Why President Energy PLC And Leni Gas & Oil PLC Are Today’s Small-Cap Winners

Small-cap oil producers President Energy (LSE: PPC) and LENI GAS & OIL (LSE: LGO) are surging today, after a week of declines as the oil and gas minnows benefit from a rising oil price. 

Bright prospects

International oil producer President Energy relies upon its North American operations to generate a significant portion of the group’s cash. Indeed, during the first half of this year, the company’s North American assets, which are located within Louisiana, produced 218 barrels of oil equivalent per day, generating revenue for the company of $22,200 per day at an average price of $102 per barrel. This made up around 70% of President’s revenue for the period. 

Unfortunately, the price of the US oil benchmark West Texas Intermediate, has been falling faster than the price of Brent, the international oil benchmark, during the past month. WTI hit a low of $80 per barrel earlier this week, implying that President’s sales will take a big hit. Luckily, the price of WTI rebounded yesterday, rising around 5% to $84 per barrel.

However, although President relied upon its North American operations to generate the majority of its revenue during the first six months of this year, the company is now more diversified. In particular, the company acquired the additional 50% of its Argentinian subsidiary Puesto Guardian over the summer and as a result, President should see its production rise by 36% during the second half of the year to 530 boepd.

At the end of June, President had a net cash balance of $23m and City analysts currently expect the company to break even by 2016. 

Gearing up for growth

Leni Gas & Oil has not released any news today but the company’s shares have jumped 21% on heavy volume, catching the attention of many investors.

It seems as if this bounce is being driven by investors taking advantage of recent declines, to boost their holdings in the company, ahead of results from four new Goudron wells. Leni’s engineers are currently in the process of testing the newly drilled wells on Pad 2, GY-665 to GY-668 for their optimal flow rates. These tests should be completed within the seven days.

Initial production tests on wells GY-666 and GY-668 gave flow rates of 300 bopd and 330 bopd respectively at the end of September. So these wells have plenty of potential. 

What’s more, Leni recently announced that it had made the first sale from its newly commissioned sales tank at the Goudron Field. These facilities have enabled the company to boost daily sales to 2,000 barrels. It looks as if Leni will need this extra capacity, if the optimal flow rates from wells GY-665 to GY-668 are anything like their initial production rates.