Ithaca Energy officially ended trading on AIM and has now been fully absorbed into the Delek empire. Well done to Delek for grabbing a very good quality company. Ithaca Energy are one of a very few stocks out there of late to be taken over. M&A has been missing in action for a few years now since Shell’s big move on BG. I would expect more M&A to kick in as we head into 2018. In the meantime, Ithaca’s sale leaves the sharehub top ten with only 9 entries which is not ideal. As mentioned in previous posts, rather than leave Ithaca in with a 20% gain (in at 99.5p and out at 119p) the decision is to reinvest the cash into a new stock thus giving some interest and growth opportunities for the second half of 2017. It was not easy finding a worthy replacement for IAE, but thesarehub top ten is suffering from weaker PoO prices as a whole and needs some firepower to get it back into the race. If PoO advances back to mid $50’s in second half of 2017 or higher, then the top picks should perform well. One area that has done well over the last year or so is ‘high impact exploration’. It’s a very risky business but it tends to deliver high growth rates if successful regardless of PoO’s movements. Hurricane, Sound Energy, Pantheon are all examples of exploration stocks that have outperformed producers. So based on this, Providence Resources has been picked as IAE’s replacement. PVR has a portfolio of high impact prospects as well as proven discoveries in Barryroe/Spanish point. In a few weeks time, the company is about to drill what I believe to be a ‘monster sized’ resource opportunity. The Stena IceMax drill ship has been contracted to drill the Druid well and is currently undergoing final tests west of Morocco. When it sets sail, the expectation and excitement should begin to build towards what should be this summers big story. PVR is debt free but has no production and prefers to seek farm out deals to gain carry’s on costs. As per news yesterday, PVR has managed to bring on board partners such as Cairn and more recently the prospect of TOTAL. Farm outs are rare in this current market and yet PVR has delivered 3 (pending partner decisions etc). They have plenty more licences in the folio to progress so any dusters will not be the end of PVR by any means. However, disappointment will be met with the usual market sell off. So risks are large but the rewards are high. Not for the faint hearted – that’s for sure.
Providence Resources will be included in thesharehub folio as of today, and entered with a 20% discount to price replacing Ithaca’s previous 20% gain. This is to align the top picks on a 10k initial investment comparison.
More coverage to follow on PVR as and when news arrives.