Within what remains an uncertain oil and gas sector, the company seems to offer significant capital growth prospects. As such, now could be the right time to buy it ahead of what may prove to be a highly-rewarding period.

Improving outlook

After what has been an uncertain period for the company, Hurricane Energy now seems to be in the midst of a more encouraging period. Changes in its strategy and in management personnel have meant that investor sentiment has been somewhat mixed. However, with its Lancaster Early Production System (EPS) on track to deliver first production next year, its financial outlook is set to improve significantly.

In fact, the stock is expected to move from a period of losses to profitability in the 2019 financial year. On a per share basis, it is forecast to deliver a profit of 3.7p. Given that it trades at a share price of around 36p today, this equates to a forward price-to-earnings (P/E) ratio of under 10. This suggests that there could be a wide margin of safety on offer that may mean the risk/reward ratio is highly attractive.

Changing industry

Clearly, there is still some way to go before the company announces improving financial performance. There could be challenges ahead regarding its production, for example. However, sentiment across the oil and gas industry may remain relatively high over the medium term. The supply glut of recent years now appears to be at an end, and with global demand for oil expected to improve over the coming months, this could spark increased demand for oil and gas stocks among investors.

Therefore, while risky, Hurricane Energy appears to offer high potential rewards. Buying it now may be a shrewd move in what remains an uncertain period for the wider resources sector.

Bright future

Also facing a relatively bright future is fellow resources company Avesoro Resources (LSE: ASO). The West African gold producer released a production update on Monday which showed that it was able to deliver record gold production in the first quarter of its financial year. Total gold production in the quarter was 68,088 ounces, which is in line with 2018 production guidance of 220,000 to 240,000 ounces.

Since Avesoro trades on a forward P/E ratio of around 10, it seems to offer a wide margin of safety. The prospects for the gold price may also be set to improve. Already in 2018, the gold price has increased by over 2% and with uncertainty increasing regarding the performance of the US economy amidst interest rate rises, demand for the precious metal may increase. This could help to support higher profitability across the sector and with production growth expected for the business this year, now could be the right time to buy it.

The post Why Hurricane Energy plc’s share price could continue rising significantly appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Looking ahead, it would not be surprising for this trend to continue. Interest in the oil and gas industry continues to increase, and this could help to push the company’s share price higher over the medium term.

Improving sentiment

With the oil price moving to its highest level since 2015, investor sentiment towards a range of oil and gas companies has improved in recent months. While in Empyrean Energy’s case its recent news has largely been responsible for its stunning share price gains, a rising oil price could mean that its valuation rises to an even higher level in future.

Certainly, there is likely to be higher volatility in the oil price. There is great uncertainty about whether OPEC will continue with its supply cut, as well as how non-OPEC producers will react to a rising oil price. However, leading producers such as Saudi Arabia and Russia seem to be keen on supporting the oil price in future. As well as this, increasing demand levels, which have reduced the supply surplus of recent years, are thus far showing little sign of slowing down. This could catalyse the oil price in future.

Furthermore, Empyrean seems to have a relatively sound financial position. It raised $1m in August of this year. With it having a net cash position, it appears to have the financial strength to deliver on its strategy. This could make investors more positive towards the stock, since a net cash position indicates that its risk profile may be lower than for a number of other oil and gas exploration companies.

Diversification

While a rising oil price may continue, it may also be prudent for investors to diversify into other assets. The gold price has also enjoyed a positive 2017, and gold miners such as Avesoro (LSE: ASO) have prospered this year. In fact, the company’s share price has gained 37% in the year-to-date, and quarterly results released on Monday showed it is making good progress with its strategy.

For example, gold production in the quarter to 30 September increased by 26% versus the prior quarter. This helped to boost revenue by 32% on the year, while adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) increased fivefold versus the second quarter level. This figure was boosted by an EBITDA margin of 21%, which was up predominantly due to reduced operating cash costs per ounce and an increase in the realised gold price.

Looking ahead, both Avesoro and Empyrean Energy could offer further share price growth. The two companies seem to have highly enticing risk/reward ratios at the present time.

The post Why Empyrean Energy plc is set to become a millionaire-maker stock appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With that in mind, here are two shares which could benefit from an investment tailwind in future years. While small and relatively high risk, they may deliver impressive total returns in the years ahead.

Improving performance

Reporting on Tuesday was West African gold miner Avesoro Resources (LSE: ASO). The company announced production results for the quarter to 30 June, with total gold production being 15,824 ounces. This represented a 6% increase on the previous quarter, with its 2017 production guidance being maintained at between 90,000 and 100,000 ounces. Furthermore, the company’s cash cost of $750-$800 per ounce remains in line with guidance, as does an all-in sustaining cost of $925-$975 per ounce of gold produced.

Clearly, demand for gold has been somewhat volatile during the course of 2017. Investors were anticipating higher inflation than has been recorded in the US, while interest rate rises have kept the price of the precious metal pegged back to at least some extent.

Outlook

Looking ahead, uncertainty in the outlook for the global economy could increase demand for gold as it has done in the past. Fears surrounding US spending plans, China’s transition to a consumer-focused economy and Brexit may weigh on investor confidence. This may make gold miners such as Avesoro more popular and lead to a higher share price for the company.

Although it has risen by 82% since the start of the year, there could be more upside potential owing to its expected move from loss to profit next year. This could positively catalyse investor sentiment and push its share price higher.

A better option?

While Avesoro is currently a lossmaking business, other gold miners such as Highland Gold (LSE: HGM) are delivering rising profitability right now. The company is set to increase its earnings by 21% in the current year, followed by further growth of 26% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of just 0.3, which suggests they offer a wide margin of safety.

As well as its growth potential and value appeal, Highland Gold also offers strong income prospects. The company currently yields 6.4% from a dividend which is covered 1.5 times by profit. This suggests that dividends could increase at a similar pace to profit in future and leave the business with sufficient capital to reinvest in its asset base for future growth. This mix of income, growth and value potential could make Highland Gold a worthwhile buy at the present time.

The post 2 hot small-cap stocks that could help you retire early appeared first on The Twelfth Magpie.

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• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.