The company has been concentrating its efforts on its Lancaster Early Production System (EPS) development, and chief executive Dr Robert Trice told us he is “delighted to report that operations have progressed to plan and within budget, allowing us to reiterate our first oil guidance of H1 2019.“

We’re looking at a post-tax loss of $75.1m for the six months, but that was partly due to a one-off related to the firm’s convertible bond, and operating expenses came in at $4.7m.

Profit when?

The big question is whether the cash will last, and at 30 June there was reportedly $210.1m of cash equivalents and liquid investments on the books. That’s despite a net decrease of $149.4m in the period, but most of that was investment in the Lancaster EPS — cash outflow from operations was stated at $2.7m.

The big difficulty is valuing the shares with a view of whether to invest, and a lot of that will be down to gut feelings for experience oil investors. I’m not one of them and I’m keeping away for that reason. But if the Lancaster EPS really is as close to first oil as it seems, I think Hurricane could well be less risky than some.

High-flyer

If you want a more impressive oil share price rise, take a look at Eland Oil & Gas (LSE: ELA). Eland is up a bit less so far this year, at 70%, but over the past two years shareholders have seen their investment more than treble in value. That’s after my colleague Harvey Jones suggested a year ago that Eland could do well if the oil price recovery proved sustainable.

Eland is also different in that it’s in profit, with forecasts for big EPS rises putting the shares on forward P/E ratios of only around four and less. 

We had first-half results from Eland on Thursday too, reporting on a period that chief executive George Maxwell described as “the most important operational and financial period in Eland’s history.”

Record production

It included record high gross production from the firm’s OML 40 prospect of 25,000 bopd, thanks to success at its Opuama-8 and Opuama-9 wells. Average gross production came in a little lower, but at a still impressive 17,146 bopd.

Gross proved (1P) reserves have been uprated by 20% to 39.5m barrels, with gross proved plus provable (2P) reserves up a little to 83.4m barrels.

With a reported post-tax profit of $44.7m, operating cash flows of $50.6m and cash on the books of $29.8m, I see Eland as one that could seriously tempt oil investors.

The post Here’s why Hurricane Energy shares could keep on climbing into 2019 appeared first on The Twelfth Magpie.

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Alan Oscroft 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.

Sitting on what it calls “the largest undeveloped discovery on the UK Continental Shelf,” the North Sea exploration company saw its shares soar as high as 67p back in May. But when it revealed it was going to need a further $520m to develop the field, its Greater Lancaster Area project, shareholders gulped hard and many of them fled — and the shares crashed back to 27p earlier in September.

But in the past few weeks, we’ve seen a recovery to today’s 32.5p price, so are we in bargain territory? The equity and bond-based fundraising has caused some dilution, but I see two big positives.

Firstly, there should be enough cash now to see Greater Lancaster through to production — with a bit of luck, the scares will be over.

A lot of oil

Then there’s the size of the find. There are 523m barrels of combined 2P Reserves and 2C Resources — with a best case estimate of 2,326m stock tank barrels.

There’s also 205m barrels at the Whirlwind licence, with new discoveries at Halifax and Lincoln, which suggest there could be some very large accumulations down there.

On fundamentals there’s little to go on, with further losses pencilled in for the next two years at least. That usually doesn’t worry investors in oil explorers too much, but it does highlight the risk for the inexperienced — a good number of such companies have gone bust over the years.

But of the ‘oil tomorrow’ explorers out there, I see Hurricane as one of the most promising.

Profits soon

Balancing a risk like Hurricane with another oily that actually has profits on the near horizon can be a way to reduce the risk, and I’m looking at Eland Oil & Gas (LSE: ELA) as a candidate.

It released first-half figures on Tuesday, with chief executive George Maxwell calling the period “very positive for Eland with the restart of production resulting in increased cashflows to further grow the business.”

The Nigeria-based producer is ramping up its production again, with its OML 40 project having restarted in January — and having contributed a total gross production of 954,728 barrels of crude oil (429,627 barrels net). The company’s previously shut-in Forcados terminal has resumed operations too, allowing exports via pipeline to resume and take over from a provisional shipping-only route.

Eland managed an average daily production during the half of 5,275 barrels gross, but the re-opening of Forcados helped that ramp up to 11,571 barrels per day in June.

Financials

Financially, a £15.2m ($19.5m) equity placing helped get the June cash balance up to $22.4m, and that’s since grow to $27.3m.

Although pre-tax losses widened for the first half, with pumping now well underway, forecasts for a return to profit this year are looking more realistic. And if further predictions for 2018 come off, we could see a near-trebling of earnings per share to bring the P/E down to under two.

Now, Eland is very small with a market cap of just £123m, and with oil prices remaining relatively low (and still at risk of renewed falls), an investment right now would bring its own big risks. 

But if you’re the kind of upbeat investor who’s happy taking on that that risk, I rate the prospects as bright.

The post A growth stock I’d buy alongside Hurricane Energy plc appeared first on The Twelfth Magpie.

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
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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?

Alan Oscroft 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.

And now it’s happened, with OPEC having finally agreed last month to limit production. It’s uncertain whether Russia will join in, with contradictory noises coming in the past few days, but the worst of the oil crash is surely over.

While the time it took wasn’t going to seriously damage the big producers like BP and Royal Dutch Shell, the big risk for smaller companies was that they wouldn’t survive the hard times — and we’ve already seen Afren hit the wall.

Can the smaller ones survive?

Does Volga Gas (LSE: VGAS) face a brightening future? The AIM-listed explorer based in Russia’s Volga region recorded its highest month’s production of the year so far in September, with a 12% rise from August’s figure to 7,929 barrels of oil equivalent per day.

That comes days after interim results showed revenue more than doubling to $15.9m, with a healthy pre-tax profit of $1.5m (compared to a loss of $1.6m in the first half of 2015). The firm reported a net cash inflow from operations of $7m after an outflow of $1m a year previously. But wait, I hear you cry, aren’t these small cap oilies all saddled with debt? Actually no, Volga Gas enjoyed a cash balance of $12.5m at 30 June, with no borrowings.

We’re looking at a company that’s expected to take home positive earnings this year, with a nice EPS rise forecast for 2017, which would result in a P/E of 11.6. With Volga bringing more production online and the oil world heading into an upbeat-looking time for the price of a barrel, that looks good to me.

The share price is up 87% since January’s low, to 51.25p, but I think there could be more to come — though with the commensurate risks of being dependent on Russia.

Terrorism threat

Speaking of geographic risk, Eland Oil & Gas (LSE: ELA) is up against Boko Haram in Nigeria, though that shouldn’t stop us looking at the shares as an investment possibility. Boko Haram wants to destroy the country’s oil and gas infrastructure, but Eland’s operations so far remain unaffected.

But the scares have helped push Eland shares down to a low P/E of 7.3 based on forecasts for this year, and with a big turnaround in EPS on the cards for 2017 we’d see that multiple pushed down as low as just 1.5! And that’s after a doubling of the share price since January’s low point — it’s been an erratic ride, but the shares have now reached 43p after trading for as little as 21p back then.

Eland delivered a decent-looking interim report last month, and though revenues were modest at $1.1m, the company ended June with a cash balance of $20.6m after a successful equity placing in April. Eland has drawn down $15m of a $25.4m borrowing facility, but with higher production rates expected to lead to that handsome earnings rise in 2017, I don’t see any problem there.

Analysts have a buy consensus on Eland, with an average price target of a little over £1 — and I find it impossible to disagree with them.

The post Are these two small oilies heading for a golden future? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• 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?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended BP and Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Soaring higher

Defence play Ultra Electronics (LSE: ULE) soothed investor nerves in Friday trading after announcing a solid uptick in client activity.

While trading has been in line with management expectations during the quarter, the London business advised that “order intake for quarter one has been strong.” The order book has swelled to £833.5m as of the start of April, Ultra Electronics advised, up from £753.8m at the beginning of 2016.

This is great news considering that £100m worth of orders at Ultra Electronics had slipped into this year and beyond — broker Edison notes that “the first quarter improvement would tend to suggest that at least some of these have been recovered alongside significant elements of new intake.”

Indeed, the Greenford firm has also inked lucrative contracts with the Royal Navy and fellow defence giant Raytheon during the past couple of weeks alone.

The City expects earnings at Ultra Electronics to tick 5% higher in 2016, and a further 6% rise is predicted for next year. I believe that subsequent P/E ratings of 13.7 times and 12.9 times represent a decent level to latch onto the firm as market conditions seem to be improving.

Failing to ignite

Boiler builder Flowgroup (LSE: FLOW) has not fared as well in end-of-week trading, however, the stock recently dealing 12% lower from Thursday’s close. The business announced today that revenues galloped 21% higher during 2015, to £40.4m. But this could not prevent operating losses widening to £17.1m from £10m in 2014.

Flowgroup said that the adverse result reflected “increased investment in staffing levels and infrastructure in preparation for further growth across the business.” However, the engineer was also hampered by a delayed launch for its Flow boiler following a European Court of Justice ruling on energy-saving products, a move that could see VAT on the device increased to 20% from 5% from 2017.

Flowgroup completed first commercial installations of the product in April at the 5% rate, and believes that boiler sales and installations should continue to benefit from a reduced tax rate.

But of course this is not a certainty, and Flowgroup could see uptake of its cutting-edge tech slump should VAT charges soar. Such a scenario could see losses extended beyond 2017, as City forecasts currently suggest.

Driller dips

Shares in fossil fuel play Eland Oil & Gas (LSE: ELA) have continued to trade below recent five-month peaks in Friday’s session.

The company has announced plans to raise $15m through a book-build placing to accelerate the development of its assets in Nigeria. As well as funding the re-entry, completion and production of its Gbetiokun-1 well, Eland will also use the funds to build a supplementary export route for production. The remainder will be used for working capital purposes, Eland advised.

Positive testing results at the field have helped propel Eland’s share price in recent weeks, and the business hopes to produce 7,800 barrels of oil per day when production commences. Maiden oil is pencilled in for the second half of 2016.

The City expects Eland to bounce back into the black this year, and record earnings of 13 US cents per share. This projection leaves the firm dealing on a P/E rating of 3.1 times.

For some, this ultra-low reading may make the business an irresistible value pick. But I believe the uncertainty related to oil drilling — not to mention the wider supply imbalance hanging over the oil price — still makes Eland a risk too far at the present time.

The post Should you buy Ultra Electronics Holdings plc, Flowgroup plc & Eland Oil & Gas plc today? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• 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?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.