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 Motley Fool UK.

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 Motley Fool UK.

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 Motley Fool UK.

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 Motley Fool UK.

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 Motley Fool UK.

The firm says that “very encouraging hydrocarbon shows” were encountered throughout the drilling of the well, with high levels of gas present throughout the 418m of the 600m target interval which was penetrated by the well.

As expected

President says the outcome from the well is consistent with the firm’s ambitious pre-drill estimates of gross mean prospective resources of 1 trillion cubic feet (Tcf) of gas and 30 million barrels of condensate — a valuable light oil.

The firm believes the greater Lapacho area could contain as much as 5 Tcf of gas and additional condensate.

More detail to come

The Lapacho x-1 well was drilled to a target depth of 4,543m into the Santa Rosa Formation, but was not straightforward.

President reported that difficult downhole conditions restricted full logging of the well, but the firm is now beginning an open hole well test that should provide more accurate data on flow rates and fluid types.

President expects to release a further update with the results of these initial tests in around 10 days — so we should have further news before Christmas.

Commercial potential

Paraguay is a relatively unexplored oil and gas province, and the country currently imports all of its energy requirements. This suggests that substantial domestic discoveries, such as Lapacho, could find a ready commercial market if developed.

Neighbouring Brazil, Chile and Argentina, where President also operates, are also net energy importers.

What’s the outlook?

The next milestone for President will be initial flow test results from Lapacho in around 10 days.

Elsewhere, the firm has production assets in Argentina and Louisiana, which generated revenue of $5.8m during the first half of this year. The firm is hoping to increase production in Argentina after gaining 100% ownership of its Puesto Guardian field in the country.

On the financial front, President reported a cash balance of $23m at the end of June, in addition to an unused $15m loan facility.

President spent around $35m on exploration and evaluation activities during the first half. Based on this rate of spending, the firm could run short of funds by the end of the year, without a new fundraising.

However, a successful well test at Lapacho should ease the route to new funding, and I believe President remains a reasonable buy.

The post Why Shares In President Energy PLC Are Soaring Today appeared first on The Motley Fool UK.

Shares in Concha (LSE: CHA) are up 16% today and, during the course of 2014, have risen by a whopping 2838%. That’s a staggering share price performance and now means that the company is valued at around £82 million by the market.

Of course, Concha has significant long-term potential, with it being focused on investing in the technology and media sectors. Both of these areas can deliver excellent returns and, with Concha having recently undertaken a placing, it now appears to be better placed to make further investments and, in the long run, deliver strong returns on investment.

The downside is that Concha remains loss-making and, with its operations being very high risk in terms of investments in small start-up companies often ending in disappointment, its share price performance in recent months may not be replicated moving forward. In other words, success in its investments appears to be priced in, so unless Concha now starts to deliver, its share price could come under pressure.

Circle Oil

Shares in Circle Oil (LSE: COP) are down 13% today and have been relatively weak since the company’s CEO, Professor Chris Green, announced his intention to stand down a couple of weeks ago. Indeed, his eight year tenure has been successful, with the company now producing around 9,000 bopd and 17 million cf/d of gas just a decade after its listing on the stock market.

Clearly, a lower oil price has hit shares in the company during the course of 2014, with shares in Circle Oil falling by 31% since the turn of the year. Furthermore, earnings are forecast to fall in the current year by 20%, although this fall seems to be adequately priced in by the market, since Circle Oil trades on a price to earnings (P/E) ratio of just 5.2.

And, with the company’s bottom line expected to rise by 7% next year, it could mean that shares in Circle Oil are good value at the moment. Certainly, there is considerable uncertainty, but for long term investors who are not risk averse it could prove to be a profitable buy.

President Energy

Also weaker today are shares in President Energy (LSE: PPC), with them being down over 8% at the time of writing. However, this decline follows upbeat news for the company, with the price it will pay to acquire the 100% ownership of the Puesto Guardian concession now being $5.8 million, down from an actual and contingent sum of $17.9 million.

The reason for the lower price is the immediate cash flow requirements of the seller, with President Energy now making a payment of $800,000 to the seller, with the previously agreed deferred consideration of $1.9 million and a 5% contingent overriding royalty being cancelled. Furthermore, President Energy has completed an initial review of Puesto Guardian, which supports its view that there is considerable potential for significant production moving forward.

As such, shares in President Energy could gain momentum, particularly if Puesto Guardian yields positive results moving forward.

Of course, not all shares move as much as Concha, President Energy or Circle Oil over such a short period of time. Indeed, here at The Motley Fool, we’re in favour of finding stocks that can deliver stunning performance over a longer time period.

The post Today’s Major FTSE AIM All-Share Index Movers: Concha PLC, Circle Oil Plc And President Energy PLC appeared first on The Motley Fool UK.

That’s because, having previously announced that a light oil/condensate discovery has been made at its Lapacho well prospect in Chaco Region, Paraguay, President Energy has now drilled the upper section of the Santa Rosa formation and considers it to be a series of gas/condensate sands. While the company has stated that it is too soon to announce that a discovery has been made prior to a full evaluation, evidence points to the potential for this to be the case.

Indeed, today’s update includes information that provides encouragement in this regard, including constant background gas ranging from 3% to over 12% in the circulated drilling mud to surface throughout the drilling of the hole. As a result, drilling will continue to a depth of 4,600 metres (from the current 4,490 metres) in order to fully evaluate the target section.

Share Price Movements

Despite the encouraging update, shares in President Energy have fallen by 19% at the time of writing. A potential reason for this is profit-taking, since shares in the company have risen by a whopping 69% over the last month — a figure that includes a 19% fall today. So, it’s of little surprise for many traders to apparently be selling on the upbeat news flow released, with the potential for a further discovery still being relatively uncertain.

Looking Ahead

Having already made an initial discovery at the Lapacho well in Paraguay (which was the major reason for such strong share price performance over the last month), President Energy seems to be making excellent progress with regard to meeting market expectations of profitability in FY 2016. Certainly, today’s update could mean that it reaches its target a little sooner, but it remains a potential discovery as opposed to an actual discovery, so it could be beneficial to remain pragmatic regarding the company’s future prospects in this space.

Still, with production in Louisiana also making encouraging progress and President Energy engaging in M&A activity through the purchase of the remaining half of its Argentine subsidiary, Puesto Guardian, the company is putting itself in a strong position to meet market expectations. Clearly, further positive news flow from the Lapacho well could send shares higher in the short term, with President Energy’s future being a little brighter thanks to today’s upbeat update.

The post Why Are Shares In President Energy PLC Sinking Today? appeared first on The Motley Fool UK.

The company announced that it had found conventional light oil and condensate at its Lapacho prospect. Management expects this oil to be of commercial quality, although further tests and drilling activities need to be carried out, before President can officially claim to have made a commercial oil discovery.

Nevertheless, what’s really exciting about the discovery of oil at the Lapacho project was the fact that the oil was discovered before the well reached its target depth. This indicates that the prospect could yield more oil than initially believed. Additionally, the presence of oil at the Lapacho prospect implies that liquid hydrocarbons may be present in the deeper sandstone reservoirs at the company’s nearby,but currently abandoned, Jacaranda prospect. President says it plans to re-commence drilling of the Jacaranda prospect in the hope of finding yet more oil at a deeper depth.  

All in all, this discovery represents a significant milestone for President Energy, as the company now has proof that oil does exist in the Paraguayan Chaco. The discovery puts in place the foundations for further drilling and exploration activities in the future.

Busy Year

Today’s news marks the latest development in what is shaping up to be an extremely busy year for President. Indeed, the company’s US operations, which are located in Louisiana, produced 218 barrels of oil equivalent per day (boepd) during the first half of this year, generating revenue for the company of $22,200 per day. Record US production yielded much needed cash for President to pursue international drilling and growth opportunities. 

Specifically, during the past few months, as well as drilling activities within Paraguay, President also acquired the additional 50% of its Argentinian subsidiary, Puesto Guardian, over the summer. Thanks to this transaction, President’s oil production should rise by 36% during the second half of the year to 530 boepd.

And, unlike many junior oil explorers, President has plenty of cash on its balance sheet to support exploration activities without the need to ask investors for cash injections.

At the end of June, President had a net cash balance of $23m and City analysts currently expect the company to break even by 2016. However, after today’s announcement and discovery of oil within Paraguay, it’s possible that City analysts will start to upgrade the company’s earning s forecasts.

Indeed, President plans to begin the first stage of production at its new Lapacho project during 2015, depending upon test results. So, now President has all of the building blocks in place to support rapid growth.

The post President Energy PLC’s Shares Nearly Double After Oil Discovery appeared first on The Motley Fool UK.

Bright prospects

International oil producer President Energy relies upon its North American operations to generate a significant portion of the group’s cash. Indeed, during the first half of this year, the company’s North American assets, which are located within Louisiana, produced 218 barrels of oil equivalent per day, generating revenue for the company of $22,200 per day at an average price of $102 per barrel. This made up around 70% of President’s revenue for the period. 

Unfortunately, the price of the US oil benchmark West Texas Intermediate, has been falling faster than the price of Brent, the international oil benchmark, during the past month. WTI hit a low of $80 per barrel earlier this week, implying that President’s sales will take a big hit. Luckily, the price of WTI rebounded yesterday, rising around 5% to $84 per barrel.

However, although President relied upon its North American operations to generate the majority of its revenue during the first six months of this year, the company is now more diversified. In particular, the company acquired the additional 50% of its Argentinian subsidiary Puesto Guardian over the summer and as a result, President should see its production rise by 36% during the second half of the year to 530 boepd.

At the end of June, President had a net cash balance of $23m and City analysts currently expect the company to break even by 2016. 

Gearing up for growth

Leni Gas & Oil has not released any news today but the company’s shares have jumped 21% on heavy volume, catching the attention of many investors.

It seems as if this bounce is being driven by investors taking advantage of recent declines, to boost their holdings in the company, ahead of results from four new Goudron wells. Leni’s engineers are currently in the process of testing the newly drilled wells on Pad 2, GY-665 to GY-668 for their optimal flow rates. These tests should be completed within the seven days.

Initial production tests on wells GY-666 and GY-668 gave flow rates of 300 bopd and 330 bopd respectively at the end of September. So these wells have plenty of potential. 

What’s more, Leni recently announced that it had made the first sale from its newly commissioned sales tank at the Goudron Field. These facilities have enabled the company to boost daily sales to 2,000 barrels. It looks as if Leni will need this extra capacity, if the optimal flow rates from wells GY-665 to GY-668 are anything like their initial production rates.

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