UK 09:13 Wednesday, 7 October 2026
Breaking news and expert analysis on fast-moving AIM and LSE listed shares
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
The weekend news from the oil sector is grim. I am not sure that folks out there in, what Malcolm Stacey might term, punterland realise just how grim it is. There is a massive PR and IR industry supporting the proposition that things can only get better. Au contraire, for the next few months at least, they are going to get a lot worse. And in that spirit I offer up a list of eleven oil E&Ps to sell now, to get out what and while you can, as they could well hit zero.
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Comments
Colin malcolm
rose?
wildrides
Hawk and LGO have the cooperation of their bankers so they wont go down . Although LGO has to put up with Whining Froths continual post DL chairmanship vendetta , not to mention the hypocrite whining on about massive decline rates . The actual decline rate as stated in the RNS 3rd Nov 2015 was 6% on quarter to quarter comparison . Distorting these facts is of course market abuse , but that wont stop Whining Froth from mis representing the facts . Readers would be well advised to double check his Whinni maths before selling their own holdings in his list in case its as bad as with LGO .
Duck and Dive
Someone please explain what an iodine producer is doing in a list of oil stocks. Is it there just to round the numbers up to 11?
And I can’t believe that you have overlooked US Oil & Gas – surely going down the pan within days. I know they aren’t listed (again) but that’s no excuse.
Not sure about LGO. They may be selling enough oil to pay the revised debt instalments but would likely struggle to do anything else. So de-listing might help them survive.
HAWK (which made me a lot of money before the POO decline) will definitely survive. They are still managing to produce 1600bopd without new wells and they have always been bankrolled by their wealthy Swedish shareholders who are in deep and won’t let it die.
Drunken Sailor
Wildes,
Now who is misleading?
“Hawk and LGO have the cooperation of their bankers so they wont go down” The froggies threw LGO a short term life line, they have not forgiven the existing covenant breaches and if LGO cannot meet the repayment schedule, which ramps up from $75k a month to over $500k a month in March, then they will go down. Banks are not charities and they have a number of problems of their own. LGO clearly has major funding problems which is why they hired Wellford and then put all the “world class” assets up for sale – it does not appear that anyone is beating a path to their door to snap them up, I wonder why.
The statement on 3 Nov said “Group production in the third-quarter is reported as 896 bopd, 6 percent lower than second-quarter. Fourth quarter production will be lower than previously forecast due to the loss of GY-678 production, continuing depletion in the field and the slowing of work on the Goudron Sandstone program.”
So despite bringing on at an initial rate production of 1200 BOPD at various points during Q3 (yes the initial flow rate is always higher than the steady state production rate) overall company production declined by 6% – Shocking. The way Tom calculated decline rates is not the right way to do it either, but at least you can see how it was calculated and the data set used (only 60 Bopd from GY 672 was reported just outside the quarter concerned – Q3 is Jul Aug and Sept not Jun, Jul Aug as you erroneously (or is it a deliberate attempt to mislead?) claim.
What are the production rates from all of those wells for Q4? really you need the per well data then you can calculate a meaningful set of decline rates. All we know is production for Q4 was expected to be lower than forecast, whatever that means, even though all of those new wells would have been producing for the whole quarter, not just part of it. That is the decline rate problem and the company is not coming clean about it and are trying to obfuscate with meaningless percentages and bland statements about lower than forecast. Tom had a go at trying to shed some light on what decline rates might be from the available data. The fact of the matter is he did not have the relevant data to calculate it properly, however true decline rates are clearly much closer to his 80 odd % than to the company’s totally meaningless and misleading 6%.
Pull your head out of your arse and check your own facts, you are misleading people with your continually spouted nonsense. Maybe if you came up with some coherent fact based analysis of your own, Tom might listen and amend his article.
Duck and Dive
DS, declines – even steep declines – always flatten out so the critical thing for LGO will be the level at which production per well stabilises. You also need to factor in the apparent fact that production from their Spanish asset is increasing (possibly to attract a buyer) – and that an enhanced oil recovery project is touted for Goudron, subject to financing.
Most importantly, the historical production cost at Goudron has been $10pb and this figure will presumably drop now that new wells aren’t being drilled.
So, LGO is not without hope. That said, they have initiated a strategic review which is invariably a sign that a company is in desperate straits. So, it’s touch and go, imho. If they can sell an asset then they might not need their AIM listing and that would save a further chunk of overheads.
Drunken Sailor
D & D
Historic production costs include what? They don’t include drilling costs as they are capex not opex and probably do not include a load of other fixed admin costs, so your theory that they are dropping is incorrect. As production drops, production costs per barrel increase – you still have largely the same opex (maybe you save a bit on transport costs, but by and large you still need the same well staff and managers) with less barrels to divide it by.
The debate about decline rates is always going to be flawed, as we do not have the right raw data on which to calculate it. However taking the 4 wells that were brought online in Q3 and multiplying the initial flow rate by the number of days left in the quarter from the date of the announcement and then dividing by 92 – the number of days in the quarter and adding all 4 together, with no declines, average daily production in Q3 should have increased by 574 BOPD, however it actually declined by 57 BOPD. The methodology is still flawed because I have used the initial reported flow rate, but you can see that that is a big shortfall when you have spent $Ms drilling a load of new wells. How big is the shortfall now they are not drilling new wells? What are the Q4 production figures could they be as low as 600 BOPD? Whatever it is it will be a lot more than a 6% Qtr on Qtr drop,
They might just be making a gross profit at $30 oil, but operating profit forget it! And then there are the financing costs and the PLC costs, including paying Wellford, who won’t come cheap.
If they can sell an asset, it would be the very best one they have, as nobody would be interested in the dross. It still would not fetch enough to pay off the froggies, who have charges over all the assets. Yes I think they may be saving themselves AIM listing costs fairly soon, but not for the reasons you give.
Daz
Good article TW, credit due, I have looked at the entire lse listed oil sector and take away the three or four largest players they are all just about toast if oil does not get above 50$ in 2016.
Gary Newman
I’d have thought that NTOG and NCT must be in trouble as well with oil prices where they are and would question how profitable they are even purely on an operational basis at these low oil prices (quite likely making a gross loss i would think)?
steven tedesco
On Thursday Nighthawk was handed the following from the Colorado Oil & Gas Commission:
Summary of Staff Analysis on Nighthawk’s Unitization Application
As currently proposed, Staff will not recommend Nighthawk’s Application for Unitization. Staff’s
concerns with the Application are briefly outlined below:
1. The Unit’s proposed boundaries are poorly defined and inconsistent. Portions of some tracts do
not appear to be contained in the geologic structure of the reservoir. In other cases, the
reservoir extends beyond unit boundaries.
2. The Unit Development Plan does not take advantage of available well spots, and leaves several
areas without withdrawal wells to take advantage of oil pushed out by the waterflood.
3. There is a risk that oil will be pushed away from withdrawal wells and out of the Unit.
4. A full development plan needs to include a 5 and 10 year plan with economics and an evaluation
method to assure that future wells are placed in the best locations to fully drain the Unit.
On January 15th there was a hearing with the Case Officer from the Colorado Oil and Gas Commission, Nighthawk and several protesters at 10 to 12 (MST). Nighthawk technical staff made a very poor showing. Admitted several technical errors as well as that several PUD are no longer viable. Their modeling of the reservoir indicates it does not work without drilling at least 10 additional wells. These types of reservoirs have never been waterflooded successfully.
On January 15th several landowners as well adjacent operators filed form 501 to protest the waterflood because of errors assigning revenues to tracts and the tracts as defined are designed to benefit Nighthawk over others. As well as potentially increasing water in adjacent lands not in the unit.
The hearing was postponed from January to March 7th. And likely based on all the present data will be denied.
The transcript from the hearing is available from the Colorado Oil and Gas Commission. I will post a copy when I receive it.
Mark D
Production costs clearly just mean lifting costs in LGO’s case since admin costs alone came in at $17 a barrel in H1 2015 according to their interim results. DS is right that there is absolutely no way LGO are making an operating profit at anywhere near $30 oil and looking at the cash flow statement it could well be burning cash at that level too. The company only brought in £500k in H1 2015 at oil prices way higher than today’s and with production at 1200 odd bopd.
It’s a hopeless basket case, and what is the value going to be on its “flagship” IPSC Goudron field against the outstanding debt? Anyone who even wanted the IPSC could just wait for them to go belly up and have it for peanuts, LGO can hardly negotiate from a position of financial strength can they?
It’s a rum and coke as Tom would say.
Phil
High inventory, falling retail prices, eroding margins = rate hike. Err I don’t think so. Another own goal, pretty much.
What s all this telling telling me. This list isn’t long enough and shorting is the only game in town.
Before I am convinced oil prices will uptick against an increasing oversupply, would someone tell me why, only please don’t bother that Saudi will cut back supply when fracking in the US is busted. Cos the premise that Saudi action against US fracking are a load of bollocks.
Clem Chowder
http://www.latimes.com/business/la-fi-oil-prices-20160112-story.html
Rather interesting is that a firm of Lawyers reckon that good old Sefton have filed for bankruptcy.
alcira16247
Tom
As Brent futures show further declines anticipating Iran poised to flood the market with another half million barrels per day. Speculation is that sub $10 is a near certainty……. a price not seen since 1998.
Until the Saudis decide a death by a thousand cuts is a pointless exercise and bully OPEC into accepting stringent binding cuts in production the future for debt ridden marginally small and middle tier producers must remain bleak.
Eleven will turnout to be pretty conservative number as market conditions worsen and more prolonged than forecasted.
wildrides
Drunk ……………… as you well know most OIL companies are in trouble at the current price . My protest at the “Whining Hypocritty Froth” article is based on an entirely different thesis .
You are infact the one with your drunken head up your arse and Whining Froths arse too . Its hard to see with shite in your eyes but you have answered your own questions many times above . As you said no one knows the current production and hence it is all speculation . What is known is the published decline rate quarter on quarter of 6% for Q ending SEPT 2015 . You have said Whinning Hypo Froths calculations are wrong , so take your head out of your arse and stop supporting his false , petty , vendetta journalism and support the truth .
The point of all my posts on LGO is that it underlines “Whinny Froths” recent decline to hypocritical petty vendetta journalism , ignoring the truth and facts when it suits him . Refusing to correct obvious errors and as a result abusing the market via deliberate mis information . The man has become a loose cannon . Power corrupts and absolute power corrupts absolutely . You Mr Drunk are giving him a free pass to continue with his inaccurate , shabby , self interested , hypocritical journalism . I on the other hand protest at such blatant nonsense and will continue to do so . I am not currently “in” regards LGO but will probably do so should a suitable entry price become available and other circumstance such as oil price at the time align suitably. However even though I am not currently a share holder reserve the right to counter nonsense I see written on the subject . The underdogs need supporters from unjustified vendettas when the whole industry is in tatters .
Hugs and Kisses
WR
Duck and Dive
@DS @Mark D – LGO have stated that Goudron OPEX is/was “less than $10 per barrel” – see https://goo.gl/txyguo – and this included (cheap) drilling costs but obviously not central/Plc overheads. Since then, production has decreased but drilling costs have reduced to zero. Presumably they have pared back their central costs too.
@Steve Tedesco – how about an update on your Nighthawk lawsuit? You’re sounding like a bad loser.
Drunken Sailor
Wildes,
Q3 to END of SEPT Q3 = Jul, Aug, Sept not Jun Jul Aug as stated by you.
I agree Tom’s analysis of decline rates was flawed, not least because he took the initial flow rate figures and counted them as whole quarter production not part quarter production and there was one small one that was announced in Oct which was outside Q3. The analysis I did on what bollocks 6% Qtr on Qtr decline was at least more valid. If I had the right figures to use rather than the initial reported figures it would be even more valid. Trying to extrapolate from that calculation to an annual decline rate as Tom did however would still be flawed and why I did not attempt to state a decline rate other than to demonstrate the decline rate claimed by the company was a misleading figure.
Now admit you were wrong and stop being a twat.
D&D,
Nothing is ever constant. Taking a variable like production costs (which do not include CAPEX costs, like drilling and other maintenance CAPEX costs – why LGO has burned so much cash at much higher POO) and dividing it by another variable – number of barrels produced to come up with a cost per barrel is only valid for one particular set of data. Assuming that a variable divided by another variable will be constant and then using it as such in further analysis is diabolically flawed and is what leads to your erroneous views on how much deep shit LGO is in. My back of a fag packet analysis, which is definitely flawed as it requires far too much guess work in the modelling, indicates that if POO is not over at least $60 a barrel they will not have enough to pay the Froggies the $500k they owe in March. Even then there are PLC costs to find and that also leaves them nothing for CAPEX or maintenance CAPEX to get production back up. LGO needs at least $80 oil to have any hope of actually increasing shareholder value. Sorry $60 by March is a pipe dream, $80 is just absurd. LGO is fucked, unless they can get a big placing away. Taking on more debt is not the answer as it would be junk debt at horrible cost. Selling the best assets would not raise what had been put in to develop them and would still leave LGO screwed for the future. I do think they will be able to scrape down the back of the sofa to find the $75k needed to pay the Froggies in Jan and Feb and why I think Tom is being a little too harsh with his bust by end Jan prediction. I could be wrong and Tom could be right. Time will tell, but at least both of us know what months relate to what Qtrs and both of us know how production declines and what effect that has on free operating cashflow before and after CAPEX costs and what being in breach of covenants means especially when you can’t then pay the revised deal.
wildrides
Drunk ………… you must be drunk ……….. it is you sir , if anybody at all , that may resemble a ladies front bottom . For you have just stated yourself that what I put forward was correct . The decline rate specified by the company in the RNS of 3rd Nov 2015 for the end of quarter 30th Sept 2015 was 6% . This was the figure passed by the nomad for publication . Anything else after that date is a guess and nothing more . I expect to hear what production was in the latest quarter later this month . Until then we shall have too agree to differ on what it might be . As I said …….you and Whinny need a fecking time machine because five of the wells you relied on to get to your dubious decline rates WERE NOT EVEN DRILLED at the beginning of the quarter whose output is under discussion . You two can wriggle as much as you like but facts are facts and you were wrong on the facts.
Drunken Sailor
Wildes,
Why do you continue to make yourself look a complete twat by twisting my very clearly expressed words – it is a very BBM like thing to do.
You said Q3 was Jun, Jul, Aug – it is not! You finally grudgingly admit it was Jul Aug and Sept, but can’t admit that you were a twat when you got it wrong, claiming Tom had included a load of new production that came after the period, when only 60 BOPD actually came after the period ie in early Oct.
Just admit you got it wrong and stop being a twat.
The point about the Company’s 6% figure is not that it is false, but that it is misleading and the way you crap on about it is also misleading. Production declined Qtr on Qtr in the Qtr to 30 Sept by 6% – true, but so what! It should have INCREASED by 574 BOPD (correctly calculated based on the proportion of the quarter they were actually producing for then averaged over the whole quarter so I can correctly compare like with like), assuming no decline, based on the figures given in RNSs for new production in the quarter (the 4 wells drilled in the quarter ie in Jul, Aug and Sept). Tom would have said 1195 BOPD using his analysis technique, which was flawed and I have said in every comment it was a flawed methodology. Trying to come up with an annual decline rate from the figures available is always going to give the wrong answer and I have never done so for that reason, but seeing all new production that should have led to an increase effectively wiped out by overall decline rates tells you that decline rates are very high and with no money for maintenance CAPEX or new Drilling, the ongoing decline is going to be pretty horrible. Declining production and declining POO means no cash to pay Froggies their $500k per month come March! Oh dear mega diluting placing / shockingly shite death spiral deal / flogging off only decent assets for a pittance / death (Froggies appoint Receivers) by end Mar (end of Q1 in case you are still confused), end Apr at the outside. Clear enough for you?
So with the last Leni tweet induced pump and dump largely over, It looks like it won’t be long before you can pile in at 0.18p to buy after all, and hope the next Leni tweet induced pump and dump makes you a bomb, rather than you getting locked in when disaster strikes, as it inevitably will.
Each time you fail to face up to these facts you make yourself look an even bigger twat.
Duck and Dive
@DS – Spain, which by now may account for one-third of LGO group production, is kept going by a single company-owned workover rig. Capex there is minimal. Good luck in finding the Spanish operating costs anywhere but it’s a bare bones production facility where no new wells are being drilled. The decline curve flattened out long ago and it sells all output to a local industrial user – on recently improved terms. At last known production rates, it should be a cash generative unit, even at $30 oil. And the Spanish unit is unencumbered – so LGO could walk away from Trinidad, handing it over to BNP in settlement of the debt which is secured upon it. As a debt-free owner of even a modestly profitable Spanish resource, LGO’s share price would have to be five times higher than it is today (albeit, de-listing would be a sensible next step).
Drunken Sailor
D&D,
In H1 the Spanish operation made an operating LOSS of £291K on 15K Barrels produced – a loss of about $30 per barrel. Average POO in H1 was about $56 (matches pretty well with segmental revenue) makes operating costs $86 a barrel. ie total operating cost of production $1.3m
Yes they did a lot of work and Production improved towards the end of Q3 (170 BOPD in Sep), but in an old field like that you have to keep on doing the work and with cash so tight have they been able to keep it up? Production will drop back very quickly if you don’t.
Lets be charitable and say they managed to maintain 150 BOPD throughout H2 so 27.5K barrels over the half at an average POO of $46 in H2 that comes to $1.26M. If we say production costs did not change – they probably went up in Q3 to get the increased production, but we are being charitable. If we allow for a stronger $ Vs Euro in H2 Spain might just have broke even at an operating level, ie before its share or PLC and other corporate costs.
With the cutbacks in spending needed to keep the lights on and pay the Froggies their $75k in Jan and Feb and $500k in Mar, will they be able to maintain that level of production in Spain in Q1? What will the average POO be in Q1? $35 possibly, oh dear Spanish assets going down the pan and burning cash again in Q1, so your cunning plan looks to be a bit flawed. Obviously this is all based on analysis of the available data and Wildes thinks we should not do that and just wait for the company to tell us how bad things really are in case our analysis is wrong, which to some extent it is bound to be. It is a very common BBM argument that you don’t know for sure so shut up and wait for the company to tell us we are screwed. much easier to do that and pick holes in other peoples’ analysis than it is to offer any credible counter analysis based on available data.