Improving outlook

Updating the market on Tuesday was oil and gas company President Energy (LSE: PPC). The company reported that it has already banked the proceeds from its first delivery of oil from the Puesto Flores Field. The acquisition of the asset, together with the neighbouring Estancia Vieja Field, was announced just a month ago and the proceeds received of $1.5m represent the revenue from the first shipment of oil under the company’s own steam.

The news has been greeted positively by investors, with its share price rising by 7%. This takes the gain over the last year to 40%, and more growth could lie ahead.

The business is focused on improving profitability and generating positive cash flow. In fact, next year it is forecast to move from a loss-making position to a profitable one. This has the potential to catalyse investor sentiment yet further – especially since the stock trades on a forward price-to-earnings (P/E) ratio of under 20.

Given the company’s growth potential in the long run, its valuation could move higher over the medium term. This means that while there are a number of energy stocks which could be worth buying right now, President Energy’s risk/reward ratio appears to be relatively favourable.

Upbeat potential

Also offering what seems to be an attractive risk/reward ratio within the energy sector is Enquest (LSE: ENQ). The UK- and Malaysia-focused oil and gas company is expected to improve on what may prove to be a tough 2017.

It’s due to move into the red this year, but then move back into the black in 2018. This improved outlook, however, does not seem to have been factored in by the market, since the stock trades on a forward P/E of 8.9. This suggests that the company’s share price could make a recovery after falling by 12% in the last year.

Of course, the outlook for the oil price is hugely uncertain. It could make a significant impact on Enquest’s earnings outlook and, having recently reached a two-year high, its prospects now appear to be rather encouraging.

Clearly, though, volatility is unlikely to disappear anytime soon and oil and gas companies could see their share prices move wildly in either direction in the short run. As such, with Enquest (and President Energy) being relatively small players, risk averse investors may prefer a stock with more size and scale. But based on their risk/reward ratios, they both appear to be worth buying for the long term.

The post Time to get greedy with these 2 dirt-cheap small-caps? 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.

The oil and gas exploration company has today released an operational update that provides clues as to whether it’s a better buy than two of its resources sector peers, Cairn Energy (LSE: CNE) and Sirius Minerals (LSE:SXX).

President Energy’s update is rather mixed. On the one hand it has experienced unforeseen issues with its new well at the Puesto Guardian concession. This has caused delays to the drilling programme, with five days of non-productive time lost due to electro-mechanical issues relating to the drilling rig. However, this was at zero cost to President and since then the drilling rates of penetration have been ahead of the company’s expectations.

Furthermore, production from Puesto Guardian is now at 510 barrels of oil per day (bopd) following an average of 440 bopd in July. And with production in Louisiana likely to rise to 250 barrels of oil equivalent per day (boepd) by the end of September following a period of lower production, President’s long term outlook is becoming brighter.

Huge potential

Similarly, Sirius Minerals has the potential to deliver a high level of profitability in the long run. Its update this week showed that it’s making encouraging progress with its funding strategy, with multiple financial institutions indicating their support for the second stage of its two-stage plan.

Clearly, there’s still some way to go before Sirius Minerals is a profitable entity as its £1bn-plus potash mine is a major project that will only bear fruit in the long run. However, with crop studies for its polyhalite fertiliser generally being positive and global demand for food likely to increase as the population rises yet further, Sirius Minerals could prove to be a very rewarding, albeit higher risk, buy for the coming years.

The right mix?

However, Cairn Energy appears to have a more enticing risk/reward ratio than either President Energy or Sirius Minerals. It’s a lossmaking business at the present time and is dependent on the price of oil in the long run for its profitability. But it has a strong balance sheet with a net cash position as well as an excellent asset base that could allow it to deliver high levels of profitability in the long run.

Furthermore, Cairn’s losses are forecast to narrow from £368m last year to £53m in 2017. It’s also benefitting from a falling cost of exploration that’s helping to keep its costs down in the short run. Due to its size, financial strength and appealing asset base, it’s a better buy than President and Sirius Minerals, although both of those two stocks have the potential to rise over the medium-to-long term should the commodity environment remain favourable.

The post Should you buy this resources stock after today’s update? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

However, Vodafone is much more than just a defensive stock to own during rough patches for the rest of the market. In fact, its business may not be as defensive as it was in the past, since it lacks the same extent of regional diversity as it once did following the sale of its stake in North America-focused Verizon Wireless. This shifted Vodafone’s dependence onto Europe; a region that has struggled to deliver any kind of economic growth in the recent past, but where Vodafone is buying up discounted assets and investing in the quality of its infrastructure.

And, with Europe offering relatively bright future growth via an expansionary monetary policy, investors could soon begin to switch from Asia-focused stocks to European-focused ones, with Vodafone likely to be a major beneficiary of this.

Of course, Vodafone remains a great income play. It yields over 5% and has an excellent track record of dividend growth, with them having increased in each of the last five years. This combination of income, growth potential plus defensive qualities mean that Vodafone should continue to outperform the FTSE 100 over the medium to long term.

The same may not be true, though, for online fashion company ASOS (LSE: ASC). It is a superb business with an efficient supply chain, slick website and a relatively high degree of customer loyalty. Furthermore, it has scope to continue to expand outside of the UK, while its position as the go-to destination for twentysomethings in the UK looks fairly stable.

However, as an investment, ASOS lacks appeal. Certainly, the 25% fall in its share price in the last six months makes its appeal somewhat stronger, but it still trades on a very generous valuation given its growth outlook. For example, ASOS has a price to earnings (P/E) ratio of 61 and, while its bottom line is forecast to rise by 24% next year, it still translates into a price to earnings growth (PEG) ratio of 2.5. Although this is lower than it has been for some time, ASOS’s shares may need to come under further pressure for it to become an enticing investment for me.

Meanwhile, oil and gas exploration company President Energy (LSE: PPC) released positive news flow today regarding its reserves, which has pushed its shares upwards by 3%. The Argentinian-focused company has stated that an independent report has shown the amount of reserves and potential resources it owns is higher than previously thought. In fact, proven oil reserves are up by 21%, while proven plus probable reserves are 28% higher.

This is clearly positive news for the company and, while a lower oil price has hurt sentiment this year (President Energy’s share price is down 41% year-to-date), the increase in proven plus probable reserves has increased President Energy’s net present value by 10% to around £215m. With its shares having a market capitalisation of £45m and a price to book value (P/B) ratio of 0.4, it could be a strong performer over the medium to long term.

The post Is Now The Perfect Time To Buy Vodafone Group plc, ASOS plc & President 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 owns and has recommended ASOS. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In this article, I’ll take a look at three firms — President Energy (LSE: PPC), Cape (LSE: CIU) and Flybe Group (LSE: FLYB) — which I believe could deliver strong performance over the next six months.

President Energy

President Energy is a small-cap oil and gas firm whose main producing assets are in Argentina, but which is also involved in exploration in nearby Paraguay.

The firm announced today that it had resolved a dispute with its joint venture partner in Paraguay. The deal means the two firms can continue with their exploration programme, which is expected to build on the information gathered from two successful wells drilled in 2014, in the hope of attracting potential farm-out partners.

However, President’s assets in Argentina could deliver more immediate gains: the firm’s production only averaged 171 barrels of oil per day (bopd) during the first half of last year, but President is planning to drill 17 new wells in its Puesto Guardian acreage this year, which is expected to increase production.

Alongside this, the firm is also seeking a farm-out partner for its Martinez Del Tineo gas prospect, which has independently assessed unrisked recoverable best estimate prospective resources of 570 Bcf of gas, and a net present value (NPV10) of $1.03bn, according to the firm.

With President shares trading at five-year lows of just 12p, President appears to offer decent upside prospects, especially as it is fully funded for 2015, following a placing earlier this year.

Cape

Shares in Cape slipped today, falling around 5%, after the firm revealed that its order book had fallen to £686m during the first quarter of this year, down from £746m at the end of last year.

However, the firm has announced two significant contract wins, with BP and ExxonMobil since that time, which Cape says have “materially increased the order book“.

Cape shares are up by 20% from their January lows, but still look good value in my opinion, trading on a 2015 forecast P/E of 9.2 and offering a prospective yield of 5.5%.

Cape shares remain a strong hold, in my view, and could still deliver solid gains from here if the oil and gas market continues to stabilise.

Flybe

Shares in small-cap airline Flybe fell by around 3.5% to 55p today.

I suspect the fall was caused by easyJet’s admission that it had been forced to cancel more than 600 flights in April due to French air traffic control strikes: easyJet expects these cancellations to wipe £25m from its pre-tax profits this year. Some of Flybe’s flights to Western Europe are also likely to have been cancelled because of the same strikes.

However, short-term adverse factors such as this are a fact of life for airlines: I believe Flybe remains an attractive turnaround play.

What’s more, with Flybe shares trading on just nine times 2016 forecast earnings, the downside risk appears to be limited, assuming the firm’s experienced management succeeds in resolving Flybe’s legacy problems.

The post Should You Top Up With President Energy PLC, Cape PLC And Flybe Group PLC? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head 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.

Mixed News Flow

Recent news flow for President Energy has been rather mixed. For example, it released an encouraging drilling update in November regarding the upper section of the Santa Rosa formation, where it highlighted the potential for a series of gas/condensate sands. In addition, President Energy was also able to acquire 100% ownership of the Puesto Guardian concession for a cut-price $5.8 million as opposed to the previously agreed figure of $17.9 million, which was clearly positive news for the company.

However, neither of these items pushed the company’s share price higher, with many investors apparently taking profits after strong gains made during October and the early part of November. Since then, an update on testing of the Santa Rosa and Icla reservoirs has sent shares lower. That’s because the test on the former was ended early as a result of a serious mechanical failure in the bottom of the test string, which prevented inflow, while a test on the latter disappointingly just found gas, with no oil present. As a result of this, shares in President Energy fell by around a third.

Looking Ahead

Clearly, the testing update has hurt sentiment in President Energy, but the company remains upbeat regarding its future prospects. For example, it still estimates a prospective reserve of around 10 million boe at the Icla reservoir, and feels there is considerable follow-on opportunity. This ties in with its belief that the overall President Energy acreage position holds between 1 and 4 billion boe in prospective resources. As such, the company appears to have considerable long-term potential and, over the medium to long term, could deliver relatively high levels of production.

In the meantime, President Energy’s share price is likely to remain highly volatile. That’s especially the case because testing and drilling updates are notoriously difficult to predict, which could move shares significantly in either direction. So, while today’s 12% rise is good news for shareholders in the company, it does not necessarily mean that further gains are around the corner. As such, its shares could move lower in the short run, despite President Energy appearing to have a bright long term future.

Of course, finding companies that could deliver long-term gains is no easy task. In fact, it’s made even more challenging by the lack of time that many private investors have to search for the best companies at the lowest prices.

The post President Energy PLC Surges 12%: Is Now The Time To Buy? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.