LGX Oil + Gas Inc ROAOF

report..........

[wobblechops]

I hear this report is spot on and base fig is to be 25mill. OILEXCO (149p) BUY - Target Price 250p - impending newsflow We expect two announcements from Oilexco over the next week or so and both will be critical for Oilexco investors. First, the (meaningless) results for 2004 will be reported on 31 March and will be accompanied by an independent assessment of the reserves in Oilexco's key asset, the North Sea Brenda field. The estimate of proven+probable reserves will be prepared in accordance with stringent Canadian booking criteria and we would expect a conservative assessment. This should determine a floor for valuations. We estimate that reserves of 25 million barrels will confirm an economic development; the current share price is anticipating 30-35 million barrels; our valuation is based on 45 million barrels; and management believes the field contains 50 million barrels. At this point, a reserves estimate of more than 30 million barrels should be positive for the share price. Second, Oilexco has just taken on contract (for up to 2 years) a semi-submersible drilling unit. This will be used to drill Brenda development wells late this year but is available for exploration wells until then. There are very few drilling units available in the North Sea until 2006 and we believe Oilexco will be able to offer other oil companies the use of its contracted unit in return for an equity stake in the exploration prospect to be drilled. We do not expect management to keep the drilling unit idle and, now it has come on contract, we expect an announcement detailing the new ventures that it will enable Oilexco to access. Our valutions include a risked value for four exploration wells on small (10-20 million barrel) prospects in which we assume Oilexco will earn an average 40% interest. Our 250p share price target uses oil futures prices to value Brenda and includes some upside from potential new ventures. Some may see it as aggressive. However, we expect newsflow over the next week or so to confirm our key assumptions and underpin valuations. As long as Brenda contains 30 million barrels, the upside from new ventures means that Oilexco shares offer significabnt upside from current levels.