LGX Oil + Gas Inc ROAOF

RBC Capital Markets report?????

[tano]

Here are some issues I have highlighted from the RBC Capital Markets report posted by someone else on this board yesterday?  

(1) The RBC analyst states that it is not clear whether the sale of the Caledonia field to Oilexco has been completed. Is anyone familiar with this issue?
 
(2) The analyst states that there is considerable uncertainty surrounding the value of the Huntington discovery because of the lack of disclosure by OIL's management. Does anyone know the range of sizes attached to the Huntington discovery by the experts? Do these opinions vary greatly?

(3) The analyst talks about "fields onstream and under development" and "undeveloped discoveries".  Would Huntington fall into the category of "fields under development" or "undeveloped discoveries"? The analyst states that the most recent deals for portfolios of undeveloped discoveries and undrilled prospects have been done at relatively low valuations. Does anyone have an idea what those relatively low valuations are?

(4) In his valuation, the analyst states that assuming $55/bbl+ Brent, the sales proceeds from the fields onstream and under development would repay the $700M bank debt. But then, he immediately goes on to state that asset prices are likely to be deeply discounted because sources of capital have dried up and potential bidders are hoarding cash. This, to me, would suggest that the analyst feels the assets are likely to fetch less than $55/bbl. However, later he states, " assuming $60bbl oil ... we would continue to hold the stock." I really don't get it. If he really feels the assets will sell for less than $55/bbl, then why does he use a price of $60/bbl to justify his recommendation that shareholders continue to hold the stock and his price target of around 40p ($.71). Interestingly, in a graph entitled "Possible cash to Oilexco shareholders after loan repayment and payments to creditors", the analyst uses a range of oil price assumptions of $30/bbl to $70/bbl. Based on this graph, assuming OIL were able to sell its assets for $60/bbl, but were unable to walk away from its drilling rig commitments, shareholders would only get around $.25/share. If OIL were able to sell its assets for only $55/bbl or less, shareholders wouldn't receive anything unless OIL were also able to walk away from its $470M rig commitments entirely, and even then, the amount shareholders would get would be around $.13/share only.
 
In my view,  there are three crucial issues that will determine whether current shareholders receive anything or are left holding an empty bag:

(1) the size of the Huntington field;

(2) the price per bbl buyers are willing to pay for OIL's assets;

(3) OIL's ability to completely eliminate or at least reduce the size of its drilling rig commitments.

Yesterday, I asked the following question but did not get any answers, so I will ask it again: Does anyone know at what price per bbl the most recent deals for oil assets similar in quality to those owned by Oilexco were made?

Any comments are welcome! TIA.