Push the gas

It’s not easy being Green, even when you own a huge acreage of exploration property in China, which the London-listed upstart secured after winning a battle with state-owned giants in 2014. The upstream group specialises in chemical-free extraction of coal-bed methane and last year its wells generated 12bn cubic feet of gas, even if only a fifth were connected to the national gas pipe network.

Green Dragon Gas could generate up to 50bn cubic feet a year which it can sell comfortably above production costs thanks to Chinese government incentives for domestic producers, plus an extra premium for coal-bed methane extraction. Today’s financial highlights show a drop in first-half revenues from $14.6m to $12.9m but markets chose to focus on the positive, a 161% jump in net profits to $1.8m.

Well, well, well

The group has net assets of $654m, up from $639m, while gas volumes rose 8% year-on-year. Founder Randeep S Grewal hailed positive results, with profit margins exceeding 50% and negligible capital expenditure. He says the group continues to focus on developing the infrastructure of the 1,339 equity wells in its flagship GSS Block, as well as carrying out a “disciplined cost reduction programme”.

Grewal also anticipates an increase in gas sales volumes from its collaborative relationship with Chinese partners CNPC & CNOOC, with new wells being drilled and connected to the gas infrastructure. Naturally, this is a risky play, despite a “conservative balance sheet” with net gearing of 22% and net equity of US$654m. It has a number of upcoming bond maturities, including $88m due for repayment in November 2017, which it is currently looking to refinance, and a $50m convertible loan note due for repayment in December 2020. The falling knife is flying upwards today, but as ever, mind your fingers.

Premier League

With Brent crude nudging $58 a barrel, it is time to look at explorers like Premier Oil (LSE: PMO) once again. With the share price rising 33% in the last three months, loyal investors are already benefitting from the upswing in prices and sentiment.

The UK oil and gas firm, which also has interests in Indonesia, Vietnam, the Falkland Islands and Pakistan, was boosted by last month’s first-half results showing a record 821,000 barrel of oil equivalents per day (boepd), up more than a third year-on-year. It also boosted margins by cutting operating costs from $16.50 to $14.70 per barrel, putting it in a solid position even if the oil recovery stalls.

Marginal gains

Premier is making progress with its Catcher and Tolmount projects, has enjoyed what CEO Tony Durrant called “a world-class exploration success in Mexico,” and is boosting cash flow from disposals. It has completed its refinancing and now hopes higher production and wider margins will shrink its hefty $2.73bn debt pile. Things are looking up, but as ever, the oil price will decide all.

The post Should you sell Premier Oil plc to buy this ‘falling knife’ energy stock? appeared first on The Twelfth Magpie.

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Harvey Jones 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.

In doing so, Centrica hopes to deliver around £750m per year in cost savings by 2020 and this should help alleviate the intense pressure on its bottom line in recent years. For example, Centrica’s earnings fell by 28% in 2014 and are expected to have declined by a further 8% in 2015.

Furthermore, a more stable business model that’s not as exposed to changing commodity prices should provide scope for further dividend increases in future years. In turn, this could cause investor sentiment to improve and push Centrica’s share price higher after its slump of 23% in the last year. With the company’s shares trading on a price-to-earnings (P/E) ratio of 11.7 and yielding 6%, they offer income, value and major turnaround potential.

Long-term confidence

Similarly, energy support services company Lamprell (LSE: LAM) is also finding life difficult in a low oil price world. Its bottom line is expected to have fallen by 45% in 2015 and with a further 2% decline expected to be recorded in 2016, investor sentiment could worsen. This could push Lamprell’s share price even lower in the coming months after its disappointing start to 2016 that has seen its valuation decline by 17%.

However, with Lamprell trading on a P/E ratio of just 7.3, it offers considerable upward rerating potential. And with its current projects being on track according to its most recent update, and Lamprell gaining an advantage from the early implementation of efficiency measures, there’s scope for improved financial performance in the long run. Furthermore, with Lamprell due to raise dividends by 60% this year, investor sentiment could pick up due to rising shareholder payouts indicating Lamprell’s confidence in its long-term financial outlook.

The dragon wakes?

Meanwhile, shares in one of China’s largest gas producers Green Dragon Gas (LSE: GDG) have risen by over 40% today even though no significant news flow has been released. According to its most recent production update, which was released around three weeks ago, Green Dragon’s operations are performing ahead of expectations and its 2015 year-end exit rate gross production target was surpassed.

In fact, Green Dragon’s gross production rate rose by 36% from 2014 to 2015. With there being tremendous scope for further infrastructure development and the connection of wells to the production network from the existing 1,977 drilled wells, Green Dragon’s shares could make further gains over the medium term.

Clearly, Green Dragon is a lossmaking entity and gas prices could come under further pressure if the price of oil continues to deteriorate. However, with production set to increase rapidly, for less risk-averse investors Green Dragon could be worth a closer look.

The post Are Green Dragon Gas Ltd., Centrica PLC And Lamprell Plc About To Mount Successful Comebacks? 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
• 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?

Peter Stephens owns shares of Centrica. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Chinese gas

China-based Green Dragon Gas (LSE: GCG) released interim results on Monday, and pleased the punters by reporting increased revenues and a reduced first-half loss. Revenue was up 8% to $16.8m, while the firm’s net loss from continuing operations was slashed by 98%, from $69.3m in the first half of 2014 to just $1.4m.

Capital expenditure was up, from $7.8m to $19.4m, but the company stressed that was in line with its “focus on infrastructure investment and drilling to deliver increased production“.

The share price had fallen 38% over the past 12 months, but it picked up 2.75p (1%) on the day to take the thinly-traded shares to 295p. And looking forward, Green Dragon is forecast to produce its first profit this year, with earnings of around 30 per share expected, rising to 9.5p in 2016 — that would give us a two-year-out P/E of 30, but at this stage such valuations don’t mean a lot.

Falklands riches

Over in the Atlantic, Falkland Oil and Gas (LSE: FOGL) has been delivering good news over the past few months with expectation-busting oil finds at Isobel Deep in the North Falkland Basin — the company has a share in a resource that could extend to a billion barrels of recoverable oil.

The problem is that it will still be some years between discovery and actual production from these fields, and there’s a lot more money needing to be invested before the profits start to flow. But with the partnership of Falkland Oil and Gas, Rockhopper and Premier Oil attracting positive sentiment, and the short-term price of oil not being representative of eventual revenues, the share price ticked up 3% on Monday to 24.75p.

Rocky ride

Range Resources (LSE: RR) has had a troubled year, with its share price suspended for some of it for technical reasons. When trading resumed in June the price shot up, but it’s since slumped back again to around the suspension price after a trading update on 7 August revealed an 8% fall in production from the firm’s Trinidad operations.

But the fallout from that looks like it might have subsided, and on Monday we saw a modest rise of 2.3%, to 0.53p per share. Range Resources is well funded for its planned drilling, but one problem for investors is that there are no forecasts available for this year, and forecasts for a very small profit for 2016 are a little out of date. It’s risky, but if it comes good the rewards could be significant.

The post Why Are Green Dragon Gas Ltd, Falkland Oil and Gas Limited & Range Resources Ltd Rising While Oil Falls? 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 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.