Saints & Sinners
Oil & Gas
The interest continued again today in Bahamas Petroleum (LON:BPC). Pushing the shares up another 7% to 7.6p on almost 3 times the average daily volume by lunch. The volumes have continued to impress over the last few sessions, and bulletin boards are speculating that Repsol SA, Statoil and ONGC are due to update the market in the coming weeks on drilling in waters 70 miles from the Florida Keys. Petronas, and Gazprom will also be drilling close to the area. Any positive updates from these names can only add weight to the BPC story. Watch this one with an eagles eye.
Bowleven (LON:BLVN) the Oil & Gas exploration company, focused on Cameroon and West Africa, has been very active over the last few sessions. The stock has run from its lows of 59p in mid-December last year, to its recent high of 88p, volumes have been steadily increasing as well. Reading through the last update I found this little snippet “Bowleven will now integrate the data from the Sapele-3 well, including the MDT data and sidewall cores acquired over the Deep Omicron interval, within its overall technical evaluation of the Omicron, Epsilon and D-1r equivalent systems across the Douala Basin side of the Etinde Permit. Volumetric updates for Deep Omicron and Epsilon, reflecting the integration of the Sapele-3 data, will follow in due course.” Possibly the market is expecting some sort of comment from the company on the last line of this comment. They also said “ Jack-up Rig for 2012 Etinde Drilling Programme, a s previously announced, the Group intends to pursue a 2012 work programme that includes up to three appraisal wells and one exploration well on the Etinde Permit. To this end, Bowleven has issued an LOI and reached agreement in principle for a jack-up drilling rig to drill a programme of two firm and up to two further option wells on the Etinde Permit in 2012. Bowleven plans to sign the contract by the end of the month, subject only to securing confirmatory government approval of the contract award. The rig is currently expected to commence operations for Bowleven in Q2 2012, in immediate continuation of work for another operator in the region.” So the first half of 2012 looks to be a busy one, and 78p looks like it could be the first line of support, with 88p/90p as head line resistance. We will be watching for any updates.
Desire Petroleum (LON:DES) continued to play catch up to the other Falkland plays today, jumping another 5% to 32p on decent volume before lunch. Bulletin boards are full to the brim with all sorts of wild speculation on this one, but that only concrete thing that does stand out here is the increase in volumes over the last few days. We will be watching to see if the punters try to rally this one to fill the gap in the chart up to 36p.
Mediterranean Oil & Gas (LON:MOG) started to heat up again towards the back end of yesterday’s trading, and I also noticed that volumes started to pick up. The stock has been very buoyant following a large long standing seller being cleared, and two purchases of shares by Chairman Keith Henry. He stepped in to buy 250,000 and 500,000 shares, showing his faith in the company. The market is also waiting on an update regarding a potential modification to Legislative Decree no. 128, dated June 29, 2010, amending the Italian Environmental Code (decree no. 152/2006) (the "Decree"), which could ban offshore drilling at the Company's Ombrina Mare permit. The Company will update the market with a further announcement once the position has been clarified regarding the proposed amendment to the Decree.
We highlighted Leni Gas (LON:LGO) yesterday as one that had been catching out eye in terms of size of volume traded. Today the Range Resources (LON:RRL) announced the formation of a partnership with Leni Gas & Oilplc ("LGO") to jointly develop their interests in the Eastern Fields Area onshore southern Trinidad, including the Goudron and Beach Marcelle fields. Full details of the nuts and bolt of the partnership were outlined in the RNS, but the market liked the sound of the update and jumped in with both feet, Pushing the stock 35% higher in trading to 1.14p.
Tower Resources (LON:TRP) jumped 6% again before lunch, albeit on thin volume. Holders here are waiting on the spudding of the Mvule-1 well, and the anticipation of potential news has kept players chomping at the bit for this one. The stock has rallied from 3p to its current levels over the last 5 trading sessions, and volumes have really been catching the eye.
Urals Energy (LON:UEN) jumped 7.3% to 7.5p on 5 times the average traded volume before lunch! The stock has been largely uneventful over the last few months, trading between 6.75p and 7.5p, but the recent surge in volume does catch the eye and give food for thought. Any break of major resistance at 7.5p could get punters interested here once again.
Wessex Exploration (LON:WSX) started to pick up this morning, pushing 5% better on decent volume. Shares have been slipping over the last few sessions after the market turned its nose up at the recent update on operations in Guyane from Tullow. Support sits at 5.5p and the shares traded close to that first thing this morning. Investors seem to have drawn a line in the sand at that level and look to be jumping aboard the stock once again. If the shares can break 6.25p, and volumes continue to increase, the next major level of interest would be the 7p resistance level.
Nostra Terra (LON:NTOG) caught the eye this afternoon, as volume started to increase. The stock had traded 3 times the average daily volume by the end of lunch, and pushed 10% higher to 0.47p. Looking through the recent announcement I found this “Nostra Terra, the AIM-quoted oil and gas producer with projects in the USA, announces that further to the revised agreement with Hewitt Petroleum, Inc. (now Richfield Oil & Gas Company ("Richfield") and Hewitt Energy Group, Inc. (the "Agreement") which was announced on 14 April 2011, a 30-day extension to the repayment period of the USD1.3 million loan note has been granted to Richfield by the Company. Settlement of the outstanding amount is now anticipated on or before 31 January 2012.” The market looks to be aligning its self ahead of this anticipated settelment.
Nighthawk Energy (LON:HAWK) finally got moving again this morning, pushing 6% higher to 2.75p. The shares have been slipping since the fund raising at 2.5p last week. The stock looks to have resistance at 3p, and if the volumes can continue to pick up, possible a test of this major resistance could be on the cards. Possibly the catalyst for a move north could be this comment from the RNS on the 17th of January “Significant $7 million (gross) work program planned to commence early in Q2 2012 with work-overs of existing wells followed by up to five new wells” Stephen Gutteridge, Chairman of Nighthawk, also said "The strong support we have received for the placing is a further vote of confidence in Nighthawk as a renewed company with substantial potential as a sizeable US shale oil player. Combined with the support of our two largest shareholders through the convertible loans, Nighthawk is now well-funded to press ahead in 2012 as operator, with a focused development and drilling program at Jolly Ranch."
I highlighted Regency Mines (LON:RGM) yesterday as a potential stock to watch, as the volumes had just started to catch the eye. The stock traded another 5 million shares by the end of lunch which is almost 5 times the recent daily average, and jumped to 2p. The stock has been a little more active due the recent announcements from Red Rock Resources (LON:RRR) of which it is the largest shareholder with around 20% of the company. If volumes continue in this fashion, it would be no surprise to see the company start to test resistance levels at 2p to 2.1p.
Greatland Gold (LON:GGP) has continued its recent rally, jumping another 5% before lunch on almost 10 times the recent average daily volume. The stock has jumped from 1p to its current levels over the last week or so of trading, and the volumes have really been catching the eye. The CEO Callum Baxter recently bought 500,000 shares at various levels between 0.92p and 0.97p, from the 20th of December to the 17th of January. The last operational update did point out that 2012 could be a very busy year for the company. Resistance at 1.65p does look to be the next major level of resistance should the 1.5p break.
Pan African Resources (LON:PAF) jumped 10% to 17p on 5 times the volume of the recent daily average. The company said “that its earnings per share and headline earnings per share for the six months ended Dec. 31 are expected to be between 83% and 93% higher than the 0.53 pence per share over the same period the previous year” Investors took that very positive news and ran with it, pushing the stock to test the 52 week high. If this one can break its resistance at 17p, it will be interesting to see how far the market takes them.
Alba Mineral (LON:ALBA) volumes have started to catch the eye a little, for a stock that tends to trade virtually nothing, 2 million shares changing hands yesterday was a significant move. ALBA have jumped from 0.55p to 1.2p over the last few trading sessions, so to see the stock trading 15% easier to 0.7p on a bit of profit taking is no real surprise, but we will be watching for any further developments here.
Metminco (LON:MNC) continued its positive momentum, jumping another 6% to 11p. Volumes over the last few weeks have been very interesting, and the stock has reacted positively to it, moving from 8p to 11p during the volume increased run. The next major resistance level looks to be 12p, and I will be doing a little more digging on this one over the next few days to see if we can find any reason that could be attributed to the volume jump.
Changes to our commodity forecasts have impacted on the target prices of a number of companies under coverage here at Fox Davies, and the full note on each can be sent on to anyone that has not already received a copy on request.
Antofagasta’s (LON:ANTO) target price has increased to £12.54 having changed the copper forecast. However, this is still some way below the current price of £13.68. We think the stock is overvalued until we get clarity and certainty on growth plans. The company has a number of development projects. We just don’t know which one they will pursue and in what way and can’t increase our target price until we know. They could double the size of Los Palambres to 350k tonnes per day. But development could be expensive. We can see them having to send $1billion on a tailings dam alone, and development costs could exceed $5billion.
Randgold Resources (LON:RRS) has been raised to a Buy with a target price of £77.74 against a current price of £69.30. Randgold has solid production growth through to 2015 on known reserves, could potentially expand Gounkoto/Loulo and could reduce operating costs through the introduction of hydro power. 2011 performance was affected by one off issues such as union discussions and poor weather. We see them going better in 2012. A share price trigger could come when they restate ore reserves at $1000/oz cut off.
We have retained our Buy on Centamin (LON:CEY) and raised the target price to £1.46 compared to the current price of 95p. We think the perception of political risk is overdone, that production should improve in 2012 and that cash costs should fall with economies of scale and higher grades. We are excited by the company’s exploration potential and are encouraged by the record material moved from the open pit and underground operations in the last quarter.
We have raised our recommendation on African Barrick (LON:ABG) to a Buy with a price target if £5.78 against a current price of £4.64. African Barrick has continued to miss production guidance and has struggled to secure consistent power supply. This has meant they have had to install back-up diesel power facilities resulting is more capital expenditure. Margins have also been hit by rising labour and power costs. However, securing new power supply at Buzwagi is expected to ensure that the mine has a significantly better 2012. Also in the first quarter of 2012, ABG is expecting to release an updated resource estimate due to the on-going exploration success at the Nyanzaga project.
Discovery Metals (LON:DEM) has been on an excellent run of late going from 85p at the start of the year to its current price of £1.08. We have increased our target price to £1.06, but this is still below the current price so we are retaining our Hold. Whilst we think the shares are currently fully valued we are excited by the near term production potential. The company plans to kick off production in H2 with a target rate of 36ktpa Cu. They have been enjoying plenty of exploration success of late and we think there is potential for Discovery to increase this planned production significantly over the coming years.
From the trading floor
Fear that Greece will fail to get a deal agreed continued to sit on the minds of traders today, pushing the FTSE 100 40 points easier by the end of lunch to 5711 (-0.72). Volumes were the same as yesterday at this point in the day, with 675 million shares changing hands by the end of lunch. The FTSE AIM All-Share continued its rich vein of volume form by trading over 2 billion at the same point in time, although it was down 0.21%.
With the world’s top brass sitting in Davos at the moment, delegates were waiting for Angela Merkel to speak. She is expected to urge the Euro nations to get their acts together and deal with underlying problems with their economies. I am sure the press with give us more of an insight of the nuts and bolts of the meeting tomorrow.
The Bank of England (BOE) Minutes hit the wires this morning, showing that members had unanimously voted to hold interest rates and continue quantitative easing. The minutes did show that members were split on whether to expand QE during 2012.
German business confidence rose for the third month in a row, showing a positive start to the year for Europe’s largest economy. The business climate index (BCI) rose slightly to 108.3 in the first month of 2012, up from 107.3 in December of last year.
Gold – ↓Trading at $1655, down $10 (-0.56%)
Silver – ↓Trading at $32.02, down 3c (-0.02%)
Copper – ↓Trading at $8378, down $61 (-0.73%)
Zinc – ↑ Trading at $2156, up $2 (+0.22%)
WTI Crude – ↓Trading at $98.01, down $1 (-1.09%)
Brent Crude – ↓Trading at $109.14, down 87c (-0.86%)
Natural Gas (HH) – ↑ Trading at $2.64, up 9c (+3.52%)
GBP vs USD = 1.5581
GBP vs EUR = 1.2009
Written by Steven Asfour, Sales Trader at Fox-Davies