Caspian Sunrise News | The Twelfth Magpie

Is the Caspian Sunrise share price a bargain after 25% fall?

Peter Stephens — Mon, 19 Mar 2018 13:45:23 +0000

Oil and gas explorer Caspian Sunrise (LSE: CASP) has declined by 25% today after it released an operational update. The company has experienced delays in its operational activities which have caused investor sentiment to come under severe pressure.

In the short run, there could be further declines as the market absorbs today’s update. However, could the stock be worth buying for the long run?

Challenging period

The company’s recent performance has been hampered by poor weather conditions. Normal operations have now resumed, although there have been further difficulties at its deep well A5. It has experienced a blockage, with the company seeking to remove it in recent weeks.

Despite this, it has been unable to do so and has now called in a contractor with more specialised coil tubing equipment. The permitting required to bring coil tubing operations is expected to be finalised by the end of March, with the 90-day flow test then due to resume.

However, the company has made progress with deep well 801. The planned side-track work from a depth of 4,516m is now under way. Provided that work is successful, the well will be placed on a 90-day flow test.

Clearly, Caspian Sunrise has experienced a challenging period, and this has been reflected in its share price decline. Its strategy appears to be sound, and progress is being made in terms of moving towards its end goals.

While potentially volatile in the near term, the company could deliver improving performance in the long term. That’s especially the case since the prospects for the oil price remain upbeat. As such, for less risk-averse investors Caspian Sunrise could offer an enticing risk/reward ratio.

Low valuation

Also experiencing a difficult period is energy support services company Petrofac (LSE: PFC). The business is currently under investigation by the Serious Fraud Office (SFO), which appears to have hurt investor sentiment in the stock. For example, it has fallen by 47% in the last year even though it has shown signs of a potential recovery in recent weeks.

With the price of oil having risen in recent months, the potential for increased activity in the oil and gas sector remains high. This could lead to greater demand for Petrofac’s services and may create a catalyst for its earnings over the medium term. So while its bottom line is due to fall by 15% this year and by a further 14% next year, its financial prospects may be more positive over an extended timeframe.

Furthermore, investors appear to have factored in the difficulties facing the company. It trades on a price-to-earnings (P/E) ratio of around 9. This factors in its projected decline in earnings over the next two years and suggests that it may offer a wide margin of safety. Therefore, while risky, it could offer capital growth potential in future.

The post Is the Caspian Sunrise share price a bargain after 25% fall? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Petrofac. The Motley Fool UK owns shares of Petrofac. 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.

Should you be tempted by UK Oil & Gas Investments plc’s 160% rise in 2017?

Peter Stephens — Mon, 20 Nov 2017 12:52:13 +0000

The last few months have generally been positive for the oil and gas industry. Investor sentiment seems to have improved significantly as the price of oil has risen to its highest level in over two years. This has prompted higher share prices for a range of oil and gas companies.

However, few have been able to match the performance of UK Oil & Gas Investments (LSE: UKOG) during the course of the year. Following positive news flow regarding its assets in southern England, the company’s shares have soared so that they are now up 160% since the start of the year. Could more growth be ahead? Or is it too late to buy the company for the long term?

Uncertain outlook

Of course, the outlook for any oil and gas exploration and development company is difficult to assess. Its future share price prospects are largely linked to the news it releases regarding its operations. Positive drilling results are likely to lead to an improved share price performance. Conversely, negative operational performance may mean investors lose interest in its prospects.

Therefore, over the medium term the share price performance of UKOG may prove to be highly volatile. What may work in its favour, however, is the prospects for the oil price. They appear to be generally positive, given that OPEC and non-OPEC countries seem keen on the idea of providing further support to the oil price in the form of supply restrictions. This could help to keep any supply surplus in check during the next year, which may allow the price to continue with its upward trajectory.

Clearly, a higher oil price may not create the conditions necessary for UKOG to make 160% gains in 2018. And recent difficulties have caused some investors to reconsider their views on the company’s outlook. However, with the business focused on what appear to be relatively low-cost operations and it having significant potential based on estimates, it could prove to be a sound, albeit risky, buy for the long run.

Growth potential

Of course, there are other oil and gas exploration companies which may be worth a closer look. Reporting on Monday was Central Asian oil and gas company Caspian Sunrise (LSE: CASP). It reported that contractors are on-site at its Deep Well A5 at its BNG Contract Area in Kazakhstan, and are expected to commence the 90-day flow test before the end of November. Furthermore, Shallow Well 146 has reached its revised total depth of 3km. Based on information analysed to date, Well 146 may resemble Well 143. It is producing at a rate of 600 barrels of oil per day (bopd).

Looking ahead, Caspian Sunrise may also benefit from a rising oil price. Investor sentiment has picked up markedly in the last month, with the company’s share price rising by around 25% during the period. As with UKOG, the company is highly dependent upon future news, but seems to offer high reward potential for the long term.

The post Should you be tempted by UK Oil & Gas Investments plc’s 160% rise in 2017? 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.

2 forgotten resources stocks with growth potential

Peter Stephens — Mon, 03 Jul 2017 14:44:21 +0000

Investing in the resources sector has been a risky endeavour in recent years. The prices of a range of commodities, including oil, have been exceptionally volatile and difficult to forecast. As such, while it has been possible to generate large capital gains, many investors have been left deep in the red by their investments in resources companies.

However, looking ahead there could be a bright future for the sector and for a number of its constituents. Here are two smaller companies within the industry which could be worth a closer look.

Upbeat update

Reporting on Monday was Central Asian oil & gas company Caspian Sunrise (LSE: CASP). It provided an update on its key BNG Contract Area, in which it has a 99% interest. It continues to progress with its drilling programme. Of notable mention is Well 144, which was spudded in May 2017. It has now been drilled to a total depth without incident. Four intervals have been perforated for flow testing. The first interval tested is flowing at the rate of around 1,000 bopd using an 8mm choke. The company now plans to engage in long-term testing in order to assess the well potential.

The early results from Well 144 have made the company more bullish on its future prospects. The reason for this is that it should increase the proven size of the structure, and also increase Caspian Sunrise’s aggregate production capacity to over 2,000 bopd.

Clearly, a lower oil price has caused costs across the industry to fall. This may have benefitted Caspian Sunrise to some extent, although the lower oil price may have also held back investor sentiment. In the long run, a higher oil price is forecast and with the company making progress on its drilling programme, it seems to offer upside potential.

Low valuation

Also offering capital gain potential within the oil & gas sector is Enquest (LSE: ENQ). Like a number of its sector peers, its share price has fallen heavily this year as the price of oil has failed to deliver positive growth. Its share price is down 23% year-to-date and, realistically, further falls could be ahead in the short run. That’s mostly due to the scope for further volatility in the price of oil.

In the long run though, Enquest is expected to deliver improving financial performance. Although it is due to report a loss in the current year, its bottom line is forecast to move into the black next year. This has the potential to improve investor sentiment over the next couple of years.

Furthermore, Enquest has a relatively low valuation which suggests it may have a wide margin of safety. Using next year’s forecast earnings figures means the company trades on a price-to-earnings (P/E) ratio of just 2.7. Clearly, there is scope for a downgrade to forecasts, but with a low valuation it could prove to be a worthwhile buy in the long run.

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