FoxDavies views from the trading floor

Friday, January 13, 2012      

Saints & Sinners

Oil & Gas

Yesterday we highlighted the sudden volume increase in DEO Petroleum and that we were very interested in the next chapter for the company, should the volumes continue in that fashion. Well today the large volume prints continued to go through, and the share price reacted very favourably to the thought that a long standing seller may have been cleared up. Later in the trading session BlueGold Capital Management announced they no longer hold a position in the
company, dropping from a previous holding of 5.3 million shares. The stock is currently trading 19% better at 27p, a far cry from its 67p high just over a year ago. Even later in the session the company said it was pleased to announce that the amalgamation agreement to combine the Licence P218 Block 15/21a Gamma Sub Area ("Gamma") and Block 15/21g ("Spaniards") areas has been finalised. The parties to the agreement will now effect the relevant transfer documentation.

A firm commitment well is expected to be drilled by Encore (Operator) in the third quarter of 2012. DEO Petroleum has a carried interest of 12.62% and will make no cash contribution to the dry-hole cost of the first well. The remaining Gamma/Spaniards equity is held by Encore (28%), Nautical Petroleum (21%), Serica Energy (21%), Faroe Petroleum (8.4%), Maersk Oil (5.74%), and Atlantic Petroleum (3.24%).

Another stock we have been speaking about recently is San Leon Energy. We pointed out that the volumes were picking up aggressively last week while the stock was trading at what we thought was a very cheap price at 8.5p. The stock has continued its impressive rebound, trading at 10.5p on decent daily volumes. We have recently met with the management of the company and were very impressed with progress. Two wells should be nearing completion over the coming
weeks, so January could be a very news bearing month.

Ithaca Energy the Oil & Gas exploration company in the North Sea, gave an update on operations and production this morning. The shares did back off a touch (3.47%) to 136p as investors took some profits from the recent rally from 120p to 140p. Part of the update shed a little light on the Athena field, which is 10% owned by Lochard Energy through its 100% ownership of Zeus Petroluem. Investors have been waiting on news of the Floating Production, Storage, Offtake (FPSO). The company said engineering work on the mooring design and associated power supply has resulted in the mooring system receiving certification for year round operation in the UK North Sea. Commissioning of the vessel power turbine is well advanced. Sailaway from Dubai is scheduled for mid-February and hardening of the vessel to add protection during its transit to the UK is now in progress. So a slight delay to the arrival, but a few weeks in this game really is nothing, it sounds like great news that the FPSO will be able to operate all year round. Lochard
were trading flat at 9.25p on the day.Range Resources jumped 10% during trading to almost 10p, on volume of over 40 million shares. The stock has been very subdued while is partner at its Puntland asset, Red Emperor has had a very impressive run. Both stocks have been in the limelight recently as bulletin boards have speculated the spudding of the Puntland asset could be any day. Red Emperor said yesterday "As has been disclosed to the market on a regular basis, Red Emperor is earning a 20% interest in two highly prospective oil & gas blocks in Puntland, Somalia. The first exploration well to be drilled as part of a two well program is due to spud shortly. This landmark well will be the first to be drilled in Puntland in over 20 years and is targeting an enormous potential oil in place of close to 1 billion barrels. While drilling has not yet commenced, it is drawing very close and a comprehensive update will be released upon spudding." That should be enough fuel to keep investors chomping at the bit.

Circle Oil continued its run again today, pushing another 6% higher to 26.75p. The stock has run up from 20p to 27p over the last eight trading sessions. An impressive run considering the market has been trading with a lot of indecision over the last few weeks. On Wednesday the company announced the successful completion of the 2D and 3D seismic acquisition program in the Lalla Mimouna and Sebou permits in the Rharb Basin, Morocco and said the interpretation of the data is expected to be completed by the end of the first half of 2012.

Gulf Keystone regained the small loss from profit taking yesterday. The stock was trading 5% better at 273p as persistent bid chatter continues to swirl around the Kurdistan Oil & Gas exploration company.

After its fall yesterday, Gasol jumped 22% in trading to 0.46p, on larger than normal volume. The stock traded 6 million shares before lunch, and for a stock that trades on average 450,000 a day, 6 million is a decent slab to trade before the lunch boxes came out!

The well documented natural resources cash shell/investment company Zoltav Resources, back by Arkady bramovich jumped 12% to 5.8p in trading as volumes returned to the stock. The press have continued to discuss the potential that a deal could be in the pipeline. As always, we like to think volumes speak loader than many other indicators, so we will be watching the developments here.

On Tuesday we highlighted the volume move in Bluebird Energy. Bulletin boards continue to chat about an update that could be due from the company, and continued to pile into the company pushing volumes higher once again. Fort a company that can at times go for a week without trading, these volumes do make me wonder what is going on here. The stock pushed 6% better to 1p, continuing its run from 0.78p.

New World Oil and Gas which is an investment company, announced today that it has signed a non-binding Letter of Intent, or LOI, with Danica Resources ApS, granting the company a 90-day exclusivity period to undertake due diligence and complete a Competent Person's Report, or CPR, on a 6,400 square kilometer oil and gas concession, License No. 1/08 located in the productive Western Baltic region of the South Permian Basin of Denmark. Investors chased the
stock 7% higher in trading to 13.35p.

After the near 40% run in trading yesterday, it was no surprise to see TXO Plc. trading 8% easier to 0.7p. I would like to add that the fall was on tiny volume, so it would seem most of the buyers yesterday were not squeezed out during the tree shake today. The shares ran yesterday after the company gave an update on its investment in Empire Energy.

Oilfield Services

Rock Solid Images stepped 6.25% better to 2.125p during trading as the impressive move higher continued.

Plexus moved 3% better in trading to 87p continuing the recent run. The stock has moved from 77p to 87p over the last few weeks.

From the trading floor

All eyes were on the Italian and Spanish bond auctions today, with the latter borrowing €10 billion at an average rate of 4%. They managed to raise a lot more than the market had anticipated. The foremen raised €12 billion from its auction and will be paying 2.735% interest for the 12-month bonds.

The European Central Bank (ECB) left the key interest rate unchanged at 1% today, and here in our own back yard, the Bank of England (BOE) also left the benchmark interest rate unchanged at 0.5%. Mario Draghi faced a torrent of questions at his post rate decision meeting. We will get more answers when the press get tapping for tomorrows headlines.

Across the pond, US retail sales were on the menu for today, with expectations of a small increase on the November number by 0.3%. The actual number hit the wires a little less than expected but still with a gain of 0.1%. It happened to be the slowest growth rate in almost seven months according to the Commerce Department. The only real positive was that the November reading was revised up a touch to +0.4% from +0.2%.

As most feel the pain of energy bills over the festive period, it does seem we will be getting a little rest bite in the form of price cuts. British Gas has cut its electricity prices by 5% with immediate effect, and Scottish & Sothern are looking to reduce gas prices by 4.5% towards the end of March.

Written by Steven Asfour, Sales Trader at Fox-Davies


Article Tags

DEO Petroleum Range Resources Corporation Ithaca Energy Circle Oil Gulf Keystone New World Oil and Gas United Kingdom West Europe Finance North Africa North Sea Seismic Spud Watch

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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