What is best value in the Oil & Gas sector in today's sea of red?

Tuesday, Mar 15 2011 by
18
What is best value in the Oil  Gas sector in todays sea of red

We have some quite dramatic drops today in the Oil and Gas sector providing some bargain values (depending on your point of view) for many stocks.

On my watch list, I have:

Europa Oil & Gas (LON:EOG) is down 10% (after a big fall yesterday) to 27.5p. It is looking very likely that West Firby will come online around about expectations putting Core NAV around the 30p mark. On top of this there is a lot of juicy exploration upside. Their work in Romania looks promising and the big Berenx gas field could be a company maker. Some brokers have a risked NAV in the £2.50 region.

SOCO (LON:SIA) 343p. Lots of downside protection and a takeout bid must be north of 450p. The recent absence of news on the TGD extension looks like a positive as they haven't be immediately knocked back. There might not do much between now and August but when they start pumping at 50K/bpd, the stock will outperform.

Xcite Energy (LON:XEL): It is at 302p and has been over 400p. CPR news due soon. It looks like this could surprise to the upside but the stock has run a long way very quickly this year and so it is taking a pasting.

Gulf Keystone Petroleum (LON:GKP) 118p. If they can resolve poliltical issues in KRG, this could easily double or more. Plenty of oil and gas but still lots of political risk.

Dominion Petroleum (LON:DPL) 5.5p. Some great prospects still waiting for farming news. It has been as high as 7p recently. It is getting a pasting today.

Encore Oil (LON:EO.) - It is back in double figures now. Core NAV must be at least 85p with plenty to play for in greater catcher, the new cather blocks and of course Cladhan. The downside just got reduced substantially by todays falls. I've increased my position.

Sterling Resources (market not open yet) - if anything, the Japanese situation might mean higher UK gas prices making Breagh more valuable. Cladhan drilling now and it could be huge.

I hold all these and have taken a bit of pain today but I wasn't thinking of selling today anyway :-)

Any comments?

Log


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Gulf Keystone Petroleum Limited (Gulf Keystone) is a holding company. Gulf Keystone is an independent oil and gas exploration and production company with operations in the Kurdistan Region of Iraq. The Company operates in three regional business units: Algeria, Kurdistan and the United Kingdom. The Kurdistan segment consists of the Shaikan, Akri-Bijeel, Sheikh Adi and Ber Bahr blocks and the Erbil office which provides support to the operations in Kurdistan. The United Kingdom segment provides geological, geophysical and engineering services to the Gulf Keystone Group. The Algerian segment consists of the Algiers office and the Group’s operations in Algeria. Gulf Keystone Petroleum International (GKPI) holds Production Sharing Contracts for four exploration blocks in Kurdistan, including the Shaikan, Sheikh Adi, Ber Bahr and Akri-Bijeel blocks. more »

Share Price (Full)
65.86p
Change
1.5  2.3%
P/E (fwd)
15.3
Yield (fwd)
n/a
Mkt Cap (£m)
577.8

UK Oil & Gas Investments PLC (UKOG) is focused on seeking investments in the domestic conventional oil and gas sector in the United Kingdom. UKOG has no interest in the latest fad of fracking for shale gas. more »

Share Price (AIM)
0.472p
Change
0.0  5.9%
P/E (fwd)
n/a
Yield (fwd)
n/a
Mkt Cap (£m)
7.1



  Is Gulf Keystone Petroleum fundamentally strong or weak? Find out More »


15 Comments on this Article show/hide all

jseth123 15th Mar '11 1 of 15
4

"If you can keep your head..."

Plenty of pain today here too. I've decided to top up on Ithaca at 155p. The good news keeps rolling in there and they are remaining on target for 20kboepd by 2013. Since there last RNS came in they have been as high as 190p and have fallen dramatically today on the back of...no...news. The price of oil has not fallen off a cliff or anything. They're still going to be making buckets of cash.

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djpreston 15th Mar '11 2 of 15
8

In reply to jseth123, post #1

Id have to agree that Ithaca Energy (LON:IAE) looks ridiculous now given that they are progressing to bring on more and mroe production over the next 2 years. its a pure development play with minimal geological risk (none other than the usual niggles that come sometimes with bringing a new field onstream).

Theres lots of pain out there as the PIs in particular go "risk off" and margins are being called.

Faroe Petroleum (LON:FPM) is starting to look interesting given the drop from almost 220p to 147p now.

A lot of LNG cargoes will be redirected to Japan in the coming months and I cant see anythign but increased conventional production in Japan. £BG will benefit from their pre-eminent LNG positon in SE Asia but longer term perhaps we will see greater dependence n gas driven productino as the more eco sensitive countries turn their backs on the nuclear growth programmes (Ironic that the likes of Germany and the UK are very much more geologically sound). Longer term therefore Gas looks a good place to be.

Cove Energy (LON:COV) looks very tempting around the 80p level. Look at the Anadarko presentation for the value that they put n the four discoveries. Then theres all the explo in Moz plus Kenya etc etc.

£EO. - Agree with Log here - looks tempting as well but Ive already got a ton of exposure to Cladhan via Sterlign Resources. Maybe I will get a result on SLG Cladhan and then slice some to EO for Catcher and other news? Interesting possibility.

I see Coastal Energy (LON:CEO) is down 7% as well. That looks overdone imo.

Bowleven (LON:BLVN) - getting back towards the 300p level with a lot of newsflow coming up. See Marben's thread here for an excellent summary of the case for BLVN.

Fund Management: European Wealth
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safetyfirst 15th Mar '11 3 of 15
3

I have been adding to my Salamander Energy (LON: SMDR) stockpile. Loads of appraisal drilling to be done in the next twelve months, with average production of circa 20Kboepd. The market is failing to appreciate the recent Angklung Discovery which i've been told could hold upto 1TCF of gas inc surrounding prospects. Could put a case forward for so many more! Good time for lots of top-ups.

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marben100 15th Mar '11 4 of 15
11

Given the long-term downside to no worse than ~85p (IMV and as mentioned by log but too conservative in repo's view!), readers may not be surprised to learn that I added to my already large Encore positon @ 98.4p today. That's the kind of risk/reward I really love.

Out of the oil & gas sector, I also added to my previously small (having banked most of my profits) Caledon (LON:CDN) holding @ 97.65p . I see little reason why GRAM's proposed bid of 112p shouldn't go through now. Whilst there may be a very short-term hit to coking coal prices as Japan's steelmaking capacity goes offline, Japan's needs for rebuilding will be bullish for overall steel demand, and mills in China and India, in particular will make hay. At current prices of $300/tonne (or anything above $200/tonne) Caledon will be highly profitable, irrespective of long overdue productivity improvements to bring down costs. So, even if GRAM's bid failed (which would undoubtedly result in a short-term selloff), Caledon remains an attractive investement IMO.

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doverbeach 16th Mar '11 5 of 15

I added small amounts to Aurelian Oil & Gas (LON:AUL) and Cove Energy (LON:COV) yesterday.

db

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tournesol 16th Mar '11 6 of 15
4

I've doubled up on Petroceltic today

The investment case for doing so is both specific and general and both short and medium/long term

Short term ISTM that the SP has this week participated in the general market weakness but that is after its specific localised over-reaction to the N African Revolution. ISTM that the long term outlook for gas is likely to be positively influenced by the reaction against nuclear energy. And on top of that there was an RNS today with news of progress in Italy which I read as very positive.

My starting position was very modest, so even after I've doubled up it still represents only 2.5%. So modest fine tuning rather than filling my boots.

Very tempted to increase my holding of BP too - maybe tomorrow......

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MaxCashflow 16th Mar '11 7 of 15
5

I added to my Serica (LON:SQZ) today. It has around $22m cashflow PA (according to their reports) from their Indonesian assets and this will be much higher with current energy prices. This cashflow is from indonesian gas, which should be in demand at present given Japan's situation. I value this at around $130m (P/CF of 6). Then they have $28m net cash. And then they have lots of UK & Ireland opportunities, including 30% of Encore's Spaniards prospect. All of this for a market cap of only $110m.

The market cap is low because they have not had much expo success in the past, and also because there hasn't been any recent newsflow. Their long awaited strategic review should be published soon, although given the Japan situation their Indonesian assets are probably worth a lot more than a couple of months ago and they may need to evaluate it again.

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Fangorn 17th Mar '11 8 of 15
2

I added to the usual suspects yesterday, EO and BP. And, on a non oil note, some AGQ.

Fortunately still fairly cash weighted but not getting too involved as want to see how Japan pans out - the Middle East/North Africa issues are quietly boiling away in the background, as is the continued European debt problem, so i don't see things recovering quickly. Definitely time for a spot of value...AV continues to inspire :)

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loglorry 18th Mar '11 9 of 15
7

So three days later and time to review where were we on the original list I posted. Often the strength a stock pulls back with after an indescriminate sell off can give you a good idea of how well loved it is.

EOG 27.5p now 34p - this stock is very volatile anyway due to its small free float and Advfn following :-)

SIA 343p now 359p - I would have preferred to see Soco bounce back a bit harder - I guess bordom really has set in here.

EO 102 now 111p - Soco bouced back fairly sharply but was helped by a broker not with price target a massive 211p. I think there is something gonig on here and definitely one to hold.

XEL 302 now 311 - this was a dissapointment to me and is obviously more unloved than I would have liked. Perhaps it will be a long hard slog to get Bently up and running. NPE might offer more upside for heavy oil lovers.

GKP 118 now 150 - todays news of a huge oil find obviously helping a lot here up 22% as I write. Still much further to go in my view. GKP is sitting on some massive sized structures.

DPL 5.5p now 6.5p - a nice bounce back.

SLG - seemed to be pretty unscathed - higher gas prices should help cashflow once Breagh starts up. Cladhan drilling news over the next couple of months might be a game changer here.





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djpreston 18th Mar '11 10 of 15
5

In reply to loglorry, post #9

Well, since Log's done his I shoudl look at mine I guess...

BTW Log, youve mentioned Soco in the Encore section.

Ithaca Energy (LON:IAE) 155 - 178 up 14.8%

Faroe Petroleum (LON:FPM) 150 - 168.25 up 12.2%

Cove Energy (LON:COV) 82 - 93 up 13.4%

£EO 98.75 - 111 up 12.4%

Coastal Energy (LON:CEO) 411 - 432.5 up 5.2%

Bowleven (LON:BLVN) 315 - 329.75 up 4.7%

All based on the prices at the time of the post.

Surprised there asnt been more strength in BLVN especially with the Sapele 2 spud today (60 day well).

All in all, not too bad a return.

Fund Management: European Wealth
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loglorry 18th Mar '11 11 of 15

ooops sorry meant "EO bounced back". Also lots of other typos in there and I can't edit the post now. I was in a hurry as always!

EOG even higher now 36p bid. One of the most volatile E&Ps out there.

Log

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djpreston 18th Mar '11 12 of 15
1

And now news of Gadaffi ordering an immediate ceasfire.

Well, like all bullies, he doesnt like it when someone bigger stands up to him.

Fund Management: European Wealth
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doverbeach 18th Mar '11 13 of 15
4

I'll take that 'ceasefire' with a large pinch of salt...

db

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soros21 23rd Mar '11 14 of 15

Some good calls there loglorry.

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