Are Rockhopper Exploration Plc, Roxi Petroleum plc And Lamprell Plc Set To Post Stellar Returns?

Are these 3 resources stocks worth buying right now? Rockhopper Exploration Plc (LON: RKH), Roxi Petroleum plc (LON: RXP) and Lamprell Plc (LON: LAM)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Roxi Petroleum (LSE: RXP) have fallen by over 7% today after the company released an update on operations at its flagship BNG asset. The main reason for their fall is that two of its deep wells (A5 and 801) have encountered blockages which have not allowed flow tests to take place. The blockages have been caused by the accumulation of unrecovered heavy drilling fluids becoming set in the oil pipe and this has prevented unrestricted flow testing, with blockages occurring after a few hours flow.

Although disappointing, Roxi expects that as these fluids come to the surface the periods of oil flow at deep well A5 should increase until the oil flows naturally on an unrestricted basis. Meanwhile, at deep well 801 Roxi believes the best way to tackle the problem is via a prolonged wash using less dense mud injected under pressure which is intended to lessen the density of the drilling fluids.

Of course, the use of extremely dense drilling fluids was required in order to control the high pressure encountered in drilling the deep wells. But, with such fluids being finite, Roxi remains optimistic regarding the quality of the oil from its deep, as well as shallow, wells. Regarding the latter, no blockages have been encountered and Roxi continues to make encouraging progress, with a third test interval at shallow well 143 detecting oil.

Clearly, today’s update is disappointing for investors in Roxi as it signifies a delay to the planned flow tests which are due to take place. However, such challenges are perhaps to be expected for oil exploration companies and, as such, the long term investment case for the business does not appear to have been significantly altered. For less risk averse investors, Roxi’s price to book value (P/B) ratio of 1 holds considerable long term appeal.

Meanwhile, the outlook for oil support services company Lamprell (LSE: LAM) is also relatively bright. Certainly, it is forecast to post a fall in earnings of 41% in the current year but, with a return to growth being pencilled in for next year, now could be a good time to buy a slice of it.

That’s because Lamprell’s valuation appears to fully reflect the short term challenges which it faces and, while investor sentiment could come under further pressure once its 2015 results are announced, a price to earnings (P/E) ratio of 9.4 indicates that there is significant upward rerating potential.

In addition, Lamprell also has upbeat income potential. Clearly, a yield of 2.4% is hardly enticing, but with Lamprell having a dividend payout ratio of just 22%, there is scope for rapid rises in shareholder payouts, with next year’s planned dividend rise of 38% being highly encouraging for Lamprell’s investors.

Also having long term total return appeal is Rockhopper (LSE: RKH), with its planned merger with Falkland Oil & Gas having the potential to create a more financially sound business through which to develop a relatively high quality asset base. And, with Rockhopper having enjoyed a considerable amount of success with its 2015 drilling campaign, it appears to be well-positioned to enter 2016 even though the outlook for the oil price is relatively downbeat.

For less risk averse investors, Rockhopper’s current P/B ratio of 0.5 indicates that there is considerable upside potential. And, with the company paying just at 11% premium to Falkland Oil & Gas’ already discounted share price, the combined group appears to offer good value for money and a relatively appealing asset base with, of course, a high degree of volatility likely over the medium term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

Up 51% in 2024, this FTSE 250 stock is flying!

This writer takes a look at one high-flying FTSE 250 share that still looks good value despite surging to an…

Read more »

Investing For Beginners

Here’s how I’m trying to prevent a stock market crash from ruining my portfolio

Jon Smith explains which shares he's avoiding and what he's thinking of buying to try and protect his portfolio from…

Read more »

Bearded man writing on notepad in front of computer
US Stock

Call me crazy, but here’s why I’m eyeing up the CrowdStrike share price

Jon Smith notes the carnage caused by Friday's global outage, but flags up why he's thinks the CrowdStrike share price…

Read more »

Investing Articles

What do Hargreaves Lansdown results mean for the share price?

The Hargreaves Lansdown share price has surged in recent months on takeover expectations, but what will the recent results mean…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Newly minted S&P 500 stock CrowdStrike just crashed! Here’s why

Shares of S&P 500 firm CrowdStrike collapse as the company lies at the centre of a global IT outage. What…

Read more »

artificial intelligence investing algorithms
Investing Articles

Is Nvidia heading for the mother of all tech stock crashes?

Nvidia stock has soared, and the company briefly became the most valuable on the planet. But not everyone’s an AI…

Read more »

Dividend Shares

The BP share price is down 15% in 3 months. Time to buy?

In the space of just a few months, the BP share price has fallen by a double-digit percentage. Is this…

Read more »

Investing Articles

A 5.4% dividend bargain I’ll buy over Lloyds shares

Harvey Jones loves his Lloyds shares but now he's found a high-yielding FTSE 250 stock that may offer even more…

Read more »