logo-loader

Beaufort Securities Breakfast Today including Rose Petroleum, San Leon Energy, Kea Petroleum and PHSC

Last updated: 09:15 09 Sep 2014 BST, First published: 08:15 09 Sep 2014 BST

no_picture_pai

The Markets

Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 16.0 points down at 7:00 am.

New York: Wall Street fell from its record level to close 0.3% lower on Monday. Decline in Chinese imports triggered speculation of an excess oil inventory. Consequently, energy shares tumbled, due to which the broader index retreated.

Asia: Japan’s Nikkei extended the previous day’s gains to end 0.3% higher. Losses in energy shares were offset by better prospects for Japanese exporters amid a weaker yen. Hang Seng remained closed for the Mid-Autumn Festival.

Continental Europe: European stocks traded mixed on Monday, with investors nervous over the outcome of the Scottish independence movement. France’s CAC 40 fell 0.3% while Germany’s DAX gained 0.1% after the country reported a trade surplus for July.

Crude Oil: Yesterday, prices of WTI and Brent Crude Oil dropped 0.7% and 0.6%, respectively. The spread between the two varieties stood at US$7.5 per barrel.

UK small caps: The FTSE AIM All-Share index closed -0.41% lower yesterday at 776.15. To read our latest research 

Today’s news

UK retail sales rise 1.3% in August

The British Retail Consortium reported that like-for-like (LFL) retail sales increased 1.3% y-o-y in August, after declining 0.3% y-o-y in July. Total sales rose 2.7% y-o-y compared with 3.6% y-o-y in the previous month.

Japan’s M2 money supply increases 3% in August

The Bank of Japan declared today the country’s M2 money supply grew 3% y-o-y to ¥875.2tn in August. The M3 money supply rose 2.4% y-o-y.

Company news

Rose Petroleum (LON:ROSE)

Rose Petroleum announced the signing of a joint venture agreement with Minera Pafex (MP) for the latter’s Charay, Charay 2 and San Luis concessions in Mexico. Rose Petroleum was acting on behalf of its wholly owned subsidiary Minerales VANE (MV). As a result of this deal, MV’s profit share from the project will be 60%, in addition to bearing all the operational expenses until cash flow from the mine operations can cover the same. Forward steps have already been taken on designing and general groundwork for mine development, in addition to obtaining other permits. Subsequent to blasting permit renewal, actual development is expected to begin in the next two months. The company expects to mine around 29,000 ounce (oz) gold and 173,000oz silver contained in 90,000 tonnes resource estimate with grade of 10 grams per tonne (g/t) Au and 60g/t Ag, including dilution.

Our view: The above Mexican concessions host the high-grade, shallow target Mina Charay project mine where MV has a prior drilling experience. This previous exposure is likely to provide the company with a better understanding of the project to improve mill grades and guarantee steady production at least over the next three years. Further, the company’ oil and gas division raised substantial funds for operations in Utah, and its assets indicate an impressive potential from a commercial angle. In view of these positives, we retain our Speculative Buy rating.

PHSC (LON:PHSC)

PHSC announced a modest decline of 2.5% in sales for the four month period ending 31st July 2014. The drop in the sales to £2.29m from £2.35m was owing to the timing differences of a couple of contracts which is expected to be recovered in the second half of the year. Profitability for the period improved by £39,000 with EBITDA at £216,000 compared to £177,000 for the previous year.

Our view: PHSC’s improved profits reflect the enhanced efficiency of its operations and good contract management within its acquired businesses. The final completion of the acquisition of QCS International was beneficial as it helped increase geographical footprint in Scotland and enhanced the product offerings. Productive post acquisition development and solid financials give the company a decent upside potential, hence, we reiterate a Speculative Buy.

San Leon Energy (LON:SLE) – Speculative Buy

Yesterday, San Leon Energy released a working interest update on its Morocco acreage. Subject to the sanction by Moroccan authorities, the company struck a deal with Petromaroc, previously Longreach Oil & Gas, to gain 1.5% working interest in the Sidi Moussa licence, offshore Morocco. San Leon will, in return, shoulder the expenses limited to Minimum Work Obligations. In a separate deal with the same partner, San Leon Energy also acquired a 22.5% net working interest in Tarfaya Onshore licence (San Leon is the licence operator) where the current exploration costs will be borne by Petromaroc.

Our view: In a clever move, San Leon Energy has managed to advance its presence in Morocco without any additional upfront cost to the company. Earlier in the year, the company had also reported commencement of drilling operations at the Sidi Moussa block in Morocco. In addition, the company expects enhanced operation in Permian Basin, Poland where it has a partnership with Palomar Natural Resources. Given the well thought-out alliances to explore the high upside potential and a solid financial background, we retain a Speculative Buy on the stock.

Kea Petroleum (LON:KEA)

On Monday, Kea Petroleum issued an operational update of the licences in Taranaki, New Zealand. Analysis of the logging information gained from the Puka-3 well indicated the location of thicker reservoir sands above the deeper oil water contact. Further, Douglas-1 well intersected a 15 metre (m) zone of oil shows in the upper Tikorangi formation. Initial analysis of the prospectivity of the outlined Tikorangi structure suggests a recoverable resource potential of between 5-20 million barrels of oil (MMbbl). Kea carried out considerable amount of work the Mauku prospect to incorporate the drilling and logging information that was obtained by the drilling of Mauku-1. However, the results were disappointing.

Our view: Kea faced slight disappointment at the Puka-3 well. Nevertheless, the company and its joint venture partner Australia Ltd has shown determination of forming a new work programme to continue appraisal at its Taranaki licences. Moreover, Puka-1 and Puka-2 wells continue to produce steadily, about 110 barrels of oil per day. In light of the above, and the ongoing discussions for a possible farm-in partner for the Mercury prospect, offshore Taranaki, we retain a Speculative Buy on the stock.

Venn Life Sciences (LON:VENN)

Yesterday, Venn Life Sciences announced signing a €2.4m contract in order to conduct a key international study for a new heart treatment. The ground breaking study in association with Professor Keith Oldroyd of the Golden Jubilee National Hospital and Professor Robert-Jan van Geuns, aims to determine if the disease in the left-main coronary artery of the heart can be effectively treated by the application of Percutaneous Coronary Intervention (PCI) with a new stent using a bio-absorbable coating. Riding on the contract news, the company’s shares jumped 12.3% on Monday.

Our view: The signing of the above contract to conduct a major international study into an innovative new heart treatment is good news for the shareholders since Venn has sufficient understanding about the supervision of such investigator initiated studies. Recent services additions and expansions put the company in a comfortable position to ably conduct such studies at a single or multiple sites. Earlier this year, the company had also signed a contract worth over €3m in Europe. In view of the line up of impressive contracts and focus on expansion plans, we recommend a Speculative Buy for now.

Ariana Resources updates resource and reserve; realises long-term strategy

Joining Jonathan Jackson in the Proactive studio is Ariana Resources PLC (AIM:AAU) managing director Kerim Sener, who sits down to discuss the latest resource and reserve update for the Zenit Mining Operations in Western Türkiye. The update encompasses the Kiziltepe and Tavsan sectors, operated...

5 hours, 33 minutes ago