Sharehub Hotlist 2017 Week 28

Federer strolled to a record breaking 8th win at Wimbledon. The amount of wins is impressive, but it’s his ability to stay fit and strong that is his secret to success. He rested his body when others were battering theirs. He targeted the slams and ignored most else.

Investing is very similar. You have to know when to reduce exposure and when to increase it. Summer periods or the ‘sell in may’ mantra has long been a period for ‘reducing exposure’ and proven to be fairly successful. So how many of you sold in May and plan to come back in Mid September? With major indices at all time highs, 2017 could be one of those years where selling in May delivers losses or missed profits. In terms of commodities, it is widely expected that H2 is the period whereby PoO and other commods will deliver growth as they bounce back from years of being out of favour. For many PoO related equities, most are at 2017 lows. That’s incredible considering the ‘worst’ should be over for PoO. OPEC cuts are now 7 months in and compliance remains strong. US crude draws are rising by the week, US shale is stuttering ans the Rig count which was rising by roughly 20 to 30 rigs per week is now virtually at a standstill. Floating storage vessels that were containing millions of barrels of oil have been all but expended. China demand has been higher than forecast and there is a crisis looming in the middle east as Saudi’s take unprecedented action against Qatar.

Yet here we are with PoO at below $47pb (wti) and the hedge funds virtually ‘all’ net short. It seems a peculiar position to be in. One would normally expect the opposite. However, if you look back to 2016, you’ll see that many casino type hedge funds went under – some survived but made losses that are eye watering. All called the PoO recovery wrong. They were short then and they got spanked. In late 2016, they switched tact and went net long. But after just 3 months many were switching back to net short. Talk about being impatient! So here we are again, approaching a period whereby the data supports OPEC actions but the hedge funds defy common sense and remain short. If history repeats itself, some are going to go under again assuming PoO finally breaks into the mid $50’s again… which is long overdue.

August looks set to be one of the strongest months for PoO as Saudi’s pull more supplies off the market to manage demand closer to home. The US data could see huge draws over the coming weeks. Of course, this requires continued OPEC compliance and there have been a few signs of late of some OPEC members filling the space made by Saudi cuts. That’s not good news and it comes as no surprise that the Saudi’s have called an EGM for July 17th (today) although this is still rumoured of course. OPEC are set to meet Russia the following week on July 24th, so one imagines they will need to have their stall in order if discussing further cuts or extensions which they want Russian to be part of.

Top ten picks results based on 28 weeks as folllows:

Good performance by the Daily Mail picks as they shoot to the top. It’s been nip and tuck all year for the Telegraph and Daily Mail. Who will win? One thing is sure, the sharehub top ten need PoO in the mid $50’s or higher if they are to mount a challenge of any sort. That said, after the 150% growth rate of last year, the current 14% gains look pretty poor by those standards. On side note, it should be highlighted that many of the newspaper top ten picks deliver dividends which are not factored into the % increases. It’s not usually more than 4% to 6% but should be considered in the bigger picture.

Stocks to watch out for July/August…

PMO is due to update on Zama-1 DEEP as well as possible deal on Tolmount licence. Faroe should have news on Brasse sidetrack. PVR could deliver the summer blockbuster drill result that all investors dream of. They have two targets back to back and part of the same drill. So if the first is a duster there is always a chance te second could deliver. And finally a mentioned for Hummingbird Resources who are quietly going about their business at the Yanfolia gold mine. It might take a few more weeks or months of finalising the development and derisking it before the market finally rerates the stock but for the moment, the sp is lagging fair value by some distance. The stock should be into the 30’s by now based on comparison to peers. An update from the company should be coming in the next few days or couple of weeks.

Sharehub Hotlist 2017 Week 26

Week 26 is upon us already and that’s flown by. Seems apt to roll out the old football adage (picture oversized sheepskin coat) “it’s a game of two halves”.  Well, when it comes to commodities it’s certainly been a game of wait and see and thus far the data has failed to deliver what the market wants. But, as we head into the scond half of the year, recent data such as US production dropping and Rig count dropping suggests that the next 6 months could be PoO’s moment of truth. This will please the Saudi’s and Russian’s as both have key events lined up for early next year. Putin has elections and Saudi’s have Aramco IPO.

The sharehub top ten is suffering from being over weighted to O&G focussed stocks but this should bare fruit over the next few months. It’s going to take some action on PoO through to $57pb and above if the champion share hub picks of 2016 is to retain the crown. A swing of over 30% is going to be needed but with stocks like Providence Resources in there, any success on the upcoming Druid Well could deliver a fair wedge of that by itself. The Well is expected to spud later today or tomorrow and is set to be this summers blockbuster drill for small caps.

Hummingbird Resources continues to make progress and if all stays on time and budget then the stock should be into the high 30’s or early 40’s delivering the first multibagger to the top ten picks. But lets not jump the gun, still a decent 4 to 5 months left of development for the Hummingbird Team.

In the meantime, back to reality… and the Telegraph leads the pack with a healthy 12% gain fir the year thus far. Daily Mail picks hanging in there and thesharehub picks clearly needing a significant rally in commodities over the next few months just to participate.

5 Stocks to watch over coming weeks: PVR, HUM, FPM, PMO and ENQ. The latter two should begin to show signs of returning to earlier 2017 highs if or when PoO gets it’s toes back above $55pb+.

Sharehub Hotlist 2017 – Week 24

The sun is shining, summer is here and Major indices are at all time highs. All is well in global markets which is a little strange when you actually start to look at the economic data that drives major indices. The US data has steadily turned from bullish to fast becoming bearish. The Fed Reserve seem desperate to get rates up as fast as possible simply so they can ‘perhaps’ reduce them in a year or two again. The UK is in one of the most uncertain periods in its history. Retail sales are shoddy, big ticket items gone missing on shoppers lists and all points to a tightening of belts based on uncertainty – not good for the economy and that’s ontop of the ‘limbo’ that British businesses face over the next 18 months of Brexit negotiations. Yet, as highlighted above, stock markets are at all time highs. Anyone remember 2007/2008? Has the market learned anything? Well, that’s the wider market environment covered – now what about commodities? Well, in uncertain times you would normally expect GOLD to be soaring. But with stock markets at highs, that uncertainty is not being felt just yet. But I suspect when the sell off comes (and it will) GOLD will indeed soar higher. That bodes well for gold producers and sharehub’s Hummingbird Resources is in the top ten for that precise reason. Call it a hedge against uncertainty. On to PoO… well, the Saudi’s and Russian’s clearly see no benefit in supporting PoO with the usual verbals at a time when PoO is in a down month. The end of Q2 is always a poor period for oil with Q3 onwards picking up considerably due to US driving/holiday season. I think the Saudi’s will prefer to wait until July is out to see what the API/EIA data is like before cutting deeper or extending beyond March 2018. The market is currently quite narrow sighted in terms of PoO. Concentrating on US production numbers as a key driver is a recipe for disaster. While the US bucks the trend with strong production numbers, other countries – mainly in South America are seeing production numbers fall off a cliff. This is the natural decline or loss of market share that the Saudi’s have fought for over the last 2 years. It’s not just US production that matters, it’s global production.

Finally, one data set that seesm to have been ignored is the US rig counts. The last time US production was over 9.3mbopd the rig count was close to 1850 rigs. Currently, rigs are running at approx 950, that’s almost half. That suggests that many of the fields are producing from Wells drilled sometime ago. These wells are likely to dry up soon and new wells will be required. That’s the costly part. And that’s where US shale begins to struggle with prices at $50pb. US shale is relatively new so it is a little tricky to define the phases whereby fields decline and new wells are required. For instance, a rise in the rig count could be an indicator of dropping supplies rather than a bullish market as field owners are forced to drill news wells to keep revenue running to pay off debt. US shale will take a decent 1 to 2 years to show the true signs of what is going on. It would not surprise me one bit to see US production numbers begin to drop as we head into Q3. That would bode well for PoO although don’t get too excited, I don’t think you’ll see $57pb broken for sometime yet. But a trip back to mid $50’s would be helpful to most producers.

Week 24 results below:

Telegraph stretches out a lead over Daily Mail and Sharehub picks waiting for a few catalysts to unfold incoming weeks before hopefully making a strong recovery. FUM looks back in favour and Delek’s top up on FPM is a reminder to all Oil focused investors that oil is still very much in demand. All eyes on PVR’s icemax stena rig which should be leaving Gran Canaria in the next couple of weeks or so.

Sharehub Hotlist 2017 – Week 23

The weeks are flying by and thus far we’ve had a decent mix of the usual Russian spats mixed with a little North Korea woes, French elections, some Trumptastic events (on a daily basis so get used to it) and of course the big risk event of the year – the UK Elections.And no matter what the market has thrown at it, it just keeps on climbing with major indices are at all time highs. One thing is sure, it’s going to hurt quite a bit when that bubble bursts. Meanwhile, despite OPEC’s 9 month extension, PoO continues to struggle as the Saudi’s and Russian’s remain content with a ‘slow’ rebalance. Both have big events coming up towards the end of the year/early 2018, so as the months ticks by, if PoO isn’t heading where they want it ($60pb) then I expect deeper cuts to be delivered. For the moment, it’s a bit like watching paint dry across the commod sector with many equities just drifting in a typical summer daze.

However, there are some bright spots and Gold seems to be one of them. Every risk event thus far in last 8 months has seen Gold rise to 1290 range and on each occasion it has failed to break 1300 level. Gold presents a good hedge in these uncertain times. With equities looking a bit toppy on the major indices, Gold could be the go-to safe haven if or when a market correction occurs. Hummingbird Resources (part of thesharehub top ten) presents an early position into a soon to be, low cost gold producer. Should Gold edge above 1300 towards end of 2017, Hummingbird will be a stock very much in demand. For the moment, the stock is still a little under the radar despite the sharehub’s efforts in spreading the word. That should change as the moves closer towards Q3/Q4.

The summer may not be that dull for many of thesharehub top picks and here’s what to watch out for in the coming weeks. First up is Enquest. This stock has been choppy of late and traded inline with PoO. However, first oil from the huge Kraken development will refocus the markets mind on Enquest’s ability to generate serious cashflows even with PoO in the high $40’s. A rerate to the sp should occur once Kraken begins to flow oil and continues to build those flows over the coming months. Start up of production will be phased to protect integrity of wells and an initial flow of around 10kbopd should get the market excited especially if it arrives ahead of June 30th guide timeframe. Kraken should flow 50kbopd at full capacity and I would expect this to occur gradually building throughout 2017. This should provide decent news catalysts for the stock and keep momentum flowing.

Next up is Faroe. The main event is already under way and I would expect the Brasse well to TD around this time next week. Like Enquest, the stock has pulled back from highs based on PoO but I think many investors misunderstand Faroe’s mix of oil and gas assets. The company is less sensitive to oil movements than other oil focused players. Any success with brasse well and they should pen in another appraisal for Q3 adding another catalyst for the stock to look forward to. Next is Premier Oil. This stock has been a thorn in many sides. The debt renegotiations and process has hang over the stock like a dark cloud. The warrant deal at 42.75p has not helped much either as I believe this gives some of the larger shorters an easy get out. Once the debt is finalised in the coming 3 to 4 weeks, the warrants will be awarded and I expect the share price will be subject to the usual market machinations. This means some volatility ahead but with the debt cloud lifted, PMO should begin a more positive recovery path assuming PoO remains above $47pb or better.

The big summer blockbuster comes via Providence Resources. PVR was added to thesharehub top ten last week and replaces Ithaca which was sold to Delek and delisted from AIM.

Providence is set to drill the Druid well along with partner Cairn. The Stena IceMax rig is parked in Gran Canaria and should take no more than 4 to 5 days to reach the well location in the south irish sea. Thesharehub will update on when the rig moves. If successful, the resources are huge and PVR could be the first multibagger of 2017. Finally, keep an ear and eye open for Hurricane Energy. If the company is to remain on track for first oil in 2019, then a funding package/farm out deal has to be agreed within the next few weeks. It’s likely to involve some dilution in my opinion and it’s going to be a long period ahead for investors as the company moves to EPS development. The assets are great, but the shape and type of finance package is key to ensure shareholders are not heavily debted and over exposed to risks of further PoO corrections.

Sharehub results week 23.

It’s neck and neck between the Daily Mail and Telegraph picks. It’s going to be an interesting second half to the year for all picks. The sharehub top ten is way down on lower commodity prices but should see a turn around in H2 assuming PoO rebalances. A decent result for PVR could flip the top ten picks by itself, so fingers crossed Providence deliver a billion barrel discovery.

Thesharehub has been a little quiet of late, largely due to the benign and paint drying conditions of the commodity sector. With plenty of news due in the next few weeks and months, I would expect updates to be flowing thick and fast so stay tuned. And remember, always do your risk assessments and research on every stock you plan to invest in.

Sharehub Hotlist 2017 Week 20

Week 20 turned out to be another ‘volatile’ one for wider markets. The DOW got Trump’d again. That’s not the first time and it wont be the last, so do not expect calm waters ahead. With major Indices at near all time highs, the froth is certainly there to be skimmed. Commodities bounced off support levels after a pretty torrid few weeks. It’s unclear whether this can be supported through the traditionally slower summer months, and in Oil’s case, thursday’s Vienna OPEC meeting will surely define the next ‘leg up or leg down’. Verbal banter has been kept to a minimum which was quite a gesture from the Saudi’s to the Iranian’s considering the latter had a very important election underway. With that now sorted, it will be interesting to see if Iran play ball on the cuts/extension plans. All involved agree broadly with the 6 month extension plans and even 9 month plans look pretty much priced in by the market. Ultimately it comes down to compliance levels. And reading between the lines and history books, most expect these compliance levels to drop fast. The last 5 months of near 95% compliance is well above what the market expected, but the frightening point to consider here is that even with these record breaking commitments, the rebalance still proves elusive. Yesterday’s announcement via President Trump on selling off half of US strategic oil reserves will worry many. It potentially sets up 2018 for another year of gluts and sub $60pb prices. I suspect this news has been ‘outted’ prior to OPEC’s meeting as a basis to secure a 9 month extension instead of just 6. Trump’s visit to Saudi Arabia looks to have been timed and planned with some precision. Another concern for 2018 is that many players who are ‘cutting’ are actually infact doing maintenance to wells and storing Oil. This means that when cuts are lifted next year, some will be faster out of the blocks than others and oil coming to market will be instant and higher than ever before. Clearly some kind of forward ‘ongoing’ management of PoO is going to be required for a good few years yet.

All eyes will be on May 25th’s meeting although for many the outcome looks odds on to extend. 9 months looks like the obvious choice to me.

Stocks to watch out for over the coming weeks… keep an eye on Providence Resources. The huge Druid prospect is due to be drilled in the next few weeks and it’s set to be this summers blockbuster event for smaller caps. Hummingbird resources continues to make good progress on their gold development and with volatility likely to rise in 2017, a gold focussed stock is not a bad idea if seeking some hedge to other commodities like PoO or just plain old market volatility. Finally, Faroe’s Brasse appraisal well is due to spud in a matter of days.

Week 20 results below:

Sharehub Hotlist 2017 – Week 19

We are fast moving through the year and after 19 weeks of performance, it’s commodities that are yet again lagging the wider market. The gains made from the last OPEC meeting in Nov 2016 have virtually been wiped out. Hedge funds long positions on crude are at the lowest levels seen in over 6 months. It’s as if a ‘reset’ button has been pressed. So has the market got it right? Does it look fair? Well, if you consider the Saudi’s ‘pump like mad’ strategy in Dec 14 thru to Dec 16, it’s pretty easy to see whereall this stock went… yep.. straight into floating oil tanker storage. The bulk of oil was sold at average levels of around $45pb. Post the OPEC cut deal which started officially for most involved as of Jan 1st 2017, the last 5 months of cuts have basically been offset by oil docked from floating storage tankers. At a nice 10% to 20% premium which just about covers the tanker costs. The Saudi’s and Russian’s flooded the market and over the last 5 months, it’s ‘all’ OPEC and non OPEC members that are taking the hit. Net result… the Saudi’s and Russian’s break even leaving the rest of OPEC nursing heavy losses and market share reductions.

One positive to come out of the recent cuts is the compliance levels. These have been at 90% or better. That’s quite impressive considering OPEC have a habit of seeing cuts through as an arbitrary event. Going forwards, the verbal banter pre OPEC meeting on May 25th is for a cut extension of 9 months. This will certainly make make a difference and support crude but the big questions that remain is can OPEC really make 9 months of cuts stick amongst all members – many of which are tired and beaten to a pulp by the last 2 years events? Furthermore, the verbals are via Saudi’s and Russian’s. But what of Iran and Iraq? The latter two have sought exemptions to cuts and have been pumping like billy-o. The sticking point to any future oil cut deal will likely hinge on whether these two unpredictable and untrustworthy OPEC players, will agree to cap or even cut production. It could be a situation of ‘no cut deal’ if these two do not participate. In conclusion, the Oil cuts have achieved one thing and that’s to burn through the floating storage which was racked up by the Saudi’s in the first place. US production is near record highs and virtually unmoved. It looks like rising further assuming PoO rises into the mid $50’s again. This leaves all involved in ‘no mans land’. The next few years could be just a continuation of the same oil price levels. But here’s the biggy. Global oil reserves are dropping fast. And there are not enough investment and new developments arriving to replace the oil volumes required to satisfy demand. It might not be until 2021 before this is felt but jitters in the market could arrive well before then.

Short term – it’s likely to be pretty boring stuff for many Oil focused stocks. The only light at the end of the tunnel is if US production begins to drop. For the same reason as above, investment has dropped in US shale and wells that have been pumping like mad for the last 5 months will soon dry up and there are not the same volume of wells coming online to replace them. This can be seen by the rig count which is still half of what it was some 2 years ago.

All in all, it’s going to longer than expected to see the Oil Market recover and $60pb might not be seen until mid 2018 at best.

Results thus far – week 19

The last 3 weeks have been good for the wider market as french election risks past. The Daily mail and Telegraph picks continue to fight it out both showing very decent gains for first half of the year with a month to go. The sharehub picks need something more than the 9 month cuts from OPEC. US production has to fall and draws need to be sizable before $57pb is broken. M&A offers a glimmer of hope, and it’s possible we could see one or two more stocks get picked off before year end. Ithaca Energy will be delisted shortly and sharehub will review whether to redistribute the proceeds from sale to the other 9 stocks or to plough them into one of the remaining 9 picks.A decision will be made shortly. Historically, stocks cannot be traded in or out of the top ten picks and have to run for a full 12 months. But with buy outs, cash can be reinvested to add some interest to the second part of the year.