Another week passes and another 1000 stabbings occur in London. That figure isn’t verified and if you asked the Police, they wouldn’t be able to verify the numbers either. The problem is… the only stabbings that get notified or registered are those that are either fatal or require emergency A&E attention. Tighter laws need to be introduced and swiftly. A knife is just as dangerous as a Gun. Unless you’re a butcher or a fisherman, I see little point in walking around London streets armed with a knife whether pen-knife size or cleaver. Just ban the carrying of any blade like weapon and increase the penalty ten fold. That should reduce the number of knife carriers by half in blink fo an eye. Some will point to the Tory cuts to policing. Of course, if you reduce the presence of Police on the streets, then crime will increase. So the government has to be held to account when it comes to the demise of London and the new Ghetto name tag. Like actions taken on pushing back the gambling law or the sloth like approach to dealing with the likes of Amazon/google tax avoidance. These are issues that need to be addressed swiftly. We don’t live in a world anymore where you can allow a year or two to slip by. Changes need to happen and happen faster. Brexit has been a distraction for all involved and if you add the number of metaphorical ‘back stabbings’ into the numbers, we’d be close to 1 million per week and that’s just within the Conservative Party. Too many politicians have used Brexit to strengthen their political donors positions. Too much infighting and not enough cohesion. Should a deal finally get agreed in the next couple of months, then minds can refocus on the important issues at home which hopefully will result in the gambing stake reduction law being introduced next year, a new Knife ban with higher penalties and many other important issues sorted out.
Week 44 Review:
The spectacular rise of Serica Energy continues. Many ShareHub readers will know from past ShareHub coverage that this stock was dealt a blow by BP a few years ago when the Oil Major pulled out of a huge exploration well in Namibia. Three years ago, Serica Shares were trading at 7p. 2 years ago they were trading at 13p. Then, this time last year, Christmas came early. BP dropped their BKR assets down the chimney. It was an astonishing deal as it effectively gave Serica huge resources / reserves and instant cash flow. Where’s the catch? Well, imagine you are buying and selling oranges and making a 20% profit only then to have to hand over that 20% profit to the tax man. That’s BP in simple terms. In Serica’s hands, these assets are hugely profitable due to the tax breaks they receive. Furthermore, the impact of the cash flows is transformational in market cap terms. The problem for large Oil majors is when fields get to the end of their life, the last few years become loss making or at very best breakeven. All liabilities with decommissiong remain as do staff costs/redundancies. The list goes on. Now, since the BP deal, Serica has continued to pick up more assets from the Oil Majors on the cheap in similar style deals. Some of these are structured in a way that makes them look a bit like a tax dodge. Serica could in effect be an offshore tax haven as some deals see Serica return cash to BP. So ineffect, BP’s cash/assets go to Serica and then come back to them via Serica (albeit reduced) but one suspects with tax benefits. Now don’t get me wrong. I adore this kind of business model. The City of London and the likes of Goldman’s and others have been washing cash through offshore accounts for years. Russian money, whether in London Property or through cars or art sales – always seems to find its way through London. These are the ugly deals – the type of deals where the man/woman on the street sees no benefit at all. UK Oil&Gas is in need of support and investment. The City of London is not interested in supporting these companies as seen by the handling of the Xcite Energy fiasco. 300mmboe in reserves and approx £90m in debt yet the finance world could not support them and instead the company is no more and the 300mmboe is still under the sea. More ‘good’ deals like Serica/BP’s should take place. There are few AIM listed management teams out there that are more than capable of taking on the responsibility of some ageing fields and have huge tax loss pots to utilise. At 134p, Serica has grown 10 fold since last year. It’s now approaching a mid-tier Oil&Gas company. If the Oil majors continue to use Serica in this way, then it could become a 20 bagger stock. It should be noted that Oil fields don’t always perform as planned and there is a risk attached to taking on these fields. Serica recently cleared a blockage in one of their pipes which held production up for some while. So tread carefully. For the moment, Serica is going great guns and the stock has helped the ShareHub top picks to 9.7% growth for the year.
Elsewhere, AMER begins (early stages) what looks like a long overdue recovery back to 20p levels. At 11.5p, it still has some way to go but based on a valuation basis, there is no obvious reason for the stock to be so deeply discounted against cash flows and future multi exploration programme.
Not many weeks left to the end of the year, but I am hopeful that CERP can put in a strong finish by hitting a 1000bopd target. CORA is in need of cash and will need to get a funding round sorted swiftly if they are to prepare for further exploration next year ahead of the Mali rainy season in June. HUM know all too well how damaging the rains can be and an update on how the company intends to move forward is much needed. It doesn’t look like a good year for the minnow Gold Producer. Finally, WRES is edging higher after making good progress on their La Parrilla project. Quite a few ShareHub top picks look set for a decent rise assuming news is good and post US mid term elections deliver a Santa Rally.
As for the story in 2019 and which stocks might perform well… we’ll get to that in a few weeks time.