Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Edison Investment Research says Leni Gas & Oil could be a mid-tier player

Leni Gas & Oil (LON:LGO) has the potential to transform itself into a mid-tier E&P player, according to Edison Investment Research.

Edison said it considers LGO to be a ‘development and rehabilitation’ specialist and that it has a ‘large resource base’ given its junior status.

“We consider LGO to be undervalued. A conservative estimate based purely on shallow field resources at $2/boe would value the company at $80m, equivalent to 7.8p per share,” Edison stated.

The company research-house highlighted that the Hontomin-2 extended well test marks the start of an extensive development plan to evaluate the untapped oil and gas resources at Ayoluengo and in the surrounding concessions.

Edison said that LGO have significant prospects in North Spain, with its ‘best estimate’ of prospective recoverable resources at 120 million barrels of oil equivalent (mmboe) - with 56 million barrels of oil (mmbbls) and 383 billion cubic feet (bcf) for gas.

Earlier this week, on Wednesday 25th August, LGO spudded Hontomin-2, which will facilitate the extended well test.

The objective of the Hontomin programme is to appraise the long term production potential of the Hontomin-2 well. The programme is expected to take 4 weeks to drill-out and re-complete prior to monitoring production performance over the coming months.

Disclosure: The author holds no positions in the company