Today’s update from shopping centre operator Intu Properties (LSE: INTU) is upbeat and shows that the company is on-track to meet full-year expectations. Although the EU referendum has caused uncertainty among investors and in global stock markets, Intu has seen little change in its operating performance in recent months. As such, it is on target to deliver growth in like-for-like net rental income of between 2% and 3% for the full-year.

Clearly, Intu’s share price fall of 12% in the last year has been hugely disappointing. But with regional shopping centres remaining a very attractive asset to global investors, Intu’s share price could rise due to increased demand for its yield and low valuation. In fact, Intu now has a yield of 4.6% and trades on a price to book (P/B) ratio of just 0.8; both of which indicate that now is a great time to buy for the long term.

Of course, UK consumer confidence could come under a degree of pressure over the medium term, as interest rate rises seem likely at some point. However, with Intu having a sound business model and a wide margin of safety, it seems to be well-placed to deliver rising profitability in future.

Going from strength to strength

Also reporting today was Direct Line (LSE: DLG), with the insurer announcing that gross written premiums rose by 4.2% in the first quarter of the year. This is in-line with market expectations and shows that the motor insurance specialist is going from strength to strength. Furthermore, trading benefitted from investment in brand differentiation and proposition initiatives, with Direct Line also witnessing a relatively high retention rate in both its motor and home divisions.

Looking ahead, Direct Line continues to expect to report a combined operating ratio of between 93% and 95% for the full-year. With its bottom line forecast to rise by 7% this year and by a further 5% next year, Direct Line could experience an upward re-rating over the medium term. That’s especially the case since it trades on a price to earnings (P/E) ratio of just 12.9 which when combined with a yield of 5.7%, indicates that Direct Line is a strong long term buy.

A sound move

Meanwhile, shares in Nighthawk Energy (LSE: HAWK) have soared by over 10% today after it amended the project for which it is currently seeking approval in Colorado. Back in March, Nighthawk received conditional approval for the project, with it requiring 80% approval of the non-cost bearing royalty interest owners. While Nighthawk is currently attempting to do just that, in an effort to expedite the process it has decided to reduce the size of the water flood area.

The effect of doing so would be to halve the cost of the project, but to recover around 70% of the original incremental reserves. As such, it seems to be a sound move and has been well-received by the market. While the wider oil and gas industry is relatively high risk, Nighthawk could be worth a closer look for less risk averse investors owing to its impressive asset base and long term profit potential.

The post Are Direct Line Insurance Group plc, Nighthawk Energy plc and Intu Properties plc ‘screaming buys’ after today’s results? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Direct Line Insurance. 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.

Shares in Nighthawk Energy (LSE: HAWK) have fallen by as much as 11% today despite the company releasing positive news flow regarding its financial situation. The US focused oil development and production company has received an extension to certain loan covenants under the company’s Reserves Based Loan. This is to allow Nighthawk further time to agree to possible amendments to the covenant and debt repayment provisions of the loan in light of anticipated financial results.

The covenants have been waived until 28 April and encouragingly for Nighthawk’s investors, it expects that new banking arrangements will be in place at or before that time. Clearly, though, this is a highly uncertain time for Nighthawk and even though today’s update is positive, and the company has the potential to deliver improved profitability in the long run, it may be prudent to await further information regarding its borrowing situation before piling in. After all, with a falling oil price causing further misery for the resources sector, the risks appear to outweigh the potential rewards.

Upbeat growth potential

Also updating the market today was Amur Minerals (LSE: AMC). The nickel-copper sulphide mineral exploration and resource development company has completed the full restock and mobilisation of all newly purchased mobile equipment to its Kun-Manie project in Eastern Russia. This positions the company to undertake and continue its development of the project towards the completion of its definitive feasibility study.

Despite this, Amur’s share price has fallen by over 5% today. That could be due to a weaker wider resources market, but it provides an indication of how volatile smaller companies such as Amur can be. However, even when such volatility is factored in, Amur’s long term profit growth prospects remain very upbeat and its potential rewards for investors are substantial. However, with the resources sector offering a number of deeply discounted mid and large operators which are highly profitable, there may be better options available elsewhere.

Margin of safety

One such company is BP (LSE: BP). The oil and gas major has a highly diversified asset base and even though it has paid out $billions in compensation claims for the Deepwater Horizon oil spill in recent years, it still benefits from excellent financial standing which will stand it in good stead during the present commodity downturn.

Looking ahead, BP is expected to grow its bottom line by around 2.5 times in the next financial year. While this forecast is highly dependent upon the price of oil and gas during that period, BP’s current valuation seems to offer a sufficiently wide margin of safety to merit investment right now.

For example, it trades on a price to earnings growth (PEG) ratio of only 0.1 and this indicates that it offers long term growth potential at a reasonable price. So, while not being risk free, BP seems to have an appealing mix of high potential rewards and more financial stability than many of its smaller sector peers.

The post Do BP plc, Nighthawk Energy Plc And Amur Minerals Corporation’s Risks Outweigh Their Potential Rewards? appeared first on The Twelfth Magpie.

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Exceptionally low valuation

A prime example is the world’s largest silver producer Fresnillo (LSE: FRES). Its financial performance started to come under pressure long before the current commodity crisis really took hold — the price of silver peaked around five years ago and has failed to mount a successful comeback ever since. As a result, Fresnillo’s profitability has come under severe pressure and its shares have been a relative disappointment in recent years.

However, Fresnillo has been able to stay in the black throughout, and while the prospects for silver are rather uncertain, it could be worth buying simply because it trades on an exceptionally low valuation. For example, it has a price to earnings growth (PEG) ratio of just 0.4 and with relatively stable finances and an efficient business model, it could be a good bet for the long term.

Major questions remain

The risk/reward ratio for Gulf Keystone Petroleum (LSE: GKP), though, seems to be rather unattractive. On the one hand it has a highly appealing asset base which should provide the company with low cost production over the long term. However, external challenges pose a real threat to Gulf Keystone Petroleum’s operations and could hurt its long term outlook.

Central to this is the political instability in the Northern Iraq/Kurdistan region, which is showing little sign of abating. Although this has not prevented Gulf Keystone Petroleum from conducting its oil production activities in recent months, it is still waiting for full payment for past production. While this situation has been alleviated somewhat byrecent payments, there remain major questions about the company’s long term financial outlook. As such, there seem to be better buys within the oil space at the present time.

Very encouraging update

Meanwhile, shares in US-focused oil development and production company Nighthawk Energy (LSE: HAWK) have soared by over 13% today, after it released a very encouraging production update. For the year to 31 December 2015 gross production was 654,800 barrels, which represents a 7.3% decline compared with the 706,319 barrels produced in 2014. The reason for this fall was a natural decline rate on existing wells, which was offset to a degree by the results from Nighthawk’s behind pipe and solvent treatment programmes.

However, the key part of today’s release is that Nighthawk now expects revenue for the full year to be significantly higher than current market expectations. This is clearly excellent news for the company’s investors and with Nighthawk having a price to book value (P/B) ratio of 0.3, it could be worth a closer look for less risk-averse investors.

The post Are Gulf Keystone Petroleum Limited, Fresnillo Plc And Nighthawk Energy Plc Too Risky To Buy? 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. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The problem is that both companies are already in a tough spot, particularly Nighthawk, whose share price has collapsed from 7.1p to just 1.15p over the past 12 months. Ophir looks resilient by comparison, having fallen just 35% over the same period to around 85p. But recent events won’t make life easier for either of them.

Driller killer

These are tense times for anybody still holding onto their shares in penny dreadful Nighthawk. The US-focused oil development and production company saw risk pile upon risk in 2015, after starting the year reckoning it could make a reasonable rate of return even if oil fell to $50 a barrel. With oil now heading towards $30 these are dark times for Nighthawk, despite producing a net 499,000 barrels of oil in the year to 30 November.

Mixed drilling results last year only made matters worse, as Nighthawk had to plug and abandon its Monarch, Happy Jack and Northstar wells. Then in early December, it announced a breach in covenants under its reserve-based loans, and it’s now mired in negotiations with the Commonwealth Bank of Australia. Nighthawk has twice announced an extension waiver on its debt renegotiations, on 22 December and again on 4 January, as both parties battle to find a solution to its compliance problems. This week’s oil price collapse and market meltdown will only make finding a lasting solution harder.

Ophir and loathing

Ophir’s share price was buoyed by its speculation towards the end of last year, with informal takeover and merger interest from several parties, although there has been little news on this front since November. I never buy purely on bid speculation but I’m soothed by its net cash position of around $350m at the end of 2015. The Africa and Asia-focused explorer’s production averaged 13,400 BOE/D last year, although it will dip this year to between 10,500 and 11,500. Its Kerendan gas field forecast should start pumping in the second half of 2016.

Ophir has also been successfully cutting costs and refinancing debt to boost its balance sheet, and management predicts a relatively comfortable 2016 year-end cash position of between $575m and $625m, and net cash position of between $250m and $300m. The share price still fell 10% in the last week, but given current market troubles, you can’t read too much into that.

With no sign of oil hitting a price floor, any stock in this sector is a gamble, although Ophir looks far more solid than Nighthawk, and should tough out 2016. The question is: are you tough enough to buy it?

The post Are Ophir Energy Plc And Nighthawk Energy Plc Tough Enough To Survive This Year? appeared first on The Twelfth Magpie.

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Harvey Jones 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.

Nighthawk Drills Deeper

Should oil rebound, fortunes will be made. Could you make yours by investing in Nighthawk Energy (LSE: HAWK)? This US-focused oil development and production company has been hunted rather than hunter this year, with its share price crashing from 7.45p one year ago to just 1.1p today. Last week it released a positive production update, reporting increased production in newly-drilled wells, with average gross production in October rising to 1,886 barrels of oil a day.

It’s also capturing more reserves from existing wells by reconfiguring them and has identified 17 new drilling locations within its Snow King Discovery area. This upbeat report follows a series of underwhelming updates that knocked faith in the company’s prospects, but has done little to revive the share price.

Yet Nighthawk may be worth a closer look. With reported operating margins of up to 60% or 70% it should be able to survive cheap oil, management claims, even if the price remains as low as $50 a barrel. A week is a long time in oil exploration, however, and oil is now heading towards $36, crashing through those calculations. If you think buying oil exploration stocks is the tough thing to do – rather than crazy, daft, reckless – you might want to swoop on this opportunity. Be warned, you could get clawed.

So Xcite-d

AIM-listed oil appraisal and development company Xcite Energy (LSE: XEL) has also had a troubled year, its share price falling from 44p to around 15p. The big challenge it faces is convincing today’s worried oil markets to invest in its flagship entry Bentley heavy oilfield in the Northern North Sea, which is thought to have reserves worth around $2.3bn over a 35-year timescale.

Xcite’s third-quarter update in late November saw management claiming progress with a number of funding options and reckoning it can exploit Bentley with total lifecycle costs of $35 a barrel. That sounded okay at the time but doesn’t look so good with oil at $37, and speculation that it could slump to $30 next year. 

The company is working hard to reduce drilling and operational costs, using innovative but proven technology such as its mobile offshore production unit. It has now completed technical and economic due diligence with one partner, and is ready to move into commercial discussions. Again, that was when oil stood at $50.

With a cash balance of $27.9m at the end of September, and a net Q3 loss of just $0.3m, debt isn’t a problem right now. Finding funds in today’s market is. The lower oil falls, the harder it will get. This stock is speculation upon speculation, and is way too tough for a scaredy-cat like me.

The post Are You Tough Enough To Invest In Nighthawk Energy Plc And Xcite Energy Limited? appeared first on The Twelfth Magpie.

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Harvey Jones 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.

Hawkish Outlook

US-focused oil development and production company Nighthawk Energy (LSE: HAWK) was always a risky play, whatever the oil price. Over the last year its share price has absolutely collapsed from 7.50p to today’s rock-bottom purchase price of a meagre 1.70p. This penny stock now reads like a penny dreadful.

It all looked so much more optimistic in December last year, when management issued an upbeat production update following increased production in newly drilled wells. It claimed that with operating margins as high as 60% to 70% it could earn a reasonable rate of return on its drilling capital even if oil fell hit $50 per barrel. Today, it is $45 a barrel. But that isn’t the main cause of its current woes.

Driller Killer

Nighthawk announced in August that it was running a five-well drilling programme for late 2015, and the results so far have been mixed. Results from its Arikaree and Crested Butte wells remain promising but management had to plug and abandon its Monarch well, after sinking around $550,000 into the project. November brought more bad news, with the Happy Jack 7-10 well also plugged and abandoned, and last Thursday management announced that the Northstar 1-14 would suffer the same fate. There is no further drilling planned for this year.

Nighthawk recently bought itself time by raising $10m through a zero coupon unsecured convertible loan note, which should fund its 2016 drilling programme. But investors tempted by today’s rock bottom share price face a nerve wracking 2016 as they await drilling success and pricier oil. That is a double dare I want nothing to do with.

Soco, So Good

Things aren’t quite so desperate at Vietnam-focused Soco International (LSE: SIA), but the outlook is still tough. At today’s 135p, the share price is well down from its 52-week high of 317p. Again, cheap oil is the major problem, but a disappointing recent production update in mid-November dealt a further blow to sentiment. Its H5 well gladdened investors when it started pumping early this year but latest figures show that production is a saddening 9,000 barrels of oil equivalent per day (boepd), against initial expectations of 11-12,000.

The subsequent share price slump has listed its yield to a hefty 11.33%, but I wouldn’t buy this stock for the dividend, as further oil price weakness or drilling disappointments will put it under increased pressure. Only buy if you are gambling on a recovery. Soco looks less risky than Nighthawk, with forecast revenues of around £140m next year, only slightly down on 2015, and pre-tax profits holding steady at around £38m. Predictions like these make me edgy because they are subject to so many variables. There is big money to be made from the oil rebound, but equally big risks. Soco looks safer than Nighthawk, but is still too risky for me.

The post Is It Game Over For Nighthawk Energy Plc And Soco International Plc? appeared first on The Twelfth Magpie.

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Xtract’s second positive piece of news was the announcement that the company has signed a joint venture agreement with Mineral Technologies International Limited, to mine alluvial gold on the Manica gold project.

Xtract expects the joint venture to produce approximately 32,000oz gold per annum, (16,000oz net to Xtract), and Mineral Technologies will cover the cost of the construction of an alluvial gold plant. When in operation, it’s estimated that the Manica gold project joint venture’s payback period will be less than six months. Construction is expected to commence during the third quarter of 2016. 

These two positive news releases only boost the investment case for Xtract. The company has made staggering progress over the past year improving its prospects and last month the group acquired the Fair Bride gold project, jacking up Xtract’s resource base to over 1m ounces of gold. 

Now could be the time to buy Xtract as the company’s mining projects get off the ground. 

Struggling with costs 

Unfortunately, as Xtract powers ahead Nighthawk Energy (LSE: HAWK) is struggling. 

Nighthawk announced today that the company is implementing a number of margin enhancement and operational efficiency measures to reduce group costs as the low oil price eats into profitability. A management shake-up has seen Nighthawk’s CFO leave, to be replaced by Mr. Kurtis Hooley, who will take up the roles of both CFO and company secretary. 

Nighthawk reported an operating loss of $5.2m for the six months to June 2015, compared to a profit of $11m in the same period last year. Moreover, the company seems to be running out of cash. Nighthawk was forced to issue a $10m zero coupon unsecured convertible loan note at the end of August to bolster its balance sheet. But as the company burnt through $7.4m during the first-half, this cash won’t last long.  

Even with the cost savings announced today, it looks as if Nighthawk is going to struggle going forward.

Cutting guidance 

Genel Energy (LSE: GENL) is another oil producer that’s struggling with the low oil price. The company announced this morning that it was reducing production guidance for 2015 to a range between 85,000 and 90,000 barrels of oil per day, from 90,000 to 100,000 bopd. 

Genel went on to say that reduced production guidance would mean a lower revenue figure for the year. It cut its revenue guidance to a range between $350m and $375m, down from $350m to $400m, based on a crude price of $50 a barrel. 

However, Genel has now reached a turning point with the Kurdistan Regional Government as the flow of oil payments from the KRG has improved. Management is confident that the KRG will continue to return owed cash to producers, removing much of the uncertainty that’s surrounded Genel for the past few years. Group net debt at the end of September was $211m. Genel currently trades at a forward P/E of 26.6. 

The post Is Now The Time To Buy Xtract Resources PLC, Nighthawk Energy Plc And Genel Energy PLC? appeared first on The Twelfth Magpie.

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Rupert Hargreaves 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.

Russia- and Ukraine-focused small cap JKX Oil & Gas (LSE: JKX) fell 20%, while Tullow Oil (LSE: TLW) also slipped lower. US firm Nighthawk Energy (LSE: HAWK) bucked the trend, climbing by 11%, but are any of these companies a buy in today’s market?

JKX: wrong place, wrong time

Shares in JKX fell by 20% to 15p when markets opened this morning, after the firm reported a 40% fall in revenue and a $7.3m operating loss for the first half of 2015.

Production fell by 15% to 8,611 barrels of oil equivalent per day (boepd) during the period, mainly as a result of gas sale restrictions and a punitive tax hike in Ukraine, which have forced the company to suspend development drilling.

JKX is fighting these restrictions, but it is not yet clear whether the Ukrainian government will honour a recent interim ruling ordering it to lower the tax rate on JKX’s gas sales to its previous level of 28%.

The group does have a cash balance of $22.4m and has slashed capital expenditure. JKX can afford to continue operating in the short term, but may struggle to return to profit unless the situation in Ukraine normalises fairly soon.

Tullow Oil

Tullow shares fell by 3% following today’s results, leaving them 31% lower than one month ago.

Today’s results were slightly better than expected, thanks mainly to an effective hedging programme that provided a $298m boost to first-half earnings. This limited Tullow’s pre-tax losses to £10m.

However, a technical problem with the firm’s flagship Jubilee field means that production guidance for the full year has been cut from 105,000 bopd to 100,000 bopd. The cut comes at a bad time for Tullow, which is currently investing heavily in the completion of its TEN project in Ghana, where first oil is due in 2016.

Although TEN is on budget, it’s worth noting that Tullow’s capital expenditure this year is expected to be $1.9bn. That’s more than total forecast revenue of $1.8bn. The shortfall will be funded by debt, which has already risen from $3.1bn at the end of 2014 to $3.6bn.

I remain concerned that when TEN production starts, the cash generated may not be enough to repay the firm’s debts and reward shareholders.

Can Nighthawk drill?

Like many US shale operators, Nighthawk has stopped drilling new wells and is relying on maximising output from existing wells to maintain production.

That seems to be working quite well at the moment. Net production in June was 1,491 bopd, compared to 1,638 bopd in April.

The question is whether Nighthawk can afford to drill. The firm said today that it has 55-65 potential drilling locations which have been qualified with seismic surveys. The problem is that in June’s AGM presentation, Nighthawk said that only 70% of its 2013-14 wells would be economic at $60 per barrel.

Given that WTI crude is currently below $50 per barrel, Nighthawk may not be able to persuade its lenders to fund new drilling in the current climate.

Today’s best buy?

All three of these companies are struggling with the low price of oil and gas, and I suspect all three could have further to fall.

The post Have Tullow Oil plc, JKX Oil & Gas Plc And Nighthawk Energy Plc Bottomed Out Yet? appeared first on The Twelfth Magpie.

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