Legacy Oil +Gas Inc. will acquire what it requires

Feb 16th, 2011 – Comment

I think that you have a good prospect with LEG and should ride it to early May then reconsider your options.


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Hello,

Could you please comment on Legacy Oil and Gas (LEG) trading on the TSE.

Satinder

 

Hi Satinder,

Legacy Oil +Gas Inc. ( LEG TSX) is driven by an experienced management team that is focused on an acquire and exploit strategy. They seek high quality light oil and natural gas assets that have a long reserve life. LEG exited 2010 producing 13,800 barrels of oil equivalent per day (BOEPD). On February 01, 2011 the company announced their latest acquisition and a $125 million bought deal financing. The deal was priced at $14.95 a share. The charts for the stock will tell the story of this ambitious energy developer.

The three year chart depicts the transformation of the company which began in July of 2009. When I see a big gap up like that I tend to assume that there was an underlying corporate action that drove the price up so dramatically. That is in fact what happened. What had been Glamis Resources was recapitalized and renamed on July 15, 2009.

Over the course of 2009 LEG management made five acquisitions and raised $215 million. In 2010 the company made three more acquisitions and and raised another $271 million. Clearly the stock has enjoyed a great advance since August of 2010 when it bounced off support at $10.00.

The six month chart illustrates the sweet profit making voyage that LEG has enjoyed. According to seasonality expert Don Vialoux, from dvtechtalk.com, the energy sector enjoys a period of seasonal strength that runs from late February to early May which suggests that LEG could enjoy further upside in the next eleven weeks.

The company has reported that it has close to 700 development drilling locations it intends on moving through. Development drilling is always most attractive because, although there is execution risk ,you are not exploring for a potential reservoir you are only looking to exploit already producing areas.

I think that you have a good prospect with LEG and should ride it to early May then reconsider your options. The energy sector  enjoys a second period of seasonal strength from late July to early October.This makes sense given that the fields have dried  after spring breakup and the rigs and their crews get back to the hard work of drilling for new production.

Happy Capitalism!

Categories: Energy
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