Are Further Gains Likely At Amur Minerals Corporation, Xcite Energy Limited & Premier Oil PLC?

Should you buy, sell or hold Amur Minerals Corporation (LON:AMC), Xcite Energy Limited (LON:XEL) and Premier Oil PLC (LON:PMO) after recent gains?

| 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.

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 Amur Minerals Corporation (LSE: AMC), Xcite Energy (LSE: XEL) and Premier Oil (LSE: PMO) have climbed between 20% and 30% over the last month.

Is the market is rerating these stocks for a brighter future, or is there a risk that prices will slide again?

Amur Minerals

Amur Minerals was one of Friday’s biggest risers, climbing as much as 20%. The catalyst for the gains was news that Amur has signed a non-binding agreement with the Russian government’s Far East and Baikal Region Development Fund.

Amur hopes that this state-backed fund will contribute to the cost of building its proposed Kun-Manie nickel copper sulphide mine. The firm plans to do 15,000m of drilling during the coming summer season, as it works to prepare a Definitive Feasibility Study (DFS). This will be used to try and secure funding for the mine development.

The Kun-Manie asset seems promising and there looks to be a reasonable chance that Amur will make a success of it. But there are still a lot of unknowns, and financing could be tricky. Friday’s deal was only a non-binding agreement. There are no guarantees.

Amur shares have fallen by 50% over the last six months. In my view they remain highly speculative.

Xcite Energy

North Sea explorer Xcite Energy is in a race against time. The firm must find an investor willing to refinance its debts and back the development of its Bentley oil field. The problem is that Xcite has to repay $139.05m of bonds in June 2016. The group doesn’t have this cash.

In better market conditions, Xcite might find a buyer for Bentley, which has proven and probable reserves of 265m barrels of oil. Costs are falling too. In a recent update, Xcite said that development costs had fallen to $30 per barrel.

However, the reality seems to be that the market isn’t interested. If things don’t change, I expect Xcite to default on its bonds in June. For a potential buyer, it will make sense to wait until then, in order to be able to buy Bentley’s barrels as cheaply as possible.

Because of the risk of a bond default, I think Xcite shares could end up going to 0p. In my view, the recent gains could be a good selling opportunity.

Premier Oil

Shares in Premier Oil have risen by 125% from their January low of 19p. The firm’s 2015 results were no worse than expected and operating costs have been cut by 25%. Premier’s deal to acquire the North Sea assets of E.ON has also been well received.

The production from the E.ON assets is well hedged and will generate valuable cash flow. The additional earnings this provides will also increase the amount of headroom available on Premier’s debt covenants.

However, this may not be enough. Premier has net debt of $2.2bn and chief executive Tony Durrant warned in the firm’s results that if oil prices stay low, further relaxation of covenants may be required”.

In my view this is a big risk to shareholders. Premier may end up needing to issue new shares to repay some of its borrowings. For this reason, Premier looks too expensive to me at the moment.

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.

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.

More on Investing Articles

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »