# LGO and a few questions answered

In this article I intend to use RNS releases and information I have gained via emails to and from Neil to answer two much asked questions that pi’s have continually speculated on the answer.

Question 1: What is the  decline rates of the wells at Goudron.

Neils response: We have always and repeatedly indicated that the wells have declined.  This is entirely normal and expected.  Look at 1.1.15 rate and 1Q average as a guide.

So here you go.

Since the 23 December 2014.  Average Group production for the month of December 2014 was 1,685 bopd. (direct statement from the 6/1/15 RNS (used as there is no 1/1/15 RNS))

During the first quarter all the new naturally flowing C-sand wells remained on restricted chokes and oil production from the field was constrained so as to achieve the best long term production potential consistent with a conservative, low risk, reservoir management strategy in a low oil price environment.  Using these depletion practices the average daily production over the quarter was 1,550 barrels oil per day (“bopd”).  Field production rate is anticipated to rise to over 2,000 bopd once the wells currently being drilled are placed on production (Direct copy of a paragraph from the RNS dated 30/4/15)

Please note at this point that one extra well was brought into production during this period. GY-669 at 365bopd on the 26/1/15

Within four months production fell by 500bopd.

Lets do some maths.

1685bopd -7.02% =1566.71bopd after 1 month

1566.71+365bopd-7.02%= 1796.10bopd after 2 months

1796.10bopd-7.02%=1670.03bopd after 3 months

1582.03bopd-7.02%=1552.78bopd after 4 months

So from this we can make an educated guess and from Neil’s response we can deduce that the production is roughly falling by 7.02% per month.

Its now almost 3 months on from the 30/4/15 so using the 7.02% depreciation and adding on the 240bopd from the recent well GY-674 we get 1485.95bopd. This would also explain why Neil was so sure that we could surpass 2000bopd this year.

Correct me if i’m wrong but I think you will find my calculations correct. The fact is we cant know for sure but around the 1400bopd and 1500bopd seems realistic from the data we have.

Question 2:

I asked why when all three wells were declared as flowing to the surface freely  and naturally yet two are going to be completed with aided production.

Neil’s answer: The pumps are to enhance what can flow naturally due to the reservoir pressure.

We know that the reservoir pressure is consistently adequate to freeflow the wells in Goudron without production aids. From the field figures and the fact that Neil confirmed that the wells can produce naturally I feel that investors should expect some good figures and that the aiding is simply to boost field output and increase the financial upside of the two wells in question.

I  would like to finish with a warning to those that are shorting LGO.

Sentiment is low at the moment but things are about to change and they will change fast. Sentiment will soon be on the side of the real investors and production is increasing year on year at a rapid rate so don’t expect a free ride.

For those who are currently disheartened by the share price I would advise doing your own research and asking a professional for their advice on the matter. I can only say that in my opinion this is a huge growth company and I am backing its progress all the way to 4pps and beyond.

I hope this article has helped people and that the main concerns of investors have been addressed.

As always:

All in my own opinion and not to be taken as fact nor advice.

Always seek professional advice before investing in any company.

This article was amended to incorporate a well that was missed in the first article and as a result some figures have been changed. Sorry for any inconvenience

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