viewArcher Daniels Midland

Views From The Trading Floor 8th December



The European pressure cooker has been cranked up to “very high” ahead of the make-or-break meeting of minds in Brussels tomorrow. The European Central bank cut the benchmark interest rate by 0.25% to a historical low of 1% from 1.25%, as the debt crisis and possible double dip recession fears continue to haunt the Eurozone. This is the second cut in as many months for the new ECB president, the first came on his first day in the hot seat. We are now back to the lows of 2009/2010. Mario Draghi will be faced with a torrent of questions at the post-meeting press conference this afternoon, I would not like to be in his shoes.

The Bank of England kept the benchmark interest rate at a record low of 0.5% today. We have been at this level since March 2009, a level I cannot see changing for some time due to the continued worries over the Eurozone and its debt load. Unless of course we see a rabbit pulled out of the hat at tomorrow's summit that will make the debt crisis disappear. Quantitative easing remained unchanged, in October the Bank of England said it would pump another £75 billion into the economy. Since 2009 the BOE has pumped £200 billion into the economy of its proposed £275 billion purchase programme.

TheTrumpet.com circulated a very interesting article via the Bloomberg news wires this morning, highlighting the continued struggle between Argentina and Brittan over the Falkland islands. Rockhopper (LON:RKH), Desire Petroleum (LON:DES), Falkland Oil & Gas (LON:FOGL) and Borders & Southern (LON:BOR) are all drilling in the disputed waters and to date Rockhopper is the only one with any success. Desire Petroleum has suffered a number of unsuccessful drills and this has been reflected in the share price over the last 2 years of trading. Even with all the uncertainties surrounding the area, this is still an region the punters love to play in, and Rockhopper has been the shining beacon for the sector. We are big fans of the Rockhopper story, and have been for some time.  With Falkland Oil & Gas and Boarders & Southern mobilising the Levi Eisiksson rig to the disputed waters, due to arrive late January 2012, and Rockhopper and Desire Petroleum expecting initial drilling and logging from the 14/15-4 farm-in well, we are in interesting times for the group. Should the Desire/Rockhopper well be another dry one, we would not expect it to be seen as much of a negative for Rockhopper, any positive findings would be welcomed with yet another rush on the share price for both Rockhopper and Desire. The ramifications for Desire should the well be dry, are unthinkable. Our favoured play in the sector is Rockhopper and our target price is 600p versus a current share price of approximately 245p.

Below is a layout of the Sea Lion discovery, the top section Rockhopper have a 100% interest in and the bottom section they have a 60%/40% split with Desire. The 14/15-4 well is towards the bottom of the image circled in red.

Commodities Corner


Gold – ↓Trading at $1713, down $29 (-1.64%)

Silver –↓Trading at $31.75, down 74c (-2.23%)

Copper – ↓Trading at $7784, down $80 (-1.01%) 

Zinc – ↓ Trading at $1993, down $3.25 (-0.16%)

WTI Crude – ↓Trading at $98.73, down $1.70 (-1.69%) 

Brent Crude – ↓Trading at $107.96, down $1.57 (-1.43%) 

Natural Gas (HH) – ↑ Trading at $3.52, up 10c (+2.63%)



GBP vs USD = 1.5627

GBP vs EUR = 1.1733


Global Themes

Desire Petroleum (LON:DES) vs. Rockhopper (LON:RKH) vs. Falkland Oil & Gas (LON:FOGL) vs. Borders & Southern (LON:BOR) comparison chart over 2 years

As you can see the star performer by a long way is Rockhopper (Light Blue line), up over 396% over the last 2 years, Borders & Southern (Red line) up over 91%, Falkland Oil & Gas up over 41% and Desire Petroleum at the bottom of the list up a poultry 24% over the last 2 years.

Saints & Sinners

Oil & Gas 

Solo Oil PLC (LON:SOLO) closed up about 5.1% at 0.6p, with 11m shares traded. The company recently announced an update on drilling of exploration well, Ntorya-1, in the Mtwara Block of the Ruvuma Basin PSA ("PSA") in Tanzania. God news with the well expected to spud around the third week of this month.Urals Energy jumped 47% as traders moved to forward gear on the back of the news that Urals has transferred its long standing loans (the "Loans") to Taas-YuriakhNeftegazodobycha ("Taas") to Nagelfar Trade and Invest Ltd ("Nagelfar"). Highlights: Urals Energy (LON:UEN) to receive US$26 million, Debt to Petraco Oil Company Limited ("Petraco") to be discharged partly, Settlement reached with Finfund Limited ("Finfund"). Sefton Resources (LON:SER) was the dog of the day, down 11% after the company announced a placing to raise £1 million at 2.1p along with an update on drilling.


Altona Energy (LON:ANR) was top of the pops today, pushing 17% higher after the AIM listed fuels and energy developer announced key approvals for the bankable feasibility study on its Arckaringa project with its joint partner CNOOC. KEFI Minerals (LON:KEFI) pushed 11% better as bulletin boards speculated an update might be due. ECR Minerals (LON:ECR) took a decent step forward, trading as high at 1.35p from its close last night of 1.125p. The company wanted to highlight the assay results for a further 6 holes drilled at the flat Copper-molybdenum-gold-silver project in New Mexico. ECR has a holding of approximately 19% in THEMAC which is a TSX listed stock. Ormonde Mining (LON:ORM) moved 5% to the good after the company gave an update on its drilling at La Zarza which it has a joint venture agreement with Antofagasta. It highlighted several priority target areas for drilling, 3000 meters of drilling has been agreed by the joint venture to test all targets.GMA Resources (LON:GMA) dropped 15% after the company announced yesterday it was in talks to sell its holding in Amesmessa Gold Mine ENOR. Alba Minerals (LON:ALBA) slipped 13% as profit takers showed up after the recent run. The company announced yesterday that Teck Ireland had entered into an exploration option and joint venture agreement with them.

Oilfield Services

Kentz (LON:KENZ) pushed 3% higher after the Dow Jones news wires posted a report saying, the company expected revenue growth of more than 10% next year in Qatar, its biggest market in the Middle East, and is bidding on $1 billion worth of contracts in war-ravaged Iraq, the company's chief executive officer said Thursday. The FTSE 250-listed company--which employs 11,000 staff globally across 28 countries and specialises in engineering, construction and support services in the energy and resources sector, expects revenues in Qatar to hit $250 million in 2011 and to increase further in 2012, driven by its on-going contracts with government-owned energy companies. Plexus (LON:POS) pushed 2% higher after the company won yet another order, this time from Australian heavy weight Santos Ltd. Reported to be worth around £800,000. Profit takers showed up to the Petrofac (LON:PFC) party, after the recent  push higher on the FTSE 100 stock.A


Quick facts: Archer Daniels Midland

Price: 42.82 USD

Market: NYSE
Market Cap: $23.89 billion

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