Shareholders who have already accepted the 750p offer don’t need to do anything. ENOC says that all acceptances will automatically be transferred to the 800p offer.

The new offer has the backing of Dragon’s two largest shareholders, Baillie Gifford and Elliott Capital Advisors. Between them, these two institutions own a 13% stake in Dragon. They have been using their voting power to argue for a higher payout.

The backing of these two investors means that ENOC will now own or have received acceptances for more than 75% of Dragon shares. This will allow ENOC to de-list Dragon shares, a process which the firm intends to begin shortly.

You need to act now

Any Dragon shareholder who has not accepted ENOC’s offer needs to act fast. The ENOC offer will only remain open until 3pm Dublin time on 28 August 2015.

After this time, you may be left holding unlisted Dragon shares which will be almost impossible to trade and effectively worthless.

In order to avoid this risk, Dragon shareholders need to accept the ENOC offer without further delay. Alternatively, shareholders can sell Dragon shares into the market, as long as the firm’s listing remains active. As I write, Dragon shares are trading at 799p, reflecting the certainty that the offer will now become effective.

Personally, I would simply sell my shares into the market today and receive instant cash, but whichever route you take, prompt action is necessary.

This is the final offer — there won’t be a higher bid.

Problems for sellers?

Dragon Oil has proved to be an outstanding investment for almost all shareholders:

Very few, oil stocks can claim gains like these, especially after the oil bear market of the last nine months.

However, until now, many long-term Dragon shareholders have preferred to receive Dragon’s generous dividend income and avoid the capital gain liability resulting from selling. This choice has now been taken away, as refusing to sell will probably result in a total loss.

This means that many Dragon investors could face a big capital gains tax bill for the current year.

If you expect to be in this position, it might be worth doing a bit of active portfolio management. Capital gains can be offset by losses, so if any of your investments have gone bad and you’ve been holding on in the hope things might improve, now could be a good time to sell instead.

Doing so could reduce your CGT bill, effectively reducing the size of your losses on any less successful investments.

New buying opportunities

In my view, having a large capital gains tax bill is a good problem to have, as it means your investments have been successful. 

And if your investment in Dragon has yielded a profit, the volatile conditions in the market at the moment could present some attractive new buying opportunities.

The post ENOC Hikes Dragon Oil plc Takeover Offer To 800p — Act Now! appeared first on The Motley Fool UK.

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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.

That was the message passed to the market this morning. It appears to be a warning for major Dragon shareholder Baillie Gifford, which has a stake over just over 7% in the oil firm and is resisting ENOC’s recent 750p per share offer.

ENOC wants to incorporate Dragon’s Turkmenistan assets into its own operations, as it moves away from being a downstream (refinery) operator and towards becoming an integrated oil firm.

In a statement issued to this morning, ENOC, which has a 54% stake in Dragon, says it “no longer sees the need to maintain a dividend profile” for Dragon Oil, “whether or not Dragon is delisted”.

In today’s statement, Saif Al Falasi, ENOC’s group chief executive, said:

“These are difficult decisions for any publicly listed company and we see this as another reason for delisting Dragon Oil.”

In my view, the twin threat of cancelling the dividend and delisting Dragon will be enough to persuade most shareholders to accept ENOC’s offer.

If Dragon was delisted and cancelled its dividend, its shares would be almost impossible for private investors to trade, and thus would effectively be worthless.

Cranking up the pressure

ENOC also warned investors that it believes Dragon’s stated goal of maintaining production at 100,000 barrels oil per day (bopd) for five years faces “operational challenges”.

Apparently, rising water and gas production, ageing wells that may cease to flow, and declining well pressure are among the possible issues.

As a result, ENOC believes that to maintain production, Dragon will need to increase its 2015 capital expenditure beyond the planned level of $700m.

Given current low oil prices, this would result in a reduction in cash generation and thus, I suppose, a reasonable argument for cutting the dividend.

Finally, ENOC said that it would set a “sustainable and de-risked” production target of 90,000 bopd for Dragon Oil. That’s essentially what the firm is producing now, according to Tuesday’s trading statement, which reported first-half production of 92,060 bopd.

Even if the Dragon shares remain listed, you don’t need to be Warren Buffett to work out what will happen to Dragon’s share price if the dividend is cancelled and production plateaus.

Is it a good offer?

The general view in the City following ENOC’s 750p per share offer was that this is quite a good deal. I agree. Dragon shares are 35% higher than at the start of the year, despite the oil price crash.

It’s also worth remembering that Dragon is basically a one-hit wonder.

Although Baillie Gifford, in a statement last month, said that Dragon Oil should be valued on its long-term growth prospects, the reality is that Dragon has never achieved anything of note outside Turkmenistan, despite a massive $1.9bn cash pile.

I don’t think ENOC will increase its offer. For private investors in Dragon, there are only two sensible options, in my view. Sell now, or make sure you’ve accepted the offer through your broker before the 30 July deadline.

The post Dragon Oil plc Shareholders Could Lose Dividend If ENOC Takeover Fails appeared first on The Motley Fool UK.

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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.

As I predicted in May, 735p per share was not quite enough. ENOC has agreed to top up its previous offer in order to get the backing of an independent committee of Dragon’s directors.

Today’s offer values Dragon at £3.7bn and represents a 47% premium to Dragon’s closing share price of 509p on 13 March, the day before ENOC’s initial approach.

ENOC already owns 54% of Dragon shares and today’s offer is likely to be final, unless a number of Dragon’s large minority shareholders combine to block the deal. According to ENOC, acceptances are needed from a further 23% of shareholders for the deal to go through.

Once this threshold is reached, Dragon shares will be de-listed from the Irish and London stock markets. At this point, any shareholders who choose not to accept the 750p offer will be left with shares that could be difficult to sell and may no longer provide a dividend income.

I believe this is quite a good offer for Dragon shareholders. Their firm only has one material asset and has proved unable or unwilling to expand over the last few years, despite the benefits of a $1.9bn cash balance and no debt.

Is Gulf Keystone next?

Dragon Oil has a number of similarities with Gulf Keystone Petroleum (LSE: GKP).

Both companies own one, large asset providing the potential for prolific long-term, low-cost production. Both operate in areas of the world where political risk is a factor. Both companies seem unlikely to make any further progress as independent operators.

It’s clear that Dragon’s Cheleken field will fit well into ENOC’s larger portfolio. Many oil experts believe that Gulf’s Shaikan field could fit equally well into a larger portfolio.

There’s only one problem. Dragon is well financed and has net cash of $1.9bn. Relatively little investment is needed to maintain production from Cheleken at current levels of around 90,000 barrels of oil per day (bopd).

The story is quite different at Gulf. While production from Shaikan has risen to around 40,000 bopd over the last year, significant investment will be needed to take production up to the firm’s targeted level of 100,000 bopd.

Gulf also has $527m of debt that may need restructuring over the next 6-12 months. As of 8 April 2015, the firm’s cash balance was just $87m.

A potential buyer would need to buy or restructure the firm’s debt, as well as acquire its shares. They would also need to inject enough money to fund further Shaikan development.

A number of new wells would need to be drilled for future production and to try and convert Gulf’s 1,024m barrels of oil equivalent of contingent resources into commercial reserves.

On top of all of this, there are the risks posed by the ISIS conflict in Iraq and long-running payment delays for oil exported from Kurdistan.

In my view, it all adds up to a situation where shareholders do not have a strong hand. Gulf’s funding needs and the rights of its bondholders mean that the firm’s shares could prove a risky buy.

The post Dragon Oil plc Agrees £3.7bn Takeover Offer — Could Gulf Keystone Petroleum Limited Be Next? appeared first on The Motley Fool UK.

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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.

Of course, LGO continues to make encouraging progress at its Goudron field, with its latest update showing that its 2015 drilling programme is performing as expected. And, looking ahead, LGO is now planning to double the size of its multi-year Goudron drilling campaign, with the company now set to seek environmental approval for the drilling of up to 60 wells in the next few years.

Furthermore, even with a low oil price environment, LGO believes that its cost base is low enough to make the field economically viable, which bodes well for its long term profitability if, as expected, we are now in an era of sub-$100 dollar oil.

Sector Peers

Of course, LGO is not the only oil company with a bright future. For example, larger peer Nostrum (LSE: NOG) is expected to return to growing profitability next year, with its bottom line set to overcome a disappointing 2015 by posting growth of up to 270% in its pretax profit next year.

Clearly, much of this growth is already priced in, with Nostrum having a price to earnings (P/E) ratio of 44.6 and, while such strong growth may be very achievable, the volatility of the oil price may mean that forecasts are downgraded over the coming months. However, even if this does occur Nostrum appears to offer a sufficient margin of safety, with it having a price to earnings growth (PEG) ratio of just 0.2.

Similarly, Dragon Oil (LSE: DGO) also has upbeat growth prospects, with its bottom line forecast to rise by 33% next year. And, with it trading on a PEG ratio of just 0.5, it appears to offer excellent value for money. The problem, though, is that Dragon Oil is the subject of a takeover attempt at the present time, with its shares trading only 7% below the offer price of 735p per share. As such, there seems to be limited upside if the deal goes through.

Meanwhile, Cairn Energy (LSE: CNE) looks set to make use of its strong balance sheet over the medium term. In fact, the lower oil price could be beneficial for Cairn, since it means that the cost to undertake its planned exploration activities is likely to be lower in the coming years and, should the oil price recover in the long run, then the company could take advantage of being counter-cyclical.

However, with it being highly dependent upon news flow in the meantime, Nostrum could prove to be a better buy than Cairn. And, while LGO undoubtedly has a very bright future, the greater size, scale and diversity offered by Nostrum makes it a more appealing buy at the present time, while for Dragon Oil it appears as though there is limited upside for now due to the aforementioned takeover attempt.

The post Is LGO Energy PLC A Better Buy Than Nostrum Oil & Gas PLC, Dragon Oil plc And Cairn Energy PLC? appeared first on The Motley Fool UK.

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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.

SSE

In my opinion SSE (LSE: SSE), like the majority of Britain’s utilities giants, is at great risk of disappointing dividend hunters as regulatory pressure ratchets higher. The company remains the subject of a Competition and Markets Authority investigation into claims of excessive profitability, and many — from politicians, the media and consumer groups alike — are even going so far as to call for the break-up of the country’s largest suppliers.

These pressures are unlikely to disappear any time soon, and SSE’s recent failure to cut tariffs in line with declining wholesale energy prices has sent even more disillusioned customers into the arms of its smaller, independent competitors. Considering these problems, the City expects the business to record a 12% earnings decline in the 12 months ending March 2016, although a 5% recovery is anticipated for 2017.

The power play is expected to keep its progressive dividend scheme on track during this period, with payouts of 90.8p per share this year and 93.6p in 2017, producing market-mashing yields of 5.5% and 5.6% respectively.

However, I believe that too much uncertainty continues to swirl around SSE’s earnings levels looking ahead, and with dividend cover registering at just 1.2 times through to the close of next year — well below the security watermark of 2 times — I reckon that current forecasts are built on shaky foundations.

Standard Chartered

Embattled bank Standard Chartered (LSE: STAN) was forced to keep the full-year dividend locked at 86 US cents per share in 2014 as a 28% earnings dip exacerbated existing pressure on the balance sheet. And with the bottom line expected to slip a further 3% this year, StanChart is anticipated to finally bite the bullet and cut the payment to around 77 cents.

In rosier news, however, the City expects a 14% earnings bounce in 2016 to get the dividend chugging higher again, to 79 cents. And for many income hunters Standard Chartered may still represent an exceptional buy, with the business sporting huge yields of 4.7% and 4.8% for 2015 and 2016 correspondingly.

However, I believe that current projections could fall disastrously short as bottom-line performance threatens to disappoint for some time to come. The emerging market-centred bank continues to experience revenues struggles in territories like Korea and Thailand, and is frantically divesting assets in order to cut its exposure. It also faces the prospect of further financial penalties owing to previous sanction breaches.

On top of this, StanChart’s refusal to divulge its capital ratio in last month’s interims raises further questions over the financial health of the bank and naturally the dividend outlook. Like SSE, I believe that the firm is an extremely-risky stock selection.

Dragon Oil

Fossil fuel explorer Dragon Oil (LSE: DGO) attracted the headlines last week after majority shareholder Emirates National Oil Company (or ENOC) put in a 735p-per-share offer to acquire the 46.1% stake it does not already hold. The company’s minority investors have a history of rebuffing such approaches, however — even if industry pressures make the current proposal a particular appetising one — so the success of ENOC’s latest move is far from a foregone conclusion.

The calculator bashers expect Dragon Oil to suffer a colossal 46% bottom-line decline in 2015 due to crushed crude prices, a result expected to drive the total dividend from 36 US cents last year to around 32 cents. However, a 33% earnings bounce next year is projected to shove dividends skywards once more, and a 34-cent reward is currently estimated. These estimates produce chunky yields of 3.6% for the current year and 3.9% for 2016.

I am not so convinced by such estimates, however, given that oil prices are in severe danger of languishing for some time to come as the market imbalance continues. Dragon Oil’s decision to slash 2014’s final dividend illustrated the impact of revenues stresses on the balance sheet, as did the company’s decision to can a takeover of Petroceltic International a few months earlier.

And although Dragon Oil’s cash and equivalents stood at a meaty $1.9bn as of March, the huge investment the Dublin firm has earmarked for exploration, drilling and infrastructure work could heap further pressure on dividends looking ahead.

The post Are Dividends In Danger At SSE PLC, Standard Chartered PLC And Dragon Oil plc? appeared first on The Motley Fool UK.

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Royston Wild 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.

Dragon has been considering a previous, lower offer by ENOC since March. The level of the earlier proposal hasn’t been disclosed, but last night ENOC described its latest offer as “a substantial increase”.

Perhaps surprisingly, Dragon’s share price hasn’t moved this morning, and remains at 680p, 7.5% below ENOC’s latest offer. This suggests the market isn’t convinced the offer will be accepted.

I can see two possible reasons for this. Firstly, even at 735p, Dragon doesn’t look expensive. ENOC’s latest offer values Dragon’s proven and probable (2P) reserves at just $6.30 per barrel, or $4.13 per barrel when Dragon’s £1.2bn cash balance has been stripped out.

To put this in context, Royal Dutch Shell’s recent £47bn bid for BG Group valued BG’s reserves at $11.10 per barrel, while Genel Energy, which operates on the fringes of the ISIS conflict in Kurdistan and faces more severe political risk than Dragon, is currently valued at about $5.60 per barrel.

I wouldn’t expect Dragon to be valued on the same level as BG, but I would expect a larger premium to Genel.

A second problem

ENOC owns 53.9% of Dragon shares and would like to own the rest in order to develop its position as an integrated oil and gas company, like a smaller version of BP.

Not all of Dragon’s shareholders agree, however. ENOC has tried and failed to take control of the firm before and failed. My impression is that major long-term shareholders are happy to enjoy Dragon’s generous dividend yield and avoid a big capital gains tax bill.

ENOC seems to be getting serious about wanting to buy out Dragon’s other shareholders, but I’m not sure this latest offer will be enough to seal a deal.

Two more bid targets?

The hoped-for merger and acquisition spree in the oil market has not really materialised. Yet there are a number of firms that could potentially be targeted by buyers wanting to add to their proven reserves.

Two possibilities are Tullow Oil (LSE: TLW) and LGO Energy (LSE: LGO).

LGO’s main asset is its Goudron field in Trinidad. Goudron has 2P reserves of 7.2m barrels, according to the firm’s website.

The industry standard approach to valuing an oil firm is by the ratio of enterprise value (market cap plus net debt) to 2P reserves. Applying this formula to LGO gives an EV/2P cost of about $23 per barrel.

For a potential buyer to make a profit from LGO’s assets they’d need to add this cost to operating and development costs, plus the bid premium required to convince shareholders to sell.

With oil prices hovering around $60 per barrel, I’m not sure this is very realistic. In my view, LGO would have to be much cheaper to become a serious bid target.

What about Tullow?

Tullow Oil has 2P reserves of 345.3 million barrels of oil equivalent (boe). Valuing the firm on an EV/2P basis gives Tullow a price tag of $17/boe. This isn’t outrageous, but isn’t especially cheap either, considering the value of the recent offers for BG Group and Dragon.

Although each of these companies has a different oil-gas mix and varying costs, I don’t think Tullow is cheap enough to attract a takeover bid at this time.

The post Dragon Oil plc Receives £3.6bn Cash Offer — Are Tullow Oil plc Or LGO Energy PLC Next? appeared first on The Motley Fool UK.

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Roland Head owns shares in Royal Dutch Shell. 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.

Profitability

Of course, a lower oil price means reduced profitability and significant impairments. This is to be expected, since the income producing potential of even the best asset base will inevitably be hurt by a depressed oil price. Furthermore, a lower oil price and subsequent reduced profitability means that the valuations of oil companies have come under severe pressure in the last year, with few stocks in the space seeing anything but increasing pessimism in investors’ attitudes.

In fact, the likes of Premier Oil (LSE: PMO) and Genel (LSE: GENL) have both seen their share prices slump in the last twelve months. In the former’s case, the impairment of assets has been a major driver, with Premier Oil dipping into loss-making territory. Meanwhile, Genel has been penalised by the market due to its considerable exposure to Iraq/Kurdistan, with there being uncertainty regarding payments for exported oil. As such, shares in Premier Oil and Genel have fallen by 45% and 35% respectively in the last year.

Looking Ahead

However, both stocks, as well as sector peer, Dragon Oil (LSE: DGO), are expected to become more efficient and hugely more profitable next year. For example, Premier Oil is forecast to return to profitability in the current year before increasing its bottom line by an incredible 96% next year. Furthermore, Genel’s bottom line is due to return to the black in 2015, followed by an increase in earnings per share of 76% in 2016. Meanwhile, Dragon Oil is set to see its profit fall by 45% this year before growing by 41% in 2016.

As such, investor sentiment in all three companies could pickup as they begin to post much better figures than the market is currently pricing in. For example, all three companies trade on very appealing valuation multiples, with Premier Oil and Genel having a price to earnings growth (PEG) ratios of just 0.2, while Dragon Oil also offers excellent value for money via a PEG ratio of 0.4.

So, while there could be more pain ahead for the oil sector, and the forecasts for Premier Oil, Genel and Dragon Oil may fail to be met, there appears to be a very wide margin of safety built in to their respective valuations. This means that they could offer superb rewards and less downside than you may expect, thereby overcoming a sluggish oil price.

The post 3 Stocks Set To Beat A Low Oil Price: Premier Oil PLC, Dragon Oil plc And Genel Energy PLC appeared first on The Motley Fool UK.

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Significant Opportunities

Of course, wind power is set to be a growth area both in the developed world and in emerging markets, with a greater focus on efficiency and a carbon neutral global economy set to lie ahead. As such, Mytrah Energy clearly has a product for which demand will grow and, as such, its long term prospects appear to be bright. That’s especially the case since its operating portfolio generates sufficient cash flow to support continued growth in its capacity each year.

However, there are a number of opportunities elsewhere – notably in the mining and oil sectors. Certainly, they may be less advanced in terms of their effects on the environment being relatively harmful, but with the prices of various commodities falling in recent months, the valuations of companies such as Dragon Oil (LSE: DGO) and Anglo American (LSE: AAL) offer tremendous appeal.

For example, Dragon Oil trades on a price to book (P/B) ratio of just 1.4 and this shows that, even if there are write downs to the company’s asset base over the medium term, its current valuation appears to take this into account. Meanwhile, Anglo American has a P/B ratio of just 0.7, which indicates that there is a tremendous margin of safety and that the company’s share price could head northwards at a rapid rate over the medium to long term.

Growth Potential

While there is clearly significant growth potential in wind power across India and the emerging world, Anglo American and Dragon Oil also offer superb growth prospects. For example, Dragon Oil is forecast to increase its earnings per share by a hugely impressive 42% next year. That’s around seven times the growth rate of the wider index and, despite this, it has a price to earnings (P/E) ratio of just 14.9 – less than the FTSE 100’s P/E ratio of 16.

And, it’s a similar story with Anglo American, with it being expected to increase its bottom line by 32% next year, with its rating of 13.4 having significant expansion potential.

Looking Ahead

So, while Mytrah has performed well and is well-positioned to successfully tap into the growing demand for wind power in India, there are fantastic opportunities elsewhere – notably with Dragon Oil and Anglo American. And, with both of those companies being bigger and arguably having more financial firepower, they could prove to be less risky than Mytrah Energy, while their low valuations and excellent growth prospects indicate that the reward on offer to their investors is very substantial. As such, Anglo American and Dragon Oil remain preferred choices to Mytrah Energy, although the latter is certainly one to watch.

The post Should You Buy Mytrah Energy Ltd Instead Of Anglo American plc And Dragon Oil plc? appeared first on The Motley Fool UK.

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Tesco

Battered supermarket giant Tesco (LSE: TSCO) already sounded the alarm back in August when it vowed to cut the interim dividend by a whopping 75%, to 1.16p per share. The company warned that “challenging trading conditions and ongoing investment” had weighed on its financial strength, and with these issues continuing the City expects dividends to take a hammering in the coming years.

Indeed, this former-dividend favourite is anticipated to shell out a meagre full-year payment of 1.24p for the year concluding February 2015 — down from 14.76p in each of the past three years — as earnings slip a colossal 68%. And payments are expected to loiter around this level during the current 12-month period, resulting in a paltry 0.5% yield through to the early part of next year.

However, analysts reckon that Tesco’s bottom-line bounceback is set to kick in from this year, with a 4% uptick due to be followed with a 29% bounce in fiscal 2017. Consequently the supermarket is expected to drive the dividend higher again next year, to 4p, a figure which produces a much-improved yield of 1.6%.

I am not so optimistic, however, even though sales at the firm have picked up more recently. Not only is Tesco’s expensive discounting strategy a huge pull on the grocer’s earnings performance, but the investment needed in online and convenience is also set to stretch the firm’s capital position. Consequently I believe that the company remains a risky opportunity for dividend chasers.

Centrica

Like Tesco, energy giant Centrica (LSE: CNA) has been battered by the effect of intensifying competition across its British Gas retail operations, not to mention regulatory pressures forcing it to slash tariffs. With declining crude prices also affecting its upstream divisions, earnings are expected to dip 5% this year.

Subsequently Centrica is anticipated to reduce the 2015 full-year dividend to 12.5p per share, down from 13.5p in 2014 and a second annual reduction if realised. However, a 2% bottom line improvement in 2016 is expected to herald a slight payment uptick, to 12.7p. As a result the power play sports a yield of 4.8% through to the close of next year.

Still, I believe that Centrica’s desire to keep a strong balance sheet and robust credit ratings could cause the business to deliver payments much lower than currently anticipated. With net debt standing at a vast £5.2bn as of the close of last year, and revenues set to remain under pressure, it is easy to envisage that dividends will keep on falling through the floor.

Dragon Oil

Fossil fuel explorer Dragon Oil (LSE: DGO) wowed the market back in August when it elected to supercharge the interim dividend by an eye-popping 33%, to 20 US cents per share. But continued weakness in the crude price since then — Brent was trading around $105 per barrel back then versus $58 currently — has since weighed on the firm’s progressive policy, and a final payout of 16 cents last year was actually down 11% from 2013 levels.

Indeed, the intensifying stress on Dragon Oil’s balance sheet was exemplified by the company’s decision to bang its attempted acquisition of Petroceltic International on the head at the tail end of last year. With earnings expected to slump 54% this year, the City expects Dragon Oil to reduce the dividend to around 32.4 cents from 36 cents in 2014.

It is true that this payout still produces a chunky 3.7% yield, and the City expects a 45% earnings rebound next year to lift the dividend to 34.9 cents, pushing the yield to an even-better 4%. But with a struggling global economy failing to suck up excess global oil supply, and output across the world continuing to stomp higher, I believe that such projections could fall by the wayside as black gold prices look set to toil.

The post 3 Dividend Darlings On Deadly Ground: Tesco PLC, Centrica PLC And Dragon Oil plc appeared first on The Motley Fool UK.

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

An initial 10 megawatt of installed AFC fuel cell capacity will be developed across three phases, with the first phase of 2 megawatts set to be installed by the end of 2016. A joint venture is also set to be evaluated this year between the two companies with a view to developing the initial fuel cell from Bangkok Industrial Gas Co’s own sources of hydrogen in Thailand.

And, looking further ahead, the second and third phases of the agreement are due to be completed in 2017 and 2018 respectively, with AFC stating that following the successful completion of the programme, the two companies will assess a number of other fuel cell deployment opportunities across Thailand.

Future Potential

Today’s gains take AFC’s share price appreciation to an incredible 344% since the turn of the year. And, looking ahead, there is the potential for further gains, since the use of alkaline fuel cell technology is forecast to increase moving forward. As such, AFC appears to be a potentially highly rewarding stock, albeit with the risk that news flow disappoints in the short run.

Clearly, the fortunes of AFC in recent months contrasts with those of energy stocks such as Genel (LSE: GENL) and Dragon Oil (LSE: DGO). In Genel’s case, its share price has fallen by 25% since the turn of the year and, while Dragon Oil is up by 15% during the same time period, this pales into insignificance when compared to AFC’s recent gains.

And, with the oil price set to remain low over the medium term, it could be argued that AFC is a better buy than Genel and Dragon Oil. Certainly, it has huge potential to continue to deliver capital gains, but so too do Genel and Dragon Oil. For example, Genel is expected to return to profitability this year and then go on to post a gain in its bottom line of 86% next year. And, with its shares trading on a price to earnings growth (PEG) ratio of just 0.2, it seems to offer excellent value for money.

Meanwhile, Dragon Oil is expected to have a challenging 2015 before increasing its bottom line by 45% next year. And, with it having a price to earnings (P/E) ratio of 14.2, it appears to offer excellent capital gains potential at its current share price.

As such, and while the three companies have been a mixed bag so far in 2015, they seem to offer strong medium term potential, although their share prices are likely to remain highly volatile in the near term.

The post Is AFC Energy plc The Perfect Partner For Genel Energy PLC And Dragon Oil plc In Your Portfolio? appeared first on The Motley Fool UK.

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Peter Stephens has no position in any 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.