Something stirring?

10th Mar '10 by djpreston

21 comments 4062 reads

No longer a holder but couldnt help noticing a sudden upswing in Encore this afternoon, bouncing strongly on decent volumes and breaking out of recent trading range. Is somethign stirring? (not that any news woudl ever leak and cause a share price to move before the official announcement of course).

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Djpreston

Premium Member

21 comments

Cuthbert C

10th Mar '10

Just spoke with someone in EO's investor relations department.

They said that as far as they are aware there is no reason for today's move/volume. They sounded convincing to me. I'd think if there were something afoot, I'd have got a "no comment" response".

So that rules out any asset deals.

Looking back at the volumes reported by Sharescope, today's level is the highest since October 2008. This means either a straightforward co-incidence where several buyers have acted at the same time by pure co-incidence.

Or alternatively perhaps someone who has taken a look at the gas storage project or any of the other assets being touted by EO for farm-ins or outright disposal has realised that they can buy the whole company cheaper* than they can buy an individual asset. And is now stake building preparatory to a bid.....

* cheaper after unwanted assets have been sold off.

nigelpm

10th Mar '10

I think it's a bid brewing. It's been stupidly cheap for too long. At some point sense returns when someone wakes up.

loglorry

10th Mar '10

Is it too cheap though? I mean the cash is about 15p but the other assets are not worth much more at present. The gas storage could be worth a lot of money but it will take a huge sum to develop it and I can't see the sort of buyers going for it in the near term. There are a lot of smaller gas storage plays to test out first. They could get it relatively cheap but it would cost them huge ammounts to put into production.

So where does that leave us? The shares have a floor no doubt but equally I can't see them going very much higher either so I suspect they will remain range bound. The share buyback was a bit of a joke to be honest. Management don't seem to be in any rush to return cash but why should they when they are sitting on a nice salary for doing not a lot of work.

There isn't a lot of point buying this stock above 17p equally not a lot of point selling it below 15p - hence I think it is range bound for a while. I'm out the capital can be used more effectively elsewhere.

Log

marben100

10th Mar '10

Loglorry,

You seem to be presuming that as well as the GS being worth v little, so is Cladhan (nor EDR deal, nor Catcher, nor other assets). Remember: http://fool.uk-wire.com/cgi-bin/articles/200811171300002931I.html

The 210/29a-4 Bowstring East discovery well was drilled to a total depth of 9,734 feet. Wireline logging confirmed 25 feet of net hydrocarbon pay over a gross interval of over 110 feet. Wireline pressure data and fluid sampling has established the presence of light oil and, significantly, no oil-water contact was observed...

...Alan Booth, EnCore Oil's Chief Executive Officer, commented:

'I am absolutely delighted with the success of this well. The well has intersected a light oil column of over 110 feet within an Upper Jurassic stratigraphic trap. Given its stratigraphic nature, there is potential for the hydrocarbon column height to increase both up dip and down dip of the current location.

'The wireline logging programme confirmed the presence of light oil with no oil-water contact and the group has now obtained sufficient oil samples, reservoir pressure and permeability data to conclude that the cost of a winter well testing programme would be better spent on further appraisal of the discovery. As such the group has decided to suspend the well for likely use during any future appraisal or development drilling.'

Encore 16.6% interest.

Cheers,

Mark

nigelpm

10th Mar '10

Well certainly it is too cheap anywhere below 15p (as it was for a good couple of months!) and IMHO below 16p given the EDR stake. And that completely ignores the rest of the business!

If you know of any better opportunities than pretty much zero downside with potential upside I'm all ears.

i.e. if everything else Encore do from here on in fails you are probably left with 14p (i.e. cash + EDR - expenses)

If anything at all comes off you are left with extra returns which could be anything from 0 to well over 100%.

It doesn't get much better IMHO iin equity ownership.

Fangorn

11th Mar '10

Hmmmmm up 10% so far this morning. Something seems to be going on.....

nigelpm

11th Mar '10

And back down again. Perhaps it was just a flurry of trades after all.

Fangorn

11th Mar '10

(: a bit of excitement nonetheless

Made my day!

wanderer101

12th Mar '10

This may explain things:

http://fool.uk-wire.com/cgi-bin/articles/201003120700054629I.html

Rig agreement signed for Catcher, spudding due in May.

NB This is from Nautical, no RNS from Encore as yet, which seems slightly lackadaisical

nigelpm

12th Mar '10

In reply to wanderer101 (post #10)

Could be Encore have more important things to worry about!

Cuthbert C

12th Mar '10

wanderer

seems v unlikely to me - IMHO the surge in EO's SP is quite disproportionate to the news about the Catcher rig.

I remain inclined to think that there is some stake building going on albeit on a small scale. I think that EO's buying in of its own shares at 14p or thereabouts has:

a) cleared the holdings of investors who are prepared to sell at these levels - leaving the bid very sensitive to further demand
b) advertised the fact that there is net cash per share of 14p - which would make an acquisition very cost effective - pay 17p get 14p back means you get the company's assets for 3p per share

and in addition EO has been touting its assets around the industry so interest in them is likely to be higher than it was

diamondharry

12th Mar '10

As a long term investor in Encore this statement from iii sums it up for me...

"The price rise IMO is due to investors realising that what we have here is an undervalued stock with several projects due to come online in the coming months. With a realistic price of 25-30p being obtainable in the next 6-12 months this is at a bargain basement price underpinned by a buyback scheme at 14.5p that has only just got it's feet wet."

Also another good link: http://www.investorschronicle.co.uk/Tips/Buy/MiniTips/article/20100208/8466f8ae-14a0-11df-95c1-0015171400aa/EnCore-hunts-DOGs.jsp

Plus all the talk about shale possibilities! Onwards and upwards!! GLA

thebuffoon

12th Mar '10

The price rise IMO is due to investors realising that what we have here is an undervalued stock with several projects due to come online in the coming months. With a realistic price of 25-30p being obtainable in the next 6-12 months this is at a bargain basement price underpinned by a buyback scheme at 14.5p that has only just got it's feet wet.

Makes you wonder why these enlightened investor/speculators didn't buy when the price was 3p cheaper a short while ago.

REO100

22nd Mar '10

Confirmation of EDR deal this morning. I noted that Alan Booth highlights that there may be a bargain or two available.

From a future strategic perspective, we are seeing increasing consolidation activity and note recent announcements of strategic directional changes to companies currently principally involved in the UK offshore E&P sector. With this changing backdrop to the UK offshore small cap sector, and the continuing limited availability of debt and equity capital, we remain alert for any consolidation or acquisition opportunities that may present themselves. We believe that our strong capital resources, our debt free balance sheet and our minimal commitments should serve us particularly well in this regard.”

This looks to be an interesting few months for EnCore, two drills, GS no value but being actively marketed and an experienced management team with cash on hip, not sure some longer term holders would want such activity but this is where you would expect the management to excel, for sure it could bring some excitement.

Based on current levels and potential activity the buy back plan looks history.

Reo

marben100

22nd Mar '10

Based on current levels and potential activity the buy back plan looks history.

...but it does mean that investors can buy or hold Encore shares, safe in the knowledge that it is highly unlikely that the SP can sink much below 15p (except during close periods when Encore might be prevented from buying back it's own shares).

Best,

Mark

REO100

22nd Mar '10

I certainly agree and see it as a positive, like an insurance policy. I am aware you have traded positively in the past with this knowledge - and quite a few took advantage of the SP (I managed a few but kept them) when it dipped around the turn/beginning of the year in a close period.

I think like most who have been invested for a while I wanted to let this run (with the knowledge of the buyback in place) and see how Cladhan in particular may play out and monitise from there, but I am starting to think management might be looking at using some of the funds in a more aggressive manner. I am relaxed about this, I just had not really considered this was a route management might take (not sure how other LT holders may feel) as whilst to this date GS has been a disappointment I still believe this management have the expertise/experience to identify opportunities. It is a risk I am willing to take and hope they will deliver and remind myself they constantly stick a certain paragraph at the end of every RNS - I will say though sometime this year would be good as it has been a bit of a slog from the Esmond results :-)

“The principal strategy is to create shareholder value through the successful exploration and appraisal of prospects and discoveries. The Company will seek to monetise or exchange the asset at the appropriate point in its life cycle and return value directly to shareholders wherever possible.”

Best Regards

Reo

marben100

22nd Mar '10

I am relaxed about this, I just had not really considered this was a route management might take

Encore's last statement on strategy was this, from their interims ,

Our strategy, as outlined at the AGM in September, is to focus our near-term capital expenditure only on those assets which, if successful, have the potential to make a material difference to our asset and market values. We identified those assets as Catcher, Cladhan and Gas Storage, all of which require only a limited amount of capital. As we discussed at the time, we expect to understand better what their potential values could be during the first half of 2010, and indeed we and our co-venturers have now procured rigs for both Catcher (late March to early April spud) and Cladhan (late May to early July spud). Additionally, we have started to market our Gas Storage project, and we also expect that the transaction with Egdon will be finalised in the first half.

We recognise that some of our shareholders would like us to continue to expose them to high risk, high reward exploration and appraisal drilling, while others, understandably, wish us to preserve our capital, with a view to returning it through a capital reconstruction later in 2010, or at the time when we have greater certainty over our three principal assets. We continue to seek farm-in partners for a number of our exploration/appraisal licences, although the market remains difficult, particularly for high risk/high reward targets. Our strategy to return value to our shareholders means that we would not wish, at this stage, to commit more of our capital to a number of these prospects. Alongside seeking farm-in partners, we are considering alternative options for what we believe to be an attractive appraisal and exploration portfolio.

I intend to attend the EGM and seek clarification of whether this strategy has changed. I wonder whether the view of major shareholders and their input to AB has changed (given that they didn't take advantage of the buyback to obtain a capital return)?

When the shares were trading below 15p, I was very heavily overweight in Encore because I regarding that holding as at least as good as cash (given cash backing and the buyback programme). I have since reduced to a normal sized shareholding, as the price has risen above NTAV, and I am very relaxed about continuing with that level of exposure at present.

Once I have got some more clarity on the strategy going forward (and, in particular, the degree of risk it entails), I will take a view on the size of position I am happy to hold, at what price levels.

Cheers,

Mark

Cuthbert C

22nd Mar '10

Hi Mark

which EGM are you talking about? I can't see any references to an EGM - but my ability to look at things without seeing them is coming on fast and according to Mrs T almost rivals my ability to listen without hearing.

T

marben100

22nd Mar '10

Hi T,

...The transfer to Egdon of EnCore's UK onshore licences and interest in Ceres is subject to approval by Egdon shareholders at a general meeting to be held on 6 April 2010...

D'oh! Looks like I misread that. :0)

Thanks,

Mark

REO100

13th May '10

From todays's Premier IMS reference - Catcher.

A rig is expected on location next week to drill the Catcher well

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Djpreston

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