ShareHub Hotlist 2018 Review – Week 49

With the DOW 30 pinging around like some fruit machine, it is clear for all to see that this market resembles more of a casino then ever before. It’s ludicrous. How can the DOW be down 400pts and then up a net 1200pts a day later. A 5% move on a major indice used to be par for the course a few years ago but that was based on a 12 month trading performance, not 12 hours. And that’s the problem investors face today. It’s an ever changing market but one which seems more and more like a day traders dream. Many stocks are struggling to make recovery moves simply because the short term money is being played in 10% ranges. The small cap commodity sector continues to suffer due to the lack of II investment. Brexit and US/China trade wars are certainly two strong reasons for many longer term investors to remain on the sidelines. There are more unknowns out there today than there were at the start of year which saw the DOW wobble from 26500 all the way down to 23000 levels. The only saving grace near term is that Christmas Santa Rally period is upon us and both of the biggest issues out there have been kicked down the road until late Jan or Feb 2019. Gives all those involved a nice festive period off and perhaps allows the bots a break too?

Last week OPEC finally agreed to deliver solid cuts across production including Non-OPEC Russia. The latter cut by double the market expected rate and when coupled with Canadian cuts, the true number is nearer 1.5mbopd being sliced from supply. PoO had been driven down to $50pb WTI based on Mr Trumps’s 1mbopd prefered cut. It’s quite a surprise to see PoO still trading near $52pb after Friday’s blockbuster reveal. PoO should be trading nearer $60pb based on those cuts but with the market overly weighted to siding with Mr Trump, the chances are most funds are still heavily short Oil. Those kind of positions take a while to unwind in an orderly fashion and sometimes it can take just two days trading before the herd starts to gather speed. PoO has little attraction to the downside based on % returns from $50pb. Anything in the $40’s would surely be short lived as those funds close out fast. Going long at $50pb range would seem to make more sense as the pop that comes from shorts covering is normally quite violent and fast. Keep an eye on PoO over the coming days as the ‘pop’ has yet to happen and is long overdue. Stocks like Tullow and Premier Oil tend to be more sensitive to PoO due to higher production volumes and debt positions which need servicing. That said, Premier Oil updated market last week highlighting impressive 30% Oil hedges on production which has yet to be rewarded. All seems well with PMO but looking at the share price it would be hard to see. Same could be said of Amerisur Resources. An exploration strike on CPO-5 block with Indico-1 well looks huge. Flow rates have yet to be released but if they are anything like the Mariposa-1 well, they could be in excess of 4600bopd. Amerisur is one of many stocks out there that has been hit heavily by the poor sentiment in the Oil&Gas sector. But the difference with AMER and other stocks is that AMER are debt free, cash rich and a low cost producer. With a fully funded active exploration programme in 2019, it’s not likely to disappoint the investor that likes solid fundamentals with some exciting exploration thrown in on top.

Investing or should I say… ‘Trading’ in 2019 is likely to be tougher than 2018. Many are calling a bear market and most see moderate growth at best. Much hangs on US/China trade deals as since these stalled, global growth has also stalled. Fix one and you might fix the other. More on what to do in 2019 next week. For the moment the focus is on 2018 performances and thus far, TheShareHub is out-performing the newspaper experts picks. There’s still a chance TheShareHub picks can tickle over the line into positive ground and if PoO edges back to $65pb on Brent, then it could be another positive year for the picks.

As for Brexit, Tory’s and the EU. All are unfortunately in a position of not wanting to act in the interest of the UK. The Tory’s always seem to capitulate through self interest. Too many wannabies that think they can do better but in all cases more focused on their careers than the man or women on the street. Prime Minister May will surely be voted out this evening. Not through her mistakes but through personal agendas within the Tory party. The best thing for Mrs May is to be voted out. Give the lady a much deserved rest and break from the brat pack. She must be knackered? She deserves great respect. As for the new boy that comes in, well, his days are numbered too so it doesn’t really matter who comes in because Labour will undoubtedly be winning the next election with a huge margin. No stand required – no preference given. Just a view of what will inevitably unfold. The Tory’s picked up after Mr Brown’s mess and now it ooks like Labour will be coming in to manage the Brexit mess. But first, we’ll have a completely unneccessary phase of Tory leadership battle which has nothing to do with Brexit and everything to do with ego’s. What would the world be like without Politicians? Now there’s a thought…

Week 49 Summary:

ShareHub top picks 2018 – Week 49

DailyMail top picks 2018 – Week 49
Guardian top picks 2018 – Week 49


London Stock Market down

The City of London stock market failed to open for business today. Blighty has a reputation for delayed trains which frustrates commuters on a daily basis. When it comes to the apparent crown jewels (where Brexit is concerned), the City of London runs like clockwork. Well today, it looks like an embarrassing glitch to the system. The normal go-to reason these days is poor old Putin and his army of hackers. No doubt some excuse will be made but either way, pre-Brexit, this is a very embarrassing moment for the LSE. For what it worth, I think a few magnets needed a tweak under the table and caused a few issues which have clearly taken longer to resolve than first thought. Punters will be invited back in shortly. For those on leverage or over exposed the delays could be costly as time stops for no one.

 

Hummingbird Resources – Security Incident

Artisinal Miners at work

Late yesterday HUM put out an RNS (as below) informing shareholders/investors of a security incident within Hummingbird’s licence blocks. It’s unstandable to see the usual knee-jerk reaction from retail investors in particular as the event is unfortunate and the RNS (due to rules) small on detail and as thus ‘open’ to interpretation. HUM will update further but the ‘word on the street’ is that the Mali Government forces were called in to ‘remove’ some Artisinal Miners from HUM’s Komana West licence block. The Mali Government are known for a zero tolerance policy and understandably when policing the North which is volatile with terror groups and other bandits. However, HUM’s Yanfolila Mine is in Southern Mali which is a different place entirely. Broadly peaceful and community driven. Unfortunately, whilst there are regional differences – the policing is much the same. Artisinal Mining is rife throughout Mali and most deaths occur through dangerous and risky gold extraction methods. Many Artisinal Miners lose their lives while hunting for Gold. For some it is a risk worth taking as any discoveries can be worth a decade of normal earnings and that’s assuming they are lucky enough to be employed. HUM runs several community projects designed specifically to build infrastructure such as sanitised water or schools etc. HUM also have a policy of recruiting Mali workers rather than expats. HUM has a work force that is 5% expats and 95% Mali locals. In the below RNS it is noted that 2 of the 3 Artisinal Miners were not from the local area. Whilst Mali has vast areas of untaped Gold exploration, foreign Artisinal Miners will look for easy pickings in and around existing Gold discoveries. The Mali Government clearly have a strict policy especially as they are keen to sell more licence blocks to international companies who have the capital resource and experience to extract the Gold and in turn create jobs for the local communities. Similar issues occur across africa whether it be diamonds, Gold or even Oil. Governments take strong action because if they didn’t, the Artisinal Miners could disrupt the Governments ability to attract international companies and gain much needed revenues.

Komana West is due for operations in Q3 and HUM also plan further exploration work elsewhere across the licence block. It’s unclear whether there are many other Artisinal Miners in the surrounding area but after yesterday’s events they would be wise to move into safer zones outside known Mali Government designated licence blocks.

Using this kind of force is impossible to comprehend or understand from a ‘western perspective’ especially without the facts or true context. But Africa is not alone. You don’t have to look too far east to see Journalists being ‘vanished’, ‘poisoned’ or just plain shot dead in cold blood for going against the establishment. Africa is far from perfect but whether killing elephants for ivory or illegally mining gold – the response is the same.

Hummingbird Resources will provide an update (eg more detail) on the incident. Although one would imagine that it will only come once Mali officials have sanctioned it and even then I’m not sure it will say too much more than what has been communicated thus far.

…………………………………………………………………………………………………………………..

RNS: 29 May 2018
Hummingbird Resources plc
Security incident in Mali

In recent days, a limited number of people in the local area have disputed the Company’s plan, previously agreed with local community leaders, the Government of Mali’s Ministry of Mines and local government, to extend mining operations within the Company’s permit area to the Komana West deposit. Our understanding is that this group of people were acting unilaterally to stop the Company carrying out initial site preparation work at Komana West.

The Company has been informed by the Malian National Guard that while upholding the rule of law, requested of them by the Government of Mali, a security incident occurred. Very regrettably, we have been informed that this incident has led to the loss of at least three lives (two of which are believed not to be Malian nationals). The Company expresses its sincerest condolences to the families of the deceased and others affected by this incident.

All Hummingbird employees and contractors are safe. The process plant continues to operate at this time.

The Government of Mali has a 20% interest in the Yanfolila Gold Mine and the mine has a 95% Malian work force.

Further updates will be given by the Company as appropriate.

**ENDS**

 

ShareHub tip – Kaz Minerals hits 10 bagger milestone

Kaz Minerals is no minnow. This is not a flighty AIM story. This is a story of stock that simply got oversold at a time when the market thought commodities were dead and buried. Of course, Kaz Minerals is not the only FTSE stock to recover strongly over the last 2 years. As mentioned before huge sector bellwethers like Anglo American and Glencore have all recovered strongly after the rout of early 2016. Just what was the market thinking? How can you value Kaz Minerals at £450m and 2 years later value the company at £4.5bln? Well the answer is simple. The market (now regularly called a ‘Casino’ is stooopid. It’s dumb at the best of times. Sophisticated it is not. Algo bot driven, spread driven, hedge fund driven… you name it… the market has become so divorced from reality in ‘value’ terms that idiotic pricing gaps occur on a daily basis. And guess what…? Who cares about value? The market today is simply about generating enough ‘opportunties’ to make money. The more ups and downs the better. It’s recovery stories like Kaz Minerals that all investors should learn a lesson from. The market can be irrational. The market can be very wrong. The market is the market. Investing in stocks at times of panic and fear is a volatile time – it’s a risky business and as such discounts to share prices should be expected. Sometimes companies go under. Sometimes they don’t. But most of the time, companies that are in trouble or looking weak, simply become weaker in share price terms based on shorting activity, debt holders arbitrage trades and of course the vultures… you know the types. Instead of helping good companies recovery from weakness, the market seeks to grind them into dust hoping to pick up the pieces for pennies. It’s an ugly attitude and reveals the true city/market mentality. Make money at all costs. Fortunately for Kaz Minerals and a few others, they escaped the ‘manufactured’ weakness in share prices and have since recovered strongly. If you look back, you won’t see too many broker recommendations on these stocks. Quite the opposite… an eerie silence. Tut tut!. As long term ShareHub followers will know, The ShareHub picks of 2016 returned a whopping 123% growth – final Results shown below.

Look a little closer and you’ll see Kaz Minerals ended 2016 at 357p delivering a solid 2.5 x multibagger after being tipped by TheShareHub at 102.25p. Today, Kaz Minerals touched 1035p and goes into the hall of fame for a second time with a magical 10 x multibagger status tag. Well done Kaz Minerals.

Of course, there are instances when successful stories end as horror stories. Look no further than Xcite Energy. Included in the 2016 picks and contributed a nasty 10% slice off the overall folio performance. And 100% down the drain on a single lined stock basis. Looking at the market today and the current Oil Price on Brent of circa $77pb, there is no doubt that Xcite Energy would be trading at multiple millions with booked reserves of circa 250mmboe+. Unlike Kaz Minerals and others, Xcite Energy failed to secure the funding they needed. A combination of poor management decisions and a market that was bearing its teeth with glee ended what should have been a very prosperous North Sea project generating many much needed jobs. Of course, hindsight is a wonderful thing, but the point that needs to be noted is that had Kaz Minerals and Glencore needed help/support, the chances are they would have been highly dilutive. That’s not the market ‘helping’ companies. It’s a market that seeks to suck the very last drop of blood. Wouldn’t it be refreshing if the market actually stepped in from time to time to ‘assist’ companies in distress on a fair value basis? Afterall, when the boot was on the other foot it was the UK tax payer that was asked to step in and save the bankers and spivs blushes. Today, bonuses throughout the city are flowing again like 2008/2009 never happened. Perhaps if the market took a different tactic going forwards it might help support ‘value’ resource based companies rather than drill them into the ground?

So next time you get fed up with the market and feel valuations are a joke… just remember the Kaz Mineral story. The market gets it wrong…. sometimes very wrong and that’s where you’ll often find the greatest opportunities of all… albeit with higher risks attached. Value often wins through in the end.

The market is full of multibaggers out there – you just have to find them.

Amerisur Resources disappoints with reduced reserves and lower production

A disappointing update from Amerisur on operations and reserves. All are heading lower and that’s after spending roughly $50m+ in capex drilling wells. From May onwards, the drill bit starts spinning on more targets which if successul will save some blushes across the management team. The latter have over promised and under delivered. If Amerisur was a premier league football team, then you can bet your last easter egg they would have been sacked long ago. Mariposa-1 and CPO-5 (as a whole) is the jewel in the crown and thankfully that it is in the hands of ONGC’s management team which look ten times more experienced and capable than AMER. A large HNWI seller adds further woes to the share price and based on today’s RNS’s, he’s been bang on the money when it comes to selling AMER. The stock is down from 2017 highs of 26p to 13p levels this am. AMER was added to the ShareHub 2018 hotlist based on the Mariposa-1 and CPO-5 potential. Progress on this asset looks on track and the next drill target (if successful) has the potential to move resources up considerably. That asset alone is potentially worth Amerisur’s current market cap. It’s been a tough few years for investors and should a predator come forward and offer to end the misery – it might be accepted with ease. AMER has plenty to offer in a region that is seeing renewed interest of late. But management needs to change as progress is slow and cash burn is high.

News catalysts such as drilling results in June/July should at the very least see some speculators return to the stock. But a change in senior management might see much needed larger investors return. Amerisur’s AGM is normally held in May so not long for shareholders to voice their concerns as well as put pen to paper.

Today’s RNS’s can be found on the Amerisur website here

Providence Resources – delivers Barryroe farm out deal

The easter bunny has arrived early for all PVR and LOGP investors. It’s taken a few years to get to this point but finally Barryroe bags a farm out agreement. Based on timelines, it’s likely that any drilling of the 3 x wells will occur in 2019 due to seasonal weather issues in the Celtic Basin. It’s the big news that all have been waiting for and it hasn’t disappointed. As a word of caution, the chinese are well known for their time consuming diligence so be aware that the deal still needs to conclude via all the usual sign off’s.

PVR is part of TheShareHub top ten for 2018 and looks like it may have sealed a place in the 2019 picks too. Subject to deal concluding of course.

28/03/2018 7:00am
UK Regulatory (RNS & others)

Dublin and London – March 28, 2018 – Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Oil & Gas Exploration Company (“Providence” or the “Company”), today provides a commercial update on Standard Exploration Licence (“SEL”) 1/11 that contains the Barryroe oil accumulation. SEL 1/11 is operated by EXOLA DAC (“EXOLA”)(80%), a wholly-owned Providence subsidiary, on behalf of its partner Lansdowne Celtic Sea Limited (“Lansdowne”)(20%), collectively referred to as the “Barryroe Partners”. The area lies in c. 100 metre water depth in the North Celtic Sea Basin and is located c. 50 km off the south coast of Ireland.

Standard Exploration Licence (“SEL”) 1/11

Farm-Out The Company is pleased to announce that the Barryroe Partners have signed a Farm-Out Agreement (“FOA”) with APEC in relation to SEL 1/11. APEC is a privately owned Chinese company which has a strategic partnership with China Oilfield Services Co., Ltd (“COSL”) and JIC Capital Management Limited (“JIC”) for the investment and development of offshore oil and gas opportunities worldwide utilising Chinese drilling units, services and equipment. Under the terms of the FOA, in consideration for APEC being assigned a 50% working interest in SEL 1/11:

Commercial Terms — APEC will be directly responsible for paying 50% of all the cost obligations associated with the drilling of 3 vertical wells, plus any associated side-tracks and well testing (hereinafter referred to as the “Drilling Programme”); — APEC will provide a drilling unit and related operational services for the Drilling Programme; — APEC will finance, by way of a non-recourse loan facility (the “Loan”), the remaining 50% of all costs of the Barryroe Partners in respect of the Drilling Programme; — The Loan, drawable against the budget for the Drilling Programme, will incur an annual interest rate of LIBOR +5% and will be repayable from production cashflow from SEL 1/11 with APEC being entitled to 80% of production cashflow from SEL 1/11 until the Loan is repaid in full; — Following repayment of the Loan, APEC will be entitled to 50% of production cashflow from SEL 1/11 with EXOLA and Lansdowne being entitled to 40% and 10% of production cashflow, respectively. Operational Terms — EXOLA will act as Operator for the Drilling Programme with technical assistance being provided by the APEC Consortium; and, — After the completion of the Drilling Programme, APEC will have the right to become Operator for the development/production phase. Issuance of Warrants to APEC — Upon completion of the Drilling Programme, APEC will be able to subscribe for warrants over 59.2 million shares in Providence at a strike price of GBP0.12 per share (the “Warrants”). — The Warrants, representing circa 9.9% of the current issued share capital of Providence, are exercisable for a period of 6 months following the completion of the Drilling Programme.

Closing

The Closing of the Farm-Out (“Closing”), which is expected to occur in Q3 2018, is conditional on completion of all ancillary legal documentation required to implement the terms of the FOA, and is subject to the approval of the Minister of State at the Department of Communications, Climate Action and Environment and the approval of the Chinese government. In addition, the details of and schedule for the Drilling Programme are subject to further ongoing technical discussions between the Consortium, Exola and Lansdowne. Subject to Closing, the revised equity in SEL 1/11 will be EXOLA (Operator, 40%), APEC (50%) & Lansdowne (10%). Further announcements on the transaction will be made in due course.

Speaking today, Tony O’Reilly, Chief Executive of Providence said: “This is a significant transaction for Providence and Lansdowne which will deliver multiple new penetrations of the areally extensive Barryroe field. In addition, it also provides for the acquisition of modern dynamic well test data that should assist in advancing the field to production. Over the coming months, we will be working with the APEC Consortium to close the transaction and finalise the specific timeline and the precise details of the drilling programme. We are very pleased to have agreed this deal, which will allow us to avail of ‘state of the art’ drilling units and technical capabilities in order to advance Barryroe to first oil.”

Mr. Colin Lui , Chairman of APEC Energy Enterprise Limited commented: “APEC, supported by Jianyin Investment Company and China Offshore Services Ltd, are very pleased to have strategically joined forces with Providence and Lansdowne to develop the Barryroe field. This field has significant recoverable resources and we look forward to jointly developing this opportunity. Whilst the Farm-Out Agreement has been agreed specifically for Barryroe, the parties have also agreed to jointly investigate further opportunities in other licensed blocks offshore Ireland in the future.”