Time flies these days. Where have the last 6 months gone? It’s not been dull – that’s for sure.
How best to sum up H1? Well, it’s been a first half full of surprises and battles of the underdogs.
First we had PoO doubling off lows. The once unwanted and battered commodity came surging back, causing widespread embarrassment for the highly paid ‘so-called’ analysts from Goldman Sachs. They’ve made more wrong turns than an out of date Sat-Nav.
Then came Leicester City – crowned PL champions and deservedly so. But 12 months prior, they were indeed scraping the bottom of the barrel. A recovery story to put a smile on every supporters face.
And more recently, we have England’s exit from the Euro’s. Not Brexit, but the woeful performance against Iceland. Like Leicester, they dared to believe and executed a job like plan with fine efficiency. Unfortunately the same cannot be said of Brexit. Yes – the people have voted, but where’s the plan B? It’s a shambles. MP’s in power should not be entering into Referendum’s if they don’t have a cohesive plan in place to deal with the consequences. It’s school boy stuff which is not all that surprising considering the bulk of the headless chickens are indeed schooled from the very same farm. Just what do they feed them for school dinners? Eton Mess?
So where does that leave us all in H2? Well, it’s not likely to be as exciting as H1 but there are a few events to look out for. Top of the list is the US elections. Hilary vs Trump. Historically, by hook or by crook, stock markets tend to rise into US elections. And with EU market girations expected for the next 6 months minimum, any US interest rate rises (the arch enemy of the money markets at the moment) seems off the table. Can’t going upsetting the US electorate can we? PoO’s re-balancing looks in full swing, with many analysts getting excitable with predictions of $70pb towards end of the year. I’d be happy with $65pb but feel even that might be too far a reach until demand rises in 2017. So some major events to come in H2 and of course the new UK PM appointment to come. But don’t get too excited, it’s in the bag (the handbag) already if you ask me.
It’s been a few years before I can say this… but i’m delighted to report that TheShareHub 2016 hotlist has kicked some serious derriere’s in H1.
Results as follows: Jan 4th – June 30th 2016.
1. TheShareHub Hotlist top ten picks up 41%+ (booooooom!)
2. The Daily Mail top ten picks up 1.7%
3. Independent top ten picks down 9.5%
Which stocks to watch out for in H2?
Currently the only two poor performing stocks (and in the red) in the sharehub top ten are XEL and OPHR. In late September (30th) XEL must agree terms with bondholders or seek a further extension if of course it is granted. The chances of the latter look slim so the next 12 weeks will be crucial for XEL shareholders. They have a terrific asset in Bentley. 260mmboe in reserves and 100% ownership. It would be a rare sight indeed to see a company holding that amount of oil go under or into admin. The debt problem involves a £90million loan. It’s not a huge amount but XEL find themselves in a tricky spot whereby buyers, farm in partners and financing players are all working off a very low price deck. At 8.5p per share and just over £25mil market cap, XEL is priced for failure. Long term holders will likely suffer (averages above 100p+) but risk on traders/investors might sense an opportunity here. If XEL pull it off it’s very likely that bondholders will seek some kind of equity. A debt free XEL or a debt ‘kicked down the road to 2018’ XEL is going to be worth possible 4 or 5 times today’s share price. It wouldn’t surprise me one bit to see the sp edge back towards 15p to 20p ranges if or when a deal approaches. Certainly one to watch but avoid like the plague if you don’t like big risk plays.
Ophir – this one is a puzzle. Yes, the bulk of exploration and development projects are a year or two away, so the paint drying treatment is fair to some extent. And the recent failed farm out deal on EG assets is certainly not great news. But this company has serious assets on its books. The tanzanian gas interests are worth in excess of $1bln using past sales. It’s one to watch in H2 simply because I think they will sell that stake soon and with the money gained, buy some bargains. And unlike the Salamander deal, I think they’ll get it right this time.
Others to watch are PMO. Premier have debt talks ongoing but once through that, should be testing 100p+ again. Not without risk of course. At 75p, they have recovered well from 19p lows.
Ithaca are the outstanding play of 2016 and the first sharehub multibagger to report. Currently up 150%+ from the 28p Jan entry price but a whopping 350%+ from 16p lows. At 74p the stock is soaring ahead of Stella first oil. Assuming all goes well with the new rig and PoO continues higher, IAE should be headed higher. That said, at 74p it has a bit priced in already.
Next up, HUR (Hurricane). The company is set to drill two wells in the next few weeks and assuming data is good, should then go on to achieve a decent farm out deal. If they are lucky, they will time those talks with PoO rebalancing in the $60’s and the market/sector in much better mood. At 17p, the stock has clear blue sky all the way up to 40p on the charts. To achieve this, they will need to prove up their OIP numbers to the high end, circa 250mmboe. If they achieve 300mmboe, then that really would be a big surprise.
Finally AMER, this one has been a headache. Management have done a fine job of building up expectations only then to dash them with missed deadline after missed deadline. It’s a torment as the stock has great promise but is going no where fast until Management can confirm pipeline is active and oil deals are in place to get decent output flowing through to Ecuador. The company can only deliver 5k to 7kbopd from their own licences. The pipeline really needs 20kbopd+ to make commercial sense and 50kbopd+ capacity is a boon. I would expect some kind of deal to be signed soon which boosts the pipeline volumes. The trouble is… AMER management have a habit of using AMER shares like candy. If they keep issuing shares like this, they’ll end up diluting the little man completely out of the picture. Market will likely rerate when it sees evidence of ‘pipeline’ revenues.
Enjoy the rest of H2, the sharehub will feature stories and commentary when discussion news arrives. It’s looking good for a blue ‘year’ but worth noting this is just the beginning. The commodity sector is long overdue some M&A and this normally brings with it a sector wide rally as market begins to speculate on who or what might be next for the buyers or predators.