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I first tipped this stock on my premium Nifty Fifty website at an 11.5p offer price on 28th October last year advising my readers to sell half their holding at 24.75p (bid price) the following month. I subsequently suggested reinvesting that cash at 13.5p (offer price). Things are now getting exciting for this company.
Leyshon Resources (LSE:LRL) is a China-focused gas explorer which the other day announced that it has commenced its previously announced estimated $20 million accelerated exploration and appraisal programme on its Zijinshan gas project.
With its on-ground experience and relationships in China, Leyshon has been able to obtain approvals quickly and is resultantly currently two weeks ahead of schedule – with more than 150 kilometres of a planned 300 kilometres of seismic already undertaken. This is being carried out as part of the company’s objective of defining a resource sufficient to delineate and submit a Chinese Reserve Report. The accelerated programme is following the company’s drilling at two wells – ZJS5 and ZJS6 – having intersecting multiple potential pay zones, with flow tests to determine whether commercial flow rates can be established from selected zones “expected to commence mid-March as planned, depending on the weather”.
The accelerated 2013 programme also comprises a further three committed wells and, potentially, a total of six wells, with flow testing of the wells as they are completed. The company emphasises that it remains “well placed to carry out its 2013 exploration and appraisal programme with a strong cash position of U$45 million. With 249 million ordinary shares on issue this represents approximately 12p per share”.
The accelerated programme suggests that Leyshon is confident in what its exploration has discovered thus far, but this remains just potential at this stage – with the company retaining some drilling optionality in the programme which it can decide on based on testing and seismic results. However, with also “pipelines sitting on the surface within 10 kilometres that access one of the fastest growing gas markets in the world, rising gas prices and a strongly supportive government policy”, the current risk-reward trade off at this stage looks sort of attractive.
Leyshon’s announcement also reminded us that the company’s Managing Director, Paul Atherley – who purchased a further £268,380 of shares in the company last month at 14.91p each, taking his shareholding to 12.56% – will be presenting the company at the UK Investor Show at ExCel London on 13th April – details of this can be found at www.ukinvestorshow.com
The thing about Leyshon is that there will be constant newsflow this year – 18 releases on drilling progress. It is clear that there is gas on its prospect and my recent chat with Paul Atherley made it clear that he still believes in ( albeit unrisked) NPV of the prospect of in excess of $1 billion. Get some positive newsflow and the shares could well move sharply on that basis. Meanwhile the cash limits the downside. A Trading buy.
Tom Winnifrith edits the Nifty Fifty premium newsletter with Steve Moore – the team who used to produce the t1pos website. Tom & Steve will be serving up a cracking new penny share tip this week on Friday at noon. To access the full service click HERE
Can you do another writeup on ocado? Interesting RNS today.