Malcy's 2017 O&G Bucket List

Wednesday, Feb 01 2017 by
4

Link below to MGW's 2017 bucket list picks for the Oil and Gas sector together with a review of the selections made in 2016.

http://www.malcysblog.com/2017/02/2017-bucket-list-2016-results/

Stockopedia metrics don't really work so well with these kind of mainly exploration and development energy stocks - just take a look at the stock ranks of the top 5 in the list - but together with the mining/other natural resource stocks 2016 was a particularly good year (fully accepting the previous three were pretty dire) for these sectors.

Gus.


Filed Under: Energy,

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Sound Energy plc is a Mediterranean upstream company. The principal activity of the Company and its subsidiaries is the exploration, appraisal and development to production as an operator in the oil and gas industry. Its principal activity is in Italy and Morocco. It operates through three segments: corporate; exploration and appraisal, and development and production. Its Tendrara permit is located in the Figuig Province, NorthEast Morocco. The Tendrara permit area, which is sub-divided into over eight blocks, covers a combined area of approximately 14,500 square kilometers. The Meridja permit is located next to its Tendrara license, and covers an area of over 9,000 square kilometers. The Sidi Moktar permit is located in the Essaouira Basin in central Morocco and is sub-divided into over three blocks (North, South and West). The Badile Permit is situated in the Piedmont Lombard Basin in northern Italy. Its Rapagnano Gas Field concession is located in Fermo Province, Marche Region. more »

LSE Price
50.75p
Change
-1.0%
Mkt Cap (£m)
515
P/E (fwd)
n/a
Yield (fwd)
n/a

Ithaca Energy Inc. is a North Sea oil and gas operator engaged in the appraisal and development of the United Kingdom undeveloped discoveries and the exploitation of its existing the United Kingdom producing asset portfolio. The Company has interests in three general areas within the United Kingdom sector of the North Sea: Northern North Sea, which consists of Dons, Fionn and Broom; Central North Sea, which consists of Greater Stella Area (GSA), Cook and Pierce, and Southern England consisting of Wytch Farm. The Dons Area consists of the Don Southwest, West Don and Ythan oil fields, which produce from the Brent reservoir sequence sandstones. The Wytch Farm field is an onshore/offshore Mesozoic oil field. Cook and Pierce produce through subsea wells. The Fionn oil field consists of a production well. The Broom field development consists of approximately six subsea wells, four gas lifted production wells and two water injectors. GSA has interests in a gas-condensate field. more »

LSE Price
110.75p
Change
 
Mkt Cap (£m)
n/a
P/E (fwd)
n/a
Yield (fwd)
n/a

Hurricane Energy plc is engaged in the exploration of oil and gas reserves principally on the United Kingdom Continental Shelf. The Company's acreage is on the United Kingdom Continental Shelf, West of Shetland, on which the Company has approximately two basement reservoir discoveries, each containing approximately 200 million barrels of oil equivalent (MMboe). Its licenses include P1368, P1485, P1835 and P2294. The Company has approximately 450 million barrels of 2C Contingent Resources on acreage. Its Lancaster discovery is located in blocks, including 205/21a, 205/22a and 205/26b. The Whirlwind discovery is located across blocks, including 205/21a and 205/22a in the West of Shetland. The Lincoln Basement prospect is located in 205/26b block. The Typhoon prospect is located in blocks, including 204/22a, 204/23c, 204/27a and 204/28a. The Strathmore Prospect is located in the 204/30a block, and contains oil in Triassic-aged sandstones. more »

LSE Price
26.75p
Change
-1.8%
Mkt Cap (£m)
524.1
P/E (fwd)
n/a
Yield (fwd)
n/a



  Is Sound Energy fundamentally strong or weak? Find out More »


9 Posts on this Thread show/hide all

Carey Blunt 1st Feb 1 of 9
3

I followed Malcy's selections last year using a dummy Stockopedia portfolio (I was too chicken to commit any real money). I bought a (fantasy) equal amount of each of the stocks.
Its up almost exactly 100% in the year since then.
The only loser was Pantheon Resources (LON:PANR) which is 4.26% down and has the lowest stockrank. The biggest gainer ( Hurricane Energy (LON:HUR) ) is up 395% and Ithaca Energy Inc (LON:IAE) is also up 394%. Both have ranks between 20 and 45.
I don't think I can post a link to the folio here that people can see but it was an interesting experiment. Mostly I think it was down to timing as oil was at a real low at that point and has steadily gone up since then.
However, i can see that a bucket of Oil shares could work as a geared oil price portfolio a bit like NAPS but horrifically riskier!

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gus 1065 1st Feb 2 of 9

In reply to Carey Blunt, post #1

Hi Carey - thanks for the feedback.

As luck would have it, I was already invested in a few O&G stocks and was looking to find some other investments to allow me to spread the risk through diversification when I came across Malcy's bucket list this time last year. With oil bottoming out at US$25 a barrel it seemed a reasonable call that there would be a recovery at some point - the hard part was trying to separate the wheat from the chaff in a sector that has historically had more than its fair share of charlatans. I found Malcy's bucket list as well as the ongoing daily blog very useful in this regard and have built up quite a sizeable sector holding.

I currently hold nine of the 14 in the 2016 list as well as SDX Energy Inc (LON:SDX) and Jersey Oil and Gas (LON:JOG) of the new picks for 2017. (I hold some other O&G sector stocks too (such as Royal Dutch Shell (LON:RDSB) , BP (LON:BP.) and EnQuest (LON:ENQ) ) as well as a few of the oil service companies). Sods law, my largest individual investment was in Pantheon Resources (LON:PANR) which appears as one of the laggards of the 2016 list. However it did peak at over 180p last summer and I was able to top slice so my average price is below the current level and after a few operational hiccups they seem to be getting back on track so I'm still optimistic for this company's prospects. As you say Sound Energy (LON:SOU) , Ithaca Energy Inc (LON:IAE) and Hurricane Energy (LON:HUR) have all been stellar performers but even the mid table companies have done pretty well (albeit from a very low base).

While I agree with your comment that oil generally had a really good year in 2016, due credit to MGW in that there have been plenty of basket cases - Gulf Keystone Petroleum (LON:GKP) springs to mind - and his list of 14 stocks is remarkably free of them.

Best,

Gus.

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Bushranger 1st Feb 3 of 9

In reply to gus 1065, post #2

I hold Hurricane Energy (LON:HUR). and SDX Energy Inc (LON:SDX). Only bought in last month. I was waiting for this years bucket list to decide what I might add to. After going through Malcy's blogs I thought these two would be definate picks, so glad to see they were definately in it. May look at holdings I can dump to shift to one or more extra on the list.

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gus 1065 6th Feb 4 of 9
1

Ten green bottles .......

Bid for Ithaca Energy Inc (LON:IAE) announced this morning by significant existing shareholder Delek @ 120p/12% premium. Looks low ball but may tease out others interested in North Sea assets, especially given the recent weakness in £ in a US$ based commodity business.

http://www.londonstockexchange.com/exchange/news/m...

Possibly first of several salvos in a wider O&G M&A shake out?

Best,

Gus.

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Carey Blunt 6th Feb 5 of 9
1

I've been range trading Amerisur Resources (LON:AMER) over the past year, buying at around 25p and selling over 30p, fairly predictable pattern. For those interested in doing their own research its about 25p at the moment.

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VegPatch 6th Feb 6 of 9
1

I am told the Ithaca bid values the company on $23/boe on a 2P basis (i.e. Proved and probable barrels of oil in .the ground). This high valuation captures the fact that £430m has been spent on developing the Greater Stella field and it is shortly due to go into production.

I wonder what a sensible metric for 2P reserves which have been discovered but not yet had any capital spent on the field infrastructure yet. A bit like buying a piece of greenfield land with planning on it. I wonder if using $5 bbl on a 2P basis is too aggressive?

The reason I ask is that Jersey Oil and Gas (LON:JOG) is drilling the Verbier prospect later this summer. They have farmed out 70%to StatOil and retained 18%. The prospect is hoping to prove up a 117m bbl recoverable field (P50 basis). They are carried for the drilling of 1 well for up to $25m. The prospect is well situated between 2 producing fields Buchan and Tweedsmuir South (Talisman) about 120 miles off the coast from Aberdeen. The Buchan field started producing in 1981 and is only scheduled to close in Sept 2017, so maybe that will free up some pipeline capacity if oil is found at Verbier.

Statoil expect to drill the well this summer. It's a wild cat well, so the chance of success is low, but we know the area is oil prone but any discovery will still need a good trap and for the oil to be mobile to the surface. In a video I watched JOG management put a 1 in 4 chance on a discovery. That is much higher admittedly than the 1 in 10 or 15 that is the normal discovery rate. But it takes into account the 3D seismic that has been shot and the general area productivity.

My VegPatch maths goes like this
100m * $5 / GBPUSD 1.25 * 18% ownership = £84m

Current mkt cap £14m

= 600% upside

And probably >75% downside in the case of a duster.

On a risk basis the shares are worth probably 50% more than where they are trading
25% chance of success * £84m = £21m
75% chance the shares are basically worthless

Current mkt cap £14m

£21/£14 = 50% upside

But to be honest it's all academic. It all depends on the well being drilled.

So it's v high risk and not normally in my comfort zone but I must admit I have bought a few...


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gus 1065 6th Feb 7 of 9
1

Hi VegPatch.

Thanks for the commentary - not least your opening comment about the valuation being put on Ithaca Energy Inc (LON:IAE) at 120p as I hadn't seen that.

Your views on assessing Jersey Oil and Gas (LON:JOG) make good sense, the $64,000 questions being the valuation per barrel on the reserves found at Verbier and the probability of success in finding them (and by extension at what cost for extraction). Having StatOil in as a partner gives a good feeling but as ever there is a fair bit of speculation involved as in any game of (Russian) roulette. Likewise, they apparently have other prospects so it is not their only play but probably their brightest prospect at the moment.

I have also taken a small opening position and am watching with interest. Perhaps not one to bet the house on at the moment but the odds seem reasonable.

Best,

Gus.

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VegPatch 7th Feb 8 of 9
1

In reply to gus 1065, post #7

Hi Gus,
never ever bet the house on an oil E&P stock (unless you have multiple houses).
But I like the risk reward and actually think the shares have every chance of rising 50% from here pre drilling which at least would allow me to take out half of my initial stake before we ever know the result
That's the theory anyway...

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Bushranger 7th Feb 9 of 9
5

In reply to gus 1065, post #2

I would agree with you that credit has to be given to Malcom for seperating the chaff from the wheat. He sets out clearly his critera for the list and is open about the risks. I value Paul and Grahams expert opinions on small caps and Malcoms expert opinions on oil companies. None however control the fortunes of companies or, in Malcoms case, where the oil lies. But their opinions are a great starting point.

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