Alan Greenspan bullish on Gold

“Significant increases in inflation will
ultimately increase the price of gold.
Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection.”

Greenspan is right, as global risks increase and the equity market continues to head towards QE fuelled highs, investment funds are likely to turn to Gold as a hedge and insurance policy. As highlighted on thesharehub a few days ago, there are risks ahead via European woes, French/German elections, Brexit negotiations, US/Russia spats, US/Iranian spats and of course let us not forget US interest rates rising and A rather bubble like QE induced Stock market.

Gold stocks/equities have risen over the last few months as signs of a new bull phase emerge. Helped by other commodity rises based on demand, Gold looks set for a return to 1400 levels and beyond in the coming months. No guarantees of course!. The below article is worth a read.  Investing in a gold fund or specific equities might help gain the right risk/balance for the next 12 months. TheShareHub top ten for 2017 contains ‘Hummingbird Resources’ which is already doing very well in 2017. Although still early in the development phase, Hummingbird should continue to perform well with every milestone passed. The company is on track for first gold sales in Q4 2017. If Greenspan is correct, then Hummingbird may have timed their development and production plans to perfection.

PDF link below:

Gold_Investor_February_2017

ShareHub Hotlist 2017 – Week 7 Results

Another sideways week. PoO continues to trade in a tight range and despite the mother of all builds, the commodity remains firmly in the $54pb to $57pb trading range. Meanwhile, with every day that passes, we apparently get closer to the point of rebalancing. I say apparently… because it’s a bit like waiting for a Bus. It could take another 3 weeks or another 12. It all depends on the likes of Vitol and co. These oil traders continue to flood the market with oil bought last year, stored in floating tankers and then floated off the US coast waiting to dock at the appropriate time. It’s a game that has been ongoing for some 6 months+ but judging by the reaction in Crude/Brent prices, the market has got to wise to it and is not taking much notice. This will frustrate the likes of Vitol who lost millions last year betting on PoO’s downfall only to see the likes of Shell and BP buying the stuff up and supporting prices. I have a feeling that when the DRAWS do come in it’s likely to be DRAW upon DRAW upon DRAW thereafter. At which point, one would expect the Russian’s to begin pumping at full capacity again.

Vitol and other oil traders might not have much more firepower left to contain PoO’s rise. Most of the floating storage should have been expended / docked by now. When the numbers turn to DRAWS instead of BUILDS, then I think you’ll see the market get excited and the current trading range broken with a new level in and around $60pb to $65pb. Of course there are still some if’s and but’s with US shale numbers and OPEC compliance. It might take another 4 weeks+ before the market finally accepts that OPEC are capable of holding an agreement for longer than a few weeks.

With the above scenario in play it is not surprising to see many oil related stocks trade sideways until a more bullish signal to trade higher is delivered by market data.

Meanwhile the golden commodity is doing well. Gold has risen some 10%+ since start of the year. Mainly driven by rising equities and increasing hedging activity, it’s a flight to safety for many risk adverse investors. With Iranian issues still quite high and Russian interference seemingly constant week on week, Gold should continue to move higher.

Sharehub hotlist results – week 7

The telegraph surges to the top after being bottom for first part of the year. Great performance over the last 3 weeks. Meanwhile the Daily mail picks which kicked off 2017 with a whopping 10% start has cooled. Sharehub top ten continues to trade sideways inline with crude/brent as many stock picks are PoO related. All top pick lists are doing well and firmly in positive territory.

Sharehub Stocks to watch over the coming weeks based on potential news releases are as follows:

Faroe: Bone/Dazzler exploration drill results expected soon.
Hurricane: Halifax exploration drill / testing news expected soon
Hummingbird: Gold’s strength and progress updates could push sp into 30’s.
Enquest: March Results could confirm Kraken first oil for May production although June currently expected.
Quadrise: Transformational news via LONO tests due anytime between March and April. This stock moves fast on news and is long overdue a spike into new trading range at 16.5p and above.

Other ‘heads up’ stocks to watch include PVR (Barryroe deal expected soon and Druid update on drill date). Also, worthy of note is AEX and SOLO. Transformational test results are due within next 2 to 3 weeks on Tanzanian Gas discovery.

Friday News round up – Ithaca, Enquest and Hurricane.

My ‘bury news on friday’ theory goes out of the window today as Ithaca Energy delivers the long awaited RNS on Stella First Oil and Enquest confirms hook up at Kraken.

Both news releases were expected which perhaps explains the lack of share price rises on both. Ithaca is unfortunately capped by the 120p DELEK offer although that all said and done, the share price has been rising from 16p lows since this time last year based on Stella’s progress and in anticipation of first oil. The sector recovery has been a major catalyst too but there’s no doubt about it, shareholders will feel a bit ‘low’ today having waited 5 years+ for first oil only to know it will be heading into the pockets of DELEK in the future assuming the deal goes through.

As highlighted on the sharehub last week, Enquest’s storage vessel left Rotterdam and headed for the Kraken licence. It arrived on Monday and has since been hooked up and stabilised. That’s another risk ticked off the list of many! The company will now go through the extensive levels of checks and commissioning works which can take anything from 6 weeks to 12 weeks. Ithaca hit niggling problems with electrics when doing their final checks on Stella and consequently took another 3 months before flowing first oil today. Delays are to be expected as projects of this size rarely go through without some niggles. Safety is the number one concern… not profits.  Enquest are due to issue 2016 Results next month (circa wc 13th) and the company should be in a better position then to update the market on first oil. For the moment, the company is sticking with Q2 as the guidance.

Finally, Hurricane Energy has appointed ‘Stifel Nicolaus Europe Limited’ to work as joint broker with ‘Cenkos Securities plc’. Cenkos has served Hurricane well and the addition of a second broker suggests that Hurricane are seeking more coverage. This is to be expected as the company heads towards making a number of key funding decisions on their Lancaster Licence. The company has already made shareholders aware that the data room is open and a farm out deal is being sought. Dependent on what type of deal is agreed, it is likely that Hurricane may need a further equity raise in the future as funds raised in late 2016 were predominately for drilling Lincoln and Halifax. Today’s news serves as a less than subtle hint.

One would hope (or advise) that Hurricane avoid taking on any kind of debt, certainly not until first oil arrives in 2019. It’s just too risky in this current market.

All three stocks are part of thesharehub top ten for 2017.

One to watch – Providence Resources

 

Providence Resources (PVR) has been in the thick of it for the last few years as the bearish commodity cycle hit the sector the hard. M&A dried up and gaining any kind of funding or farm out deal was nigh impossible. Luckily for shareholders, PVR survived 2016 with the help and support of institutional investors who stumped up close to $70m in a very dilutive equity raise. Surprisingly, the company still has a moderate amount of shares in issue at 598m having done a reorganisation of capital some years back. This is quite small for an out and out explorer and still leaves some mileage for future equity raises should that be needed. The company has a number of key licences in and around the Celtic Basin. But by far and without a doubt, the jewel in the crown is a licence called ‘Barryroe’.

Barryroe is located in the North Celtic Sea Basin, offshore southern Ireland and is adjacent to the PETRONAS operated Kinsale Head gas field. The Company acts as Operator with 80% interest and Lansdowne (LOGP) 20%. In March 2012, Barryroe flowed at rates of 3,500 BOPD from a 7-metre vertical section of reservoir. Post-well analysis, in conjunction with the new 3D seismic data set, led to a substantial upgrade in the field size to over 1 billion barrels in place (2C). Subsequent work on multiple development concepts, together with detailed engineering studies on recovery factors, led to estimated 2C recoverable resources of over 300 million barrels of oil from the two main tested reservoir intervals. PVR’s market cap in 2012 was just shy of £700m.

Today, their market cap is just £100m.

This is very much down to poor market sentiment which tends to lead to a rather pessimistic view of 2C resources and especially in the case of a smaller player with limited access to funding. Barryroe requires more testing before a development plan can be agreed and the company has been seeking a farm out deal with a view to drill one or two more wells on the licence. It’s a similar position to that seen on Hurricane Energy in 2016. Hurricane also had a sizable discovery in their Lancaster Licence but due to the poor market backdrop had failed in gaining a decent farm out deal. With around 650m shares in issue, the company decided to do a dilutive equity raise of approx 350m shares at 10p which brought in valuable funds to drill a new well on the asset. The market cap was around £65m at the time of the fund raiser. 4 months later, and after some significant success with the drill bit, the market cap jumped to £400m. A further equity raise of 200m shares was done, more drill success followed and now with 1.2bln shares in issue, the market cap is £650m. But here’s the payback… the company still holds a 100% of all their assets.

Improved market conditions have also helped deliver share price growth. The second half of 2016 was a transformation to the earlier doldrums seen in Feb 2016. Since the end of 2016, the sector has improved further with M&A action accelerating and deals getting done.

Like Hurricane, Providence Resources did a dilutive equity deal in 2016 (as mentioned above). But the funds raised were not intended to be used directly on Barryroe, but instead are being used (in part) to finance a drill on a huge prospect called Druid/Drombeg in the southern porcupine basin. (See RNS below).

Providence have yet to confirm the finer details and timings around the SPB drill but all appears on track for June 2017. More announcements over the next few weeks should confirm all the pieces are in place.

With a market cap just over £100m, the Druid drill looks in for free. Should they be successful, it’s more than possible that they could follow in the footsteps of Hurricane Energy. The companies current cash position and upcoming drill catalyst also improves the chances of a good farm out deal on Barryroe – that and an improving market backdrop.

Of course, if all goes well, they may not need to farm out at all, but there’s something to be said for being sensible. And the reality is Barryroe is so large that it deserves a major cashed-up player behind it. But all in good time.

In summary, Providence Resources is back on the centre stage and as June approaches, it would not surprise to see the market beginning to price in a bit of the better sector sentiment that has to date deserted PVR. News on a Barryroe farm out deal could come at any time. Any prospective partner will be acutely aware that PVR have a potentially transformational drill in around 16 weeks time.

Current share price 18p. Broker targets vary between 30p and 40p.

Based on the opportunity ahead (drill catalyst) and current market conditions improving for farm out deals (M&A) thesharehub Pre-TD target for PVR is 36p. Any major success and that number could easily double again. Also worthy of a note is Lansdowne Oil&Gas (LOGP). They currently hold 20% share in Barryroe licence and with a market cap of just £6.5m, any Barryroe deal could see their shareprice rerate significantly higher. It’s possible that any farm out deal or partner involved could just take Lansdowne out with a bid as the company has little else on its books now after recent licence relinquishments.

Usual caveats apply. Please read the risk warnings in the right-hand side column.

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23 Jan 2017 07:00:20
PROVIDENCE RES.
Licence Update
Frontier Exploration Licence 2/14
Southern Porcupine Basin

FEL 2/14 PROGRESSED TO THE SECOND PHASE OF THE LICENCE
PRIMARY WORK PROGRAMME ACTIVITY IS THE DRILLING OF THE DRUID PROSPECT

PLANNED SPUD DATE FOR THE DRUID WELL IS JUNE 2017
Dublin and London – January 23, 2017 – Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Oil and Gas Exploration Company, provides an update on the Frontier Exploration Licence (“FEL”) 2/14, which lies in c. 2,250 metre water depth in the southern Porcupine Basin and is located c. 220 kilometres off the south west coast of Ireland.  The licence is operated by Providence Resources P.l.c. (“Providence”, 80%) on behalf of its partner Sosina Exploration Limited (“Sosina”, 20%), who are collectively referred to the “JV Partners”.  FEL 2/14 contains the Paleocene “Druid” and the Lower Cretaceous “Drombeg” exploration prospects.

LICENCE UPDATE
The Minister of State for the Department of Communications, Climate Action and Environment has given his consent to the progression to the second phase of the licence, subject to the completion of the agreed work programme which includes the drilling of the 53/6-A exploration well on the Paleocene Druid prospect and the subsequent integration of the well data into a comprehensive assessment of the petroleum potential of the licence.

OPERATIONAL UPDATE
In November 2016, the Company signed a drilling contract for the provision of the Stena IceMAX drill-ship to drill an exploration well in FEL 2/14 during 2017. The drilling contract provides for one firm well, plus an additional option, which is electable at the discretion of the JV Partners for the drilling of a second follow-on well.  Other key service contracts are now being finalized for the drilling operations for the planned 53/6-A exploration well. Based on the latest project timeline and, subject to standard regulatory approvals and consents, the 53/6-A exploration well is currently planned to spud in June 2017.

Speaking today, Tony O’Reilly, Chief Executive of Providence said:

“We are pleased to have received this confirmation from the government on the licence progression as we continue to move forward with all the necessary works to enable the drilling of this high impact exploration well during summer 2017.”

OPEC’s Top Producer Saudi Is Turning to Wind and Solar Power

Interesting article below via Bloomberg. Full story can be accessed via the below link.

Whilst it is largely focused on Solar and Wind, the implications go wider. Quadrise investors should be encouraged by this article as it shows the Saudi intent on renewables which should of course include MSAR at some juncture.

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  • Solar and wind plants will cut need to use oil in power plants
  • Expanding natural gas production to support new industry

The nation most identified with its massive oil reserves is turning to wind and solar to generate power at home and help extend the life of its crucial crude franchise.

Starting this year, Saudi Arabia plans to develop almost 10 gigawatts of renewable energy by 2023, starting with wind and solar plants in its vast northwestern desert. The effort could replace the equivalent of 80,000 barrels of oil a day now burned for power. Add in natural gas projects set to start later this decade, and the Saudis could quadruple that number, according to Wood MacKenzie Ltd. That could supplant all the crude burned in the kingdom during its winter months.

The effort goes hand-in-hand with a drive by the royal family to broaden the economy following two years of budget deficits tied to low oil prices. More industry, though, means more energy, with the amount of power used at peak times growing by 10 percent in the last year alone.

“Renewable energy is not a luxury anymore,” said Mario Maratheftis, chief economist at Standard Chartered Plc., in an interview. “If domestic use continues like this, eventually the Saudis won’t have spare oil to export.’’

https://www.bloomberg.com/news/articles/2017-02-14/saudis-warm-to-solar-as-opec-s-top-producer-aims-to-help-exports

ShareHub Hotlist 2017 – Week 6 Results

It was a choppy week for some stocks with FUM dropping to 45p only then to bounce back to 55p within a couple of days on nothing more than ‘no news’. Similar action on Enquest, although Enquest dipped to 41.75p only to bounce back to 48.75p on news the of the long awaited Armada Kraken departure. Rumours had begun across some bulletin boards (coincided with Marshall Wace opening a short, cough cough) that there were problems with the vessel and that it could be months before it departs, pushing back first oil on Kraken and denting the attraction of Enquest. This was prove untrue (Trump would call it Fake News!) last week as the vessel finally left Rotterdam on Friday. By then the Enquest share price had recovered back to 48.75p level and Marshall Wace had closed some of their short. These wild swings certainly give traders opportunities to make money but those less informed and nervy may have fallen foul of the recent dip and be sat on the sidelines nursing losses. News voids and a sniff of delays offer shorters opportunities to make some hay while ‘news’ is away. A week or so ago Premier Oil also dropped quickly from levels of 98p to 78p on nothing more than traders departing after the share price reaction post debt deal announcement lacked the relief spike they were looking for. Premier Oil has some sizable shorter positions currently in play and at some point these will need to be closed especially if PoO continues to rebalance. Until then, the stock is likely to be ‘managed’ or ‘traded’ as those shorters seek to exit with decent profits. Unfortunately for many of these shorters, they entered the party a bit late and have short positions in the 70’s and 80’s. The Saudi’s and OPEC mean business and with PoO (Brent) priced at around $56.5pb, the market is currently betting that OPEC compliance falls in the coming months. Historically compliance on cuts does not last long but this time around, compliance has been high, albeit 6 weeks in. Also note that January and Feb are historically poor months for PoO. The recent record build number which was issued last wednesday was indeed the product of oil traders bringing in floating storage. The benefits of this is that the headline number will always read ‘large build’ and that’s enough for the Oil traders to be able to close their shorts as PoO dips. It explains the sharp dips on oil only then to correct minutes later. It’s unclear how many vessels are still floating outside US ports but the consensus is that these manipulative games may be nearing an end and Oil Traders will be left to fight for Oil supplies as and when they come to market. This should see PoO correct further but is hugely dependent on OPEC seeing cuts through for at least another 3months. The full 6 month Cut period may not be needed but that depends on the speed of rebalance. and countries like Nigeria and Libya who have yet to bolster export levels.  When or IF PoO shows signs of sharp rebalancing, Enquest and Premier Oil should do very well. Shorters know this and know they have a small window to get positions closed. Premier’s debt deal will take some months to finalise but the risks of not getting a deal signed are close to zero. All parties involved agreed to the deal which took some 6 months+ to agree.

In summary, the market is still throwing up very decent opportunities and after some weeks of consolidation, some tussles are taking place between bulls and bears. Long term if PoO continues to recover, Premier Oil’s share price should be up nearer to 150p than the current 84p levels. And Enquest, well… if they get first oil flowing from Kraken within the next couple of months production numbers should come in at the high end to the early 50k’s. The market views the Kraken development as high risk and a huge unknown. Until first oil flows, that risk remains. At this present time (Monday 8.30am) the Armada Kraken vessel was just outside the Shetland area and within a few hours of the Kraken field location. Exciting times for Enquest holders, the stock should be trading at 70p+ when production gets up to 51kboepd levels as the company will be through the worst and looking ahead to a good few years of very decent production levels.

Week 6 was choppy but some decent bounce backs from a number of stocks sees the sharehub top picks leap to top of the table. The Telegraph is close behind and the Daily Mail picks which have led since week 1 are showing some signs of weakness and slip to 3rd spot.

Long way to go, but looking good for thesharehub top ten picks.