LGO Energy(LSE: LGO) andBowLeven(LSE: BLVN) are rising, with their shares up 9% and 5%, respectively, at the time of writing.Their recent performances are encouraging, too but which one should you choose to if you want to make a bundle?
Is LGO The One?
There hasnt been anything major to report since 30 April, whenLGO issued its latest Goudron Drilling and Field Update,which didnt add much to theinvestment case.
The shares have appreciated by about 20% since, and investors are seemingly attracted to LGO ahead of its trading update for 2014, which is expected at the end of May.No news would be bad news this time around, and thats a risk that would-be investors ought to consider. Moreover, trading volumes remain rather low.
The stock is in recovery mode, but is still down 33% on the year to date. What appears certain is that if concrete, positive news aboutits Goudron field in Trinidad emerges in the next few quarters, LGO could almost certainly end the year in positive territory.After all,LGO has funding options, although one of the biggest mid-term risksinto 2016/2017 is represented by dilution risk LGOmay have to turn to its shareholders to raise fresh funds if findings at its Goudron field do not meetexpectations.
What Youd Be Buying
Theres time, though.
Its worth considering that even though LGO had accumulated losses of 25m on revenues of 17m between 2009 and 2013, in the first quarter it announced that its subsidiaryGoudron E&P Limited had managed to raise a $25m pre-paid oil swap facility viaBNP Paribas.
If you invest now at 2.87p a share, where LGO currently trades, you should considerthat it traded above 6p at around the end of September.That post-crisis record valuation came only a few days before LGO reported a trading update, according to which Goudron would remain its focus in 2014, while other elements of its portfolio had significant untapped potential.
In fairness, not many elements have pointed to rapid growth and meaningful progress since, Id argue.For the record, LGO hit a 52-week low of 1.02p on 15 May 2014.
BowLeven Has Cash To Spend
BowLevens equity valuation is up 17% since the 2015 trough that it hitin January. The shares are flat for the year so far, though, and according to their current valuation of 31p, BowLevens market cap stands at 100m, for an implied enterprise value of less than 40m, which signals a strong net cash position.
When BowLevencompleted the Etindefarm-outtransactionwith Lukoil/New Age earlier this year a deal thatrelated to the sale of part of its interests in theEtinde Permit, offshore Cameroonthe aggregate total consideration it fetched to give up control in the development was about $250m, and comprised initial cash proceeds of$165m, which were received on16 March 2015.
Even assuming that Bowlevens cash pile has fallen since,at todays price of about 30p a share youd be buying the stock for roughly the value of its grosscash position.Only a fewanalysts cover the shares, but consensus is thatBowLeven could double, and I find some merits in such a view.
Considering all these elements, risk could be minimised by investing your hard-earned savings in another premium small-cap that: a) belongs to a different league; b) is more defensive thanLGO and BowLeven; c) and whosetrack record, financials, cash flows and current/forward valuationpoint to plenty of value right now.
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Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.