Clearly, it’s not the only stock to have experienced a fall in market value in recent months. Could another stock which reported positive results on Friday eventually deliver a successful turnaround?

Growth prospects

The stock in question is Parkmead (LSE: PMG), which is an energy group that is focused on the UK and Netherlands. It released results for the year to 30 June 2018, with revenue increasing by 70% versus the previous year. Its gross profit increased by 242% to £4.1m, while it remains well-capitalised due to a cash position of £23.8m and no debt. The company has benefited from enhancing its gas production in the Netherlands, with the combination of its various divisions providing the wider group with increasing balance.

During the period, Parkmead completed seven acquisitions. It has also made progress with its Greater Perth Area project, with an increase in its stake providing it with a rise in oil and gas reserves of 67%. Increased production at its Diever West gas field helped to boost its cash flow, while it continues to seek further acquisitions.

As such, the company appears to be performing relatively well. Although it remains relatively risky and lacks the size and scale of some of its rivals, its long-term growth potential could be improving.

Recovery potential

Having declined by 18% since early July, the ITV share price seems to offer a relatively wide margin of safety. The stock trades on a price-to-earnings (P/E) ratio of around 9.5, which suggests that it could offer good value for money. Furthermore, a dividend yield in excess of 5%, which is covered over 1.9 times by profit, suggests that there could be improving income returns ahead for the business.

Of course, parts of ITV’s business are underperforming at the present time. A weak UK economy is contributing to a general slowdown in demand for advertising, although the company’s online advertising has continued to deliver high growth rates. In the near term, it seems unlikely that the performance of the wider sector will drastically improve, given the prospects for the UK economy. But as a cyclical stock, this is perhaps to be expected at certain times over the long run.

As such, now could be the right time to buy ITV. It may deliver further paper losses in the near term as it faces difficult operating conditions. But from a long-term investment perspective, buying cyclical shares during tough economic periods could prove to be a logical strategy.

The post Why I’d buy FTSE 100-member ITV’s share price in these weak stock markets appeared first on The Motley Fool UK.

Parkmead’s progress in the last financial year has been impressive. It has been able to make considerable improvements to its long-term outlook despite a challenging oil price environment. It discovered and brought on-stream a new gas field at Diever West within a time period of just 14 months. This has helped the company’s gas production to continuously beat expectations, with Parkmead’s production averaging around 34m cubic feet per day during June.

Parkmead’s low-cost, onshore work programme has acted as a natural hedge to low global oil prices. It has allowed production from four separate gas fields in the Netherlands to have an average operating cost of $14 per barrel of oil equivalent. This has helped to boost Parkmead’s cash flow and has ensured that the company is cash flow positive on an operating basis.

And Parkmead’s reserves and resources have increased significantly through two licence acquisitions. They help it to remain well-placed to take advantage of the ongoing lower oil price environment, with its significant cash resources, lack of debt and low-cost profile probably helping it to outperform a number of sector peers in the future.

High risk

Of course, Parkmead is set to remain lossmaking in the current financial year. As well as its relatively small size, this shows that it remains a relatively high risk option within what’s an uncertain sector. Oil and gas prices could remain highly volatile for a while, and it may be prudent for investors to seek out stocks within that space that offer a high degree of diversity.

That’s a key reason why BP remains an attractive buy. Its asset base may not be as strong as it was prior to the Deepwater Horizon oil spill in 2010. However, it offers an appealing risk/reward profile over the long term, as well as greater stability than Parkmead. And with BP being highly profitable, it’s able to pay a generous dividend that’s due to be covered by profit next year. BP’s yield of 7.2% will boost its total return and could make a significant difference if capital gains are difficult to come by in an uncertain environment for oil and gas companies.

As such, selling BP and buying Parkmead doesn’t appear to be a sound strategy. Both stocks have appeal and could deliver strong growth over the medium term. However, BP’s lower risk profile and greater diversity make it the favoured choice for patient investor.

The post Should you sell BP plc and buy The Parkmead Group plc after gas production rises sixfold? appeared first on The Motley Fool UK.

Parkmead has doubled its holding in the Polecat and Marten oilfields in the North Sea, sites that are within spitting distance of the Buzzard field. The oilie describes the assets as “two sizeable existing Buzzard sandstone oil accumulations, which are jointly estimated to hold over 90m barrels of oil in place and over 33m barrels of contingent resources.”

Parkmead’s increased stake has boosted its total contingent resources by 39%, to 59.1m barrels of oil equivalent. And the proximity of Polecat and Marten to the firm’s Perth-Dolphin-Lowlander (or PDL) hub project means that “they could be jointly developed as part of the Greater PDL Area project,” Parkmead noted.

While exciting news, I still believe Parkmead is an unsuitable stock pick for risk-averse investors.

The company is expected to remain lossmaking until 2017 at least, and given the heavy supply imbalance washing over the oil market — not to mention the unpredictability of Parkmead’s operations — I believe earnings could drag long into the future.

Big beast

Real estate investment trust (or REIT) Tritax Big Box (LSE: BBOX) was also heading higher following news of another acquisition.

Shares have touched fresh record peaks above 140p per share following news that Tritax had bought Amazon’s distribution centre at Kingston Park, Peterborough for £42.9m. This is the first property Tritax has let to the US internet giant, and takes the British company’s portfolio to 31 ‘big box’ assets.

Today’s announcement follows hot on the heels of another acquisition, Tritax saying on Tuesday that it had snapped up the distribution hub of Kellogg’s in Trafford Park, Manchester for £23.5m.

While the full impact of Brexit on the UK economy is yet to be fully understood, I believe Tritax’s bias towards blue chip tenants should allow it to navigate any near-term shocks in the UK economy.

And I reckon a forward P/E ratio of 15 times and 4.5% dividend yield make Tritax an attractive pick at current prices.

Losing its shine

The news isn’t so good over at Gem Diamonds (LSE: GEMD), however, a disappointing operating update sending the stock 3% lower from Tuesday’s close.

Gem Diamonds announced that “excessive snow falls and severe winds” across the Maluti Mountains in Lesotho, South Africa have affected access to its Letšeng mine. The company is using standby generators due to damage to power lines, resulting in reduced production rates, although electricity supply is expected to be fully restored in the short term.

As a result, Gem Diamonds said that “full year guidance for ore tonnes treated and operating costs may need to be re-assessed,” although it added that the strong operational performance during January-June means that “carats recovered are not expected to be affected materially.”

Today’s news adds another layer of risk to Gem Diamonds, the company already battling against a backdrop of subdued stone diamonds thanks to plentiful supplies. I reckon investors should continue to steer clear despite a ‘low’ forward P/E rating of 7.4 times.

The post Should you buy these London stocks after today’s updates? appeared first on The Motley Fool UK.

The black stuff

In the middle of August, Brent Crude reached its lowest value since the spring of 2009, at around $45 a barrel. Since then, the price of the black stuff crept up and trades around $53 today.

The price of oil responds to many factors, such as supply, demand, speculation, crises, economic activity, and changes in expectation of all those things. So, it’s hard to judge where oil prices might be going. However, we can see where the price has been, and that makes $53 look vulnerable.

At the end of 2008, the price was about $37, a level that it rose to earlier in the Spring of 2004. We need to go back to the 1980s to see oil above that level. The price of oil at $40 per barrel or lower remains a possibility during the current bout of price weakness. Furthermore, after hitting that summer low of $45 the chart has yet to show a series of higher lows. If it had, I’d feel a lot happier that the downtrend in the price of oil might be over. As it stands, the downtrend still appears to be in place.

The chart and the price action can’t tell us what will happen next, but I think it can inform us about why we should remain cautious in the oil sector.

These firms are hurting

BP, Tullow and The Parkmead Group have all seen rising shares recently — the uptick in the oil price must have helped that. However, it’s clear that a low oil-price environment is hurting those firms.

BP reckons it has reached agreements in principle to settle all outstanding federal and state claims, and claims made by more than 400 local government entities, arising from the firm’s 2010 Deepwater Horizon oil spill. Clearing up that uncertainty must have helped peg the firm’s share price slide at around 324p, at least for now.

However, Bob Dudley, BP’s chief executive, reckons the firm’s approach to the challenging oil-price environment is to increase efficiency, reduce costs, apply capital discipline and to divest of yet more of the company’s assets. That worries me a bit. Selling off the family silver in hard times makes me wonder what shape BP might be in if the good times ever return — the firm certainly looks set to become smaller than it was, which could work against longer-term investor returns.

Down the pecking order

Mid-cap oil producer Tullow oil’s profits collapsed and the share price took back around ten years of investor gains since it began falling at the beginning of 2012. A 45% or so bounce in the share price since the middle of September is some relief or a spectacular gain for those smart, or lucky, enough to invest at the right time, but will the recovery continue?

The chief executive reckons Tullow reset its business with emphasis on managing costs, capital expenditure, and the balance sheet. The directors plan to deleverage the business by considering options for non-core assets and levels of participation in major developments. The story seems similar to BP’s — the lower oil-price environment is forcing a change in the way the firm goes about its business.

Meanwhile, AIM growth company The Parkmead Group just posted its maiden profit. The firm’s chairman, Tom Cross, reckons Parkmead is well placed to become a key exploration and production (E&P) player in the North Sea.

Parkmead has more ‘E’ than ‘P’ and strikes me as the least correlated of the three firms featured to fluctuating oil prices. Investors’ returns depend on the firm’s deal making, whether it strikes oil and gas, and how the company balances fund raising with investor returns. Of the three companies featured here, I’m more likely to take my chances with The Parkmead Group. 

The post Is Now The Time To Invest In BP plc, Tullow Oil plc And The Parkmead Group plc? appeared first on The Motley Fool UK.