Hurt in a fall

Clearly, Lonmin continues to be a relatively uncertain business. It has been severely hurt by falling commodity prices and has struggled to maintain investor confidence, as evidenced by its 99.9% fall in share price during the last five years.

However, with a new strategy and a fundraising which should allow the company to deliver on its turnaround plans, Lonmin could continue the share price rise of 70% which has been recorded since the start of the year. Certainly, its outlook remains relatively risky, but with Lonmin due to return to profitability next year, it could be of interest to less risk averse investors.

Prudent to wait

Also volatile today are shares in Nighthawk Energy (LSE: HAWK), which are 9% lower at the time of writing. That’s despite there being no significant news flow released by the company today, although investor sentiment has been weak since the company announced a reduction in the limit of its borrowing facility. Previously it had been $23m, but it will now be $13m and Nighthawk stated in the latest update that it was consistent with many other operators’ reserve based loans in a challenging oil environment.

With Nighthawk having borrowings of $23m and $2m of cash, it is exploring other options with its lender to address the deficit. For the company’s investors, now is a highly uncertain time and although Nighthawk has an appealing asset base, and the potential to deliver high levels of profitability in the long run, it may be prudent to await further news before buying a slice of the business. That’s especially the case since the resources sector remains cheap and offers a number of other stocks with superior risk/reward ratios at the present time.

Improving sentiment

Meanwhile, shares in Metal Tiger (LSE: MTR) have been up by as much as 6% today and this took their gain to 371% since the turn of the year. Clearly, they have benefitted to a significant degree from the upturn in the outlook for the wider mining sector in that time, with Metal Tiger’s various investments benefitting from improving investor sentiment towards the wider mining sector.

Certainly, there is the scope for further gains in future and in a number of commodity markets it could be argued that the worst of the bear market is now behind us. However, even though Metal Tiger has a relatively well-diversified asset base, it could prove to be highly volatile and may only be worth a closer look for the least risk averse of investors.

The post Why Are Traders Moving Lonmin Plc, Nighthawk Energy Plc And Metal Tiger PLC? 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.

Somewhat brighter

Certainly, a more stable oil price has caused LGO Energy (LSE: LGO) to attempt to ramp-up production at its key Goudron field in Trinidad. In fact, it is aiming to increase production by around 200 barrels of oil per day (bopd) through two separate programmes. The first involves the restoration of production from a number of existing wells, which it is anticipated will increase production by 100 bopd within the next few weeks.  The second involves several well recompletions, and will cost around $150,000, but should also increase production by around 100 bopd.

This is clearly encouraging news for LGO’s investors, with the cost of the work set to be funded from existing cash resources. But while its future may now be somewhat brighter than a number of weeks ago (as reflected in a share price which is up by 35% in the last month), with the wider sector being cheap there appear to be better options available elsewhere.

Positive news

Also rising recently have been shares in Nighthawk Energy (LSE: HAWK). They are up by 169% in the last month, largely due to positive news flow. In fact, Nighthawk’s application for its planned Arikaree water flood enhanced oil recovery project was approved just last week by the Colorado Oil & Gas Conservation Commission. It is, of course, subject to Nighthawk obtaining 80% approval of the non-working interest owners within the next six months, which the company believes will be successfully obtained within the next few months.

This was positive news for the company and once the project is completed, it has the potential to significantly increase production as well as boost field reserve levels. Although Nighthawk remains a relatively high risk play, its shares could continue to rise and it may therefore be of interest to less risk averse investors.

Highly leveraged

Meanwhile, shares in Xcite Energy (LSE: XEL) have fallen by 26% in the last week, as doubts surrounding its financial viability continue to surface. While Xcite Energy has a strong asset base, with the Bentley field in the North Sea having long term profit potential, the company’s balance sheet remains relatively highly leveraged.

For example, it has around $134m of debt on its balance sheet which is due to be repaid in June of this year. With the company having no revenue, it is apparently seeking a financial partner but has been unsuccessful in doing so thus far. As such, investors appear to be concerned about its near-term prospects. With a number of other opportunities within the oil and gas space, it seems prudent to watch, rather than buy, Xcite Energy due to the relatively high degree of uncertainty surrounding it at the present time.

The post Is Now The Right Time To Buy These 3 Resources Stocks? LGO Energy PLC, Nighthawk Energy Plc And Xcite Energy Limited appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.

Discussions are also ongoing with other potential investors, as well as with LGO’s bankers, BNP Paribas. The latter is regarding a possible extension beyond the end of this month of the waiver on payments on the funds drawn down by LGO’s subsidiary.

Due to its precarious financial position, LGO has ceased all drilling activities and is attempting to conserve cash in the current low oil price environment. Looking ahead, the dual challenges of a continued low oil price as well as the challenging financial outlook which the company faces mean that LGO’s shares are incredibly risky.

Certainly, the company’s asset base is appealing and as today’s update states, the Goudron field in Trinidad continues to offer long term potential. However, with other oil and gas plays being in stronger financial positions and offering good value for money, there appear to be better risk/reward opportunities available elsewhere.

Also among the biggest movers in the oil and gas sector today is Nighthawk Energy (LSE: HAWK). Its shares have risen by 8% today despite there being no significant news flow released by the company. However, investor sentiment has been relatively buoyant in the last month owing to strength in the wider resources sector and also as a result of a positive production update from Nighthawk.

In fact, the company announced on 1 February that it expects total revenues for the full-year to be significantly higher than current market expectations. And with Nighthawk forecast to return to profitability in the 2016 financial year with a pretax profit of £6.6m, investor sentiment could continue to improve over the medium term following its share price rise of 39% in the last month. As such, it may be worth a closer look for less risk averse investors.

Meanwhile, shares in competition company Best of the Best (LSE: BOTB) (where entrants can win a supercar) continue to soar and have risen by an additional 10% today. This takes their capital gain to an incredible 250% in the last year and with a special dividend recently announced, they are due to yield over 8.5% in the current year.

The special dividend seems to have improved investor sentiment in Best of the Best yet further, with it equating to 19.5p per share, which works out as 7.6% of the current share price. It is being paid because the company feels that it has excess cash sitting on its balance sheet which will not be required for working capital purposes over the next year. And with the company being cash generative and having a relatively strong balance sheet, it appears to have a bright long term future.

With shares in Best of the Best trading on a price to earnings (P/E) ratio of 31.8, they seem to be rather expensive given that earnings growth of 13% is forecast for the current year. But further gains simply cannot be ruled out, since there is still significant online growth potential on offer.

The post Which Small-Cap Should You Buy? LGO Energy PLC, Best Of The Best plc Or Nighthawk Energy Plc appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.

Clearly, there is a huge amount of uncertainty regarding the prospects for the price of silver and in recent years it has been a major disappointment. Unlike gold, it is not seen as a particularly effective store of wealth, and while Fresnillo is also a gold producer, silver remains its main business and its price is likely to have a major impact upon its financial performance.

With Fresnillo’s shares having risen by 19% since the turn of the year, investor sentiment in the company is clearly on the up. And while its valuation is not as appealing as it was six weeks ago, Fresnillo still offers at least 20% upside over the medium to long term. A key reason for that is its growth outlook, with the company forecast to increase its bottom line by 81% in the current year. This helps Fresnillo to trade on a price to earnings growth (PEG) ratio of only 0.3, which indicates that its shares could rise by 20% or more and still be relatively cheap.

Also offering over 20% potential upside is Glencore (LSE: GLEN). Clearly, this is a relatively risky stock since Glencore has the potential to fall significantly if commodity prices tumble and if its refreshed strategy does not work out. Certainly, the recent update by the company indicated that its debt reduction plan was moving in the right direction, while it is gradually becoming increasingly efficient, too.

Glencore is forecast to increase its earnings by 19% in the current year and while this could realistically change depending on commodity prices, it puts Glencore on a PEG ratio of only 0.8. This indicates that there is considerable upside potential and while it is a very high risk play, long term, less risk-averse investors may wish to take a closer look.

On the topic of 20% rises, Nighthawk Energy (LSE: HAWK) has soared by more than that amount today, although it is still down by 71% in the last three months. Recent news for the company has been positive, with the oil development and production company releasing an annual production update just last week which stated that it expects revenue for the full-year to be significantly higher than market expectations.

Clearly, the price of oil could fall further and hurt Nighthawk’s long term profitability. But with the company forecast to record a pre-tax profit of over £6m in 2016, its forward price to earnings (P/E) ratio of 2.5 indicates 20% upside is achievable. As such, it may appeal to less risk-averse investors who can live with a high degree of volatility and risk.

The post 20% Gains Are On The Cards For Glencore PLC, Fresnillo Plc And Nighthawk Energy Plc 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.

Now dry your eyes, because anybody investing in smaller oil explorers knows the risks they take. Also, you will need your wits about you to work out whether these two stocks are worth buying today.

Night, Night

AIM-listed shale driller Nighthawk ended 2014 on a high, with an upbeat production update highlighting increased production in newly-drilled wells. Management boldly stated that with operating margins of 60% to 70% Nighthawk could survive $50 oil. Investors aren’t as confident, as the share price confirms.

Recent half-year results showed year-on-year oil sales volumes rising slightly from 345,558 barrels to 351,609. This is impressive given the fact that Nighthawk pretty much stopped new drilling activity after admitting in June that 70% of its 2013/14 wells were uneconomic at $60 a barrel. Instead, it has been working to maximise production from its existing wells. 

With a realised oil price of around $44 a barrel, including hedging, Nighthawk is clearly under pressure. First-half revenues fell from $25.4m last year to $16m in 2015. EBITDA operating profits dropped from $17.4m to $6.6m. This left Nighthawk down to its last $2.3m in cash, a situation since remedied by raising $10m through a zero coupon unsecured convertible loan note. That should fund its 2015 and 2016 drilling programme, helping Nighthawk boost production and cash flow, and strengthen its balance sheet. It has no debt due for repayment before 2019.

It can’t do much else about cheap oil apart from slash costs, which it is doing with gusto, shedding staff and streamlining financial and corporate functions. Nighthawk needs pricier oil. No sign of that yet.

So-So Soco

Soco International is up 12% over the last month, as its share price reacted more strongly than expected to the recent oil price rebound. Too strongly, according to Macquari, leaving the stock overvalued, only a penny or so off the broker’s target price of 185p. Currently trading at 65 times earnings, Soco certainly doesn’t look cheap. The ahead-of-schedule H5 exploration project gives some grounds for hope on the production side, and sharing $51m of dividends with investors in June is a sign of positive intent. Currently, Soco yields 5.45%.

Operating cash flow for the first six months of this year was $45.3m, sharply down from $141m in the first half of 2014. Its cash balance stood at $96.6m in June, way better than Nighthawk’s. That is down from $166.4m at the end of last year, although much of the erosion was due to that dividend. Future payouts are likely to be far less generous unless oil quickly recovers. Happily, Soco is free of debt.

If the oil price rebounds, investors can expect a rapid relief rally in both stocks, but with China slowing and supply still holding up, this one could go to the wire. Over to you, Opec.

The post Will Nighthawk Energy Plc Or Soco International Plc Drill Through Their Cash Pile First? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.