reserves and production in both 2008 and 2009. The company’s exciting 2008 drilling campaign will interest those investors looking for organic drill-bit growth backed by tangible production. ====================================== cheers, beck ps godspeed to the shorts.