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+.

Faroe announces successful DST on Brasse appraisal

Terrific news for Faroe shareholders. The 6kbopd flow tests are exceptional considering the step out far flank position of this appraisal.

Full guide to Brasse (up to date) below via company website:

Drilling of the Brasse Exploration Well 31/7-1, in the Norwegian North Sea (NO), commenced in May 2016 targeting Jurassic aged sandstones in a four-way dip-closed structure. This well, operated by Faroe, was drilled to a total depth of 2,780 metres and encountered approximately 18 metres of gross gas-bearing and approximately 21 metres of gross oil-bearing Jurassic reservoir. This reservoir is analogous to the reservoir at the Brage Producing Oil Field (Faroe 14.3%), located approximately 13 kilometres to the north of Brasse. Extensive coring, wireline logs and pressure data showed that the well had encountered oil and gas in reservoir sandstones of medium to good quality. The presence of oil and gas was confirmed subsequently by fluid sampling.

A successful side-track appraisal well was completed in July 2016; the objective was to appraise the south eastern part of the hydrocarbon bearing structure previously identified by the main discovery well. The Brasse side-track reached a total depth of 2,530 metres (MD) and encountered a 25 metre gross oil column and a six metre gross gas column. Results based on extensive coring, wireline logging and sampling show that the well has encountered oil and gas in medium to good quality Jurassic reservoir sandstones, similar to those seen in the main well, and provide important information about the reservoir distribution in Brasse. The hydrocarbon-bearing interval in the side-track well was found to be at a similar pressure level to the hydrocarbon-bearing interval in the initial discovery well.

Drilling of the Brasse Exploration Well 31/7-1, in the Norwegian North Sea , commenced in May 2016 targeting Jurassic aged sandstones in a four-way dip-closed structure. This well, operated by Faroe, encountered approximately 18 metres of gross gas-bearing and approximately 21 metres of gross oil-bearing Jurassic reservoir. This reservoir is analogous to the reservoir at the Brage Producing Oil Field (Faroe 14.3%), located approximately 13 kilometres to the north of Brasse. Extensive coring, wireline logs and pressure data showed that the well had encountered oil and gas in reservoir sandstones of medium to good quality. The presence of oil and gas was confirmed subsequently by fluid sampling.

A successful side-track appraisal well was completed in July 2016; the objective was to appraise the south eastern part of the hydrocarbon bearing structure previously identified by the main discovery well. The Brasse side-track encountered a 25 metre gross oil column and a six metre gross gas column. Results based on extensive coring, wireline logging and sampling show that the well has encountered oil and gas in medium to good quality Jurassic reservoir sandstones, similar to those seen in the main well, and provide important information about the reservoir distribution in Brasse. The hydrocarbon-bearing interval in the side-track well was found to be at a similar pressure level to the hydrocarbon-bearing interval in the initial discovery well.

Total gross volumes of recoverable hydrocarbons are estimated by Faroe as operator to be 28-54 mmbbls of oil and 89-158 bcf of gas (43-80 mmboe in aggregate).

The Brasse Discovery is located within tie-back distance to existing infrastructure: 13 kilometres to the south of the Brage Field platform, in which the Company holds a 14.3% working interest, 13 kilometres to the east of the Oseberg Sør Field platform and 13 kilometres to the south east of the Oseberg Field platform.

In May 2017 an appraisal well was drilled on the Brasse discovery which successfully penetrated the oil-water contact on the flank of the Brasse Field and encountered approximately 8.5 metres of gross oil-bearing Jurassic reservoir above the oil water contact. Preliminary results based on extensive coring, wireline logs and pressure data show that the well has encountered oil in a sand rich reservoir of very good quality and preliminary analysis confirms the same oil-water contact as in the discovery well and side-track and indicated good pressure communication within the reservoir. Accordingly a Drill Stem Test (DST) has been undertaken which provided clear evidence of a highly prolific reservoir and excellent quality sands with multi-Darcy permeability at this location with the well flowing at a constrained maximum stable rate of 6,187 bpd of oil from a 3.6 metres perforated interval, through a 1” choke. The site sampling of the fluid produced during the DST confirmed good quality light crude similar to the nearby Brage field (Faroe 14.3%), with the presence of 36.2° API oil with a gas/oil ratio of 887 scf/stb ( to be confirmed by onshore laboratory testing) Trace element analysis revealed no undesirable components and the oil flowed sand and water free for the duration of the test.

The Brasse appraisal programme continues with the drilling of a side-track well, targeting a location approximately 1,000 metres west of the current main well bore. The objective of the side-track is to map the reservoir distribution and further delinate the Brasse structure. A further announcement will be made at the completion of drilling activities including a revised estimate of recoverable resources for the discovery.

PL740 was awarded in 2015 and extension acreage PL740B was awarded in 2017.

Hurricane Energy opt for self finance on EPS

Disappointing is a word that can be used both lightly and heavily. Where Dr Trice and team are concerned, i’m afaid I view the news on Placing/Debt finance as heavily disappointing.

Had Dr Trice and team delivered a funding deal that suited ‘ALL’ shareholders, then I think it would still be ‘slightly’ disappointing. A farm out deal was always the best way to avoid dilution and mitigate the risk. Avoiding a right issue is equivalent to handing II investors a nice netry level and diluting long standing and loyal pi’s in the process. Very unfair and very unpopular. It wasn’t needed. A rights issue could have been organised. Dr Trice has had 6 months to sort the funding package out and instead investors were handed a fudged interim placing followed by a massive bout of dilution.

The problem for Dr Trice and team began with the CPR. As stated by thesharehub at the time, it was significantly below expectations in terms of the bookable 60mmboe required to secure a decent farm out deal. Instead, the CPR delivered approx 38mmboe based on the FPSO / EPS field life of 6 to 7 years. Dr Trice and co tried to look at getting the FPSO modified to perform over 10 years rather than 6. Based on today’s fundraiser, it looks like that plan failed.

Unfortunately this situation is becoming all too common in the markets. Sirius Minerals is another example whereby huge dilution was required merely to secure the next funding round. It was not done at a fair value price and whilst SXX has recovered some of the ground lost, the upside potential has diminished. HUR investors are not split into two types. Those that have size/scale to profit from smaller growth projections and those that have had their holdings diluted and growth projections reduced. With 2 billion shares in issue, it’s going to be a long time (18months+) before HUR can justify a market cap of £1bln or 50p a share.

For long term holders, it’s certainly a stock worth tucking away and revisiting in a couple of years. But for near term investors who like cash investments to convert to profits via growth shares, it might be time to exit HUR and look for the next growth opportunity which will deliver over the next 6 to 12 months. I suspect if you exited HUR and came back in 12 months time, you’d probably find the share price has barely moved.

Hurricane Energy is part of thesharehub top ten for 2017.

Providence Resources – Rig on the move to location

Great news for all PVR investors. The Stena IceMax Drillship is enroute to the SPB.

Strap yourselves in, this is without a doubt this summers blockbuster drill. Billions of barrels are up for grabs, the question is can PVR, Cairn and Sosina bring the black gold safely to the surface?

Any success will be transformational for all involved but for PVR this is not the first time they have struck the jackpot. They currently have the ‘Barryroe’ discovery under their belts and are due to confirm farm out arrangements/deal on that licence in the not so distant future. My guess is they will wait until this Druid drill is over before finally committing to terms.

It’s going to be an exciting 4 to 6 weeks ahead for PVR investors.

Subject to weather/rig arrival spud date looks approx July 3rd/4th.

PVR is part of thesharehub top ten for 2017.

…………………………………………………………

28 Jun 2017 07:00:22

PROVIDENCE RES.

OPERATIONAL UPDATE

FRONTIER EXPLORATION LICENCE 2/14
SOUTHERN PORCUPINE BASIN

MOBILISATION OF THE STENA ICEMAX DRILLSHIP FROM LAS PALMAS TO IRELAND HAS COMMENCED

Dublin and London – June 28, 2017 – Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Oil and Gas Exploration Company (the “Company”), today provides an operational update regarding Frontier Exploration Licence (“FEL”) 2/14 located in the southern Porcupine Basin. FEL 2/14 is operated by Providence Resources plc (56%) on behalf of its partners Capricorn Ireland Limited (a wholly owned subsidiary of Cairn Energy PLC, 30%) and Sosina Exploration Limited (14%), collectively referred to as the “JV Partners”. The licence contains the Paleocene “Druid”, Lower Cretaceous “Drombeg” and pre-Cretaceous “Diablo” prospects.

The JV Partners have contracted the Stena “IceMAX” deep-water drillship to drill the 53/6-A (Druid & Drombeg) exploration well in FEL 2/14. Following the granting of a safety permit in respect of Well Work activities for Providence’s Well Work Safety Case and Stena’s Non-Production Safety Case from the Commission for Energy Regulation, the IceMAX has now mobilised from its base in Las Palmas, Gran Canaria with a current expected time of arrival (ETA) at the planned 53/6-A well location of July 3rd.

Enquest delivers first oil from Kraken

That’s one massive project with massive risk delivered on time and under budget. It’s been a while since the North Sea has seen a development of this size brought online by a smaller mid tier player. Well done to all the Enquest team for not only delivering on this project but by also ensuring the company had a footing to surivive through the tough periods of lower PoO.

At 32p, this is a decent 20p off where most would have expected the share to be based on derisking a project of this size. Granted, PoO has wobbled and the glut has taken longer than expected and finally sentiment has dipped. But it’s events like these today that makes you marvel at the commitment of some of these companies. The unwavering confidence and determination to make tough projects work.

At full pelt, Kraken should be knocking out around 50kbopd. For the moment, I suspect it is more likely to be doing around 10kbopd. Enquest will bring all wells online in an orderly fashion and no doubt there will be some minor operational issues to iron out as the development builds into 2018.

This development is a lifesaver for Enquest and also for UK Oil &Gas. Later this year, Premier Oil is due to bring Catcher field online and hopefully Hurricance Energy will sign a deal soon to bring the EPS on the Lancaster Field into action in H2 2019. This is all against a very poor PoO backdrop and one would hope that as the Saudi’s head towards their own big event in the Aramco IPO, that PoO is nearer $60pb. If or when PoO does get back to $60pb or more, Enquest should be creaming it in.

Today is without a doubt ‘one in the eye’ for the doubters. And at 32p, Enquest is priced for the doubters and not for the believers.

Enquest is part of thesharehub top ten for 2017

Tullow – Cheap Cheap!

Tullow has certainly seen its fair share of shorting interest. The Stock is currently heavily shorted with over 11% of float being short. That’s a rather large number and all those involved are adding to shorts at a time when PoO is at yearly lows. However, it was larger some weeks ago at 15%+ and many have closed out.  Smart move if as many suggest PoO does strengthen in H2, as Tullow will surely rise with PoO leaving many shorters exposed to any spikes in the upside.  The company is set to issue a trading update on June 28th (next week) and this will hopefully provide investors with a better idea of the business rather than the shorters manufactured share price as an indicator.

As with many stocks that are heavily shorted, a sharp spike to the upside often occurs when stocks get oversold and shorters close out.

The share price has been shorted more heavily with more weight added over the last few days which suggests those involved are trying their best to lower price. Based on these weights you would normally expect the price to lower at a quicker pace but buyers are entering the market and making the shorters lives a little more tricky.

Assuming good news via Trading Update arrives next week and PoO has the oversold bounce that most expect, it could present a decent recovery bounce for the stock.

Currently broker recommendations are all in or around the 200p to 300p level. You’ll be hard pushed to find a broker target that is at 150p or below which begs the question… why is Tullow at 145p so cheap cheap?

Some Broker recs below, RBC have issued a note this morning with a 200p target.

Tullows current sp at time of writing… 145p.

It would not surprise me on bit if this did a u-turn back to 160p to 170p levels ahead of Trading Update on June 28th… based on short closing alone!

Short positions & Broker recs below:

Fund manager % short Change Date changed/created
AHL Partners LLP 1.20% ↑ 0.10% 2017-06-20
Capital Fund Management SA 0.71% ↑ 0.10% 2017-06-19
Citadel Advisors II LLC 0.75% ↓ -0.05% 2017-06-16
Key Group Holdings (Cayman), Ltd 2.03% ↑ 0.08% 2017-06-07
Marshall Wace LLP 1.87% ↓ -0.04% 2017-06-16
Millennium International Management LP 1.05% ↓ -0.11% 2017-06-16
ODEY ASSET MANAGEMENT LLP 1.71% ↑ 0.05% 2017-06-15
Oxford Asset Management 0.60% 2017-05-31
Systematica Investments Limited 0.69% ↓ -0.01% 2017-06-20
WorldQuant, LLC 0.71% ↑ 0.04% 2017-06-09
Total 11.32%
Broker Recommendations for Tullow Oil (TLW)
Date Broker Rating Old Target New Target Change
13-Jun-17 Barclays Overweight 220.00 Reiteration
07-Jun-17 Barclays Overweight 220.00 Restart Coverage
18-May-17 Canaccord Genuity Hold 210.00 200.00 Reiteration
18-May-17 Deutsche Buy 270.00 260.00 Reiteration
17-May-17 Jefferies Buy 270.00 250.00 Reiteration
17-May-17 JP Morgan Cazenove Overweight 270.00 245.00 Reiteration
07-Apr-17 UBS Neutral 222.00 205.00 Reiteration
27-Mar-17 Goldman Sachs Neutral 207.40 200.60 Upgrade
23-Mar-17 RBC Capital Markets sector perform 400.00 275.00 Downgrade
22-Mar-17 Canaccord Genuity Hold 275.00 210.00 Reiteration
22-Mar-17 Numis Securities Add 225.00 Reiteration
21-Mar-17 Deutsche Buy 330.00 270.00 Upgrade
10-Mar-17 Numis Securities Add 285.00 Upgrade
21-Feb-17 Canaccord Genuity Hold 265.00 275.00 Upgrade
20-Feb-17 Jefferies Buy 260.00 340.00 Upgrade