LGX Oil + Gas Inc ROAOF

What FK is saying.

[Box927]

Oilexco Inc. (OIL : TSX : $11.57) - Buy - Target C$21.00 Frederick Kozak Comment: Oilexco grows in the North Sea -- by acquisition and drilling; target increased to C$21 from C$19 Oilexco announced late on August 15 that the company has executed a purchase and sale agreement with CNR International (UK) Limited for all of CNR's interests in the Balmoral Floating Production Vessel ("FPV"); and the Balmoral, Glamis and Stirling Fields, which currently produce approximately 1,800 barrels of oil per day, net to CNR. Oilexco also gets certain exploration acreage, all located in Block 16/21 in the UK Central North Sea, all for $50 million, funded out of Oilexco's bank line. In addition to acquiring 1,800 bbl/d of incremental production, Oilexco becomes the operator (with UK government approval) of the facility that processes the company's major production. This puts Oilexco firmly in control of its production for Brenda/Nicol as well as the additional production acquired and other potential new area production. We value Oilexco at a multiple of cash flow, reflecting our estimates of the timing of new production additions through 2009. Our increased target price of C$21.00 (previously C$19.00) is based on 4.6 times 2008E debt-adjusted CFPS, but only 3.5 times 2009E debt adjusted CFPS and does not include the potential impact of the company's current exploration program. Next catalyst? Oilexco has an active drilling program through the remainder of 2007, focusing on the Huntington area. However, the next immediate catalyst will be the news as to when the Ocean Guardian, damaged in a fire on August 14, will be back drilling on the 100% owned Shelley project.