Leyshon Resources (LRL) - Ordos Basin It's tough to beat the...

Leyshon Resources (LRL) - Ordos Basin It's tough to beat the risk-reward profile of Leyshon Resources' ZJS5 well in central China's Ordos Basin. The company is spending $5m on an onshore, three-well drill program targeting a large unconventional gas reservoir, which independent consultant RISC estimates could hold between 1 trillion and 3.8 trillion cubic feet of tight gas. So while upside is high, downside is limited because the company is currently trading for less than cash. Even after the drill program, Leyshon could have as much as A$43m (£28m) in its treasury, compared with its current market capitalisation of £27.6m. Moreover, Leyshon's 100-per-cent-owned licence lies in a major gas producing region with advanced infrastructure less than a dozen kilometres away, and several multi-trillion-cubic-feet gas discoveries in adjacent blocks. An experienced drilling team from PetroChina is currently drilling the first well, expected to be completed by the end of November. IC view: With all the right ingredients in place to capitalise on a potential discovery, Leyshon is a low-risk bet on unconventional exploration and China's growing energy demand. True, the geologic chance of success is about one in six, but the company's strong cash backing means this is a no-brainer. Speculative buy. http://www.investorschronicle.co.uk/2012/11/07/shares/news-and-analysis/drill-watch-YmbL