Views from the Trading Floor - Monday 23rd January 2012

A fresh week, but the same old chatter around Rockhopper (LON:RKH). Continued press speculation of Anadarko, and possibly up to 5 other names  could be in the frame for the Falkland explorer. Longer term readers of this note will remember the many articles We have posted over the months with our long term thoughts on the stock. For the new comers, here is the chart I have been discussing. Resistance at 350p is being tested as I type, a break of that could see a test of resistance at 390p. 312p looks to be the first line of support now.

Ithaca Energy (LON:IAE) the Oil & Gas explorer in the North Sea, today announced “We note the recent movement in the Company's share price on the Toronto Stock exchange and confirms that it has received a confidential, non-binding proposal to acquire all of the outstanding shares of the company.” Shares were trading 20% higher at 170p just before lunch, on 10 times the average daily volume. I will be looking for any speculation on price over the coming trading sessions. The other stock to keep the peepers on with this whole situation would be Lockhard Energy (LON:LHD). The stock has been drifting easier over the last few weeks, as they announced a small delay to the FPSO (Floating production, storage and offloading), but only because they were having additional work done to make it ready for all year round use. Lockhard owns 10% of the Athena project through is 100% ownership of Zeus Petroleum, and Ithaca are the other main partner in the project. Any further developments on the potential bid, could have an impact on Lockhard. Eyes down!

President Petroleum (LON:PPC) has been on a fantastic run over the last few days, and continued to shine again today. The stock jumped another 25% to 50p just before lunch, on 5 times the average daily volume, after the company announced “Martinez Del Tineo Prospect, or MDT, in Argentina has been identified as a play opening significant gas-condensate prospect by Gaffney Cline & Associates. The prospect is a large anticlinal structure with 24 kilometers closure, defined by 3D, and is analogous to other producing fields in Argentina. Gross Prospective Gas Resources unrisked of 570 billion cubic feet with an additional 14.5 million barrels of condensate. GC assesses gross unrisked NPV 10 of gas and condensate at MDT at $1.03 billion, or $515 million net to President, representing 289 pence per share. GC assess a 26% geological chance of success at MDT, providing a gross risked NPV of $268 million, or $134 million net to President, representing 77 pence per share. Number of additional gas/condensate leads exist on PG which bear similar characteristics to MDT and which will now be investigated during 2012.” A lot to digest in the report, but it looks very bullish and the market is backing the story. 

Tower Resources (LON:TRP) was very active again today, trading 15 million shares by lunch, and pushing 10% higher to 4.35p at the time of typing. Volumes over the last few days of trading have been increasing at a decent rate, and the stock has broken a number of resistance levels during that run. The stock is trading about 8 times the average daily volume of late, possibly as investors get ready for the spudding of the Mvule-1 well. We will be watching the news wires to see if the investors get what they desire.

Petrolatina (LON:PELE) jumped 8% during trading, on 5 times the average volume to 16p. The stock has been very quiet recently, so it is interesting to see the volumes picking up ahead of the expected update at some point in February. Resistance looks to be 17p and 20p, with potential support looking to kick in at 14.5p.

Andes Energia (LON:AEN) jumped another 7% by lunch to 52p on 3 times the average daily volume. The stock has been on an incredible run since September last year, when the stock was trading at 18p. Investors have been getting excited about the Shale Oil and Shale Gas plays in Argentina,  and reading through the RNS from the 17th of November, this could be one of the reasons the shares have been running again over the last few sessions “The Vaca Muerta shale interval in the MMOx1 well is approximately 136 metres thick. The joint venture expects the completion works, full testing and fracturing of MMOx1 to commence within the next 30 days.” So possibly an update on operations is due?

Leni Gas (LON:LGO) finally broke out from long term resistance at 0.63p today, pushing 16% better to 0.73p by the end of lunch. The volumes here have been increasing nicely over the last few sessions, possibly due to this little note from the RNS on the 1st of December “Work will start almost immediately with preparatory operations in the A#2 well to abandon the existing well below 7,600 feet ahead of the arrival of a drilling rig, Ocean Columbia. The rig is scheduled to be on site by early January 2012.” We are no longer in “early Jan” but maybe investors are getting ready for an update on the rig? We will be watching closely here.

Global Petroleum (LON:GBP) ticked 10% better to 14p today, albeit on thin volume. The stock has been on a decent run since the backend of December last year, moving from 10p to its current levels. Reading through the previous announcements, it would appear that the market is waiting on an update on operations in Namibia. However, bulletin boards are speculating that an update on the sales of its producing assets in the US could be on the cards. One for the watch list.

After breaking long term resistance at 7.5p last week, Petrel Resources (LON:PET) has continued to rally on decent volumes. Investors are waiting for an update on operations, and with volumes like this it would be no surprise if they got it soon. Since breaking the 7.5p level it has gone through resistance at 8p with ease, and looks like it has the potential to test major resistance at 10p.

Mining

On Friday I highlighted the volume increase on Forte Energy (LON:FTE). The stock had seen a large increase in traded volume towards the back end of last week, and I attributed the volume increase to investors expecting an overdue assay result. Today the company updated the market with A238 drilling assay, confirming mineralisation extensions. The RNS said “In Mauritania, initial assay results have been received for 36 drill holes out of a total of 55 drilled to date; results confirm mineralised extensions to the north west of A238 and at depth below the existing A238 resource. Initial drilling of calcrete hosted uranium prospects at the Hasi Baida (948) license is scheduled to start at the end of Jan. In Guinea, a 5,000 meter drilling program commenced at Firawa on Jan. 9 to test the extensions along strike and at depth. Results add further confidence to what could be a significant and commercial uranium resource in Mauritania.“ The share were trading 15% better by the end of lunch at 3.5p, on almost 7 times the average daily volume. Glad to have been of assistance!

Goldplat (LON:GDP) the gold exploration and tailings company, gave a progress update on gold production and exploration projects. Shares were up 15% to 13.25p by the end of lunch on almost 6 times the recent average daily volume. The RNS said “Excellent  progress  being  maintained  on  all  fronts - increasing revenue through  improving gold recovery production and first gold mining operations commencing January 2012 at Kilimpaesa. Milestone  first gold sales  achieved at Kilimapesa  with 399 ounces sold on 13 January 2012. Plant  capacity  will  initially  increase  to  3,000 tonnes  per month with further expansions planned as ore resources expand. Kilimapesa expected to raise production levels towards 10,000 ounces of gold by the end of 2012. Drilling  programme underway in tandem  with ongoing underground development designed  to expand Kilimapesa's ore resource to in excess of 500,000 ounces of gold. 4,800 metres  core  drilling  exploration  programme  commenced at Anumso in Ghana - continuation of mineralised Tarkwaian conglomerates confirmed.”  Now the major resistance level to watch for here is 13.5p, if the stock can break that a test of previous resistance at 15p could be on the cards. 

Solomon Gold (LON:SOLG) popped 25% to 12.5p on just over the average daily volume by the end of lunch, as bulletin boards speculated and update was due on the companies drilling programme. The previous RNS said “Diamond drill hole FDDH008 at Ballyorlo, Kiovakase and Meriguna to test for surface oxide gold resource. A review and reinterpretation with an independent porphyry / epithermal consultant, of the data associated with geophysics, soil, rock chip, trenching and drilling progress has been completed for the Ballyorlo, Kiovakase and Meriguna Prospects, in-order to generate on-going drill targets and determine the direction of the on-going exploration program” We will be watching for the potential update, as I believe volumes are a huge indicator in the small cap arena.

Thursday of last week I pointed out that Berkley Mineral Resources (LON:BMR) had broken a number of significant resistance levels, and that if the stock could break and close above 4p, then a test of major resistance at 4.6p could be achievable. Well today the large volumes continued and the stock tested the major resistance at 4.6p. Shortly after the stock retreated to 4.35p, and is still at the 4.35p level as I type. It would not be a surprise to see 4p turn into a support level now, and 5p to be the next test, should the stock break out of 4.6p of course.

Nyota Minerals (LON:NYO) the duel listed Gold miner, dropped 5% to 6.9p by the end of lunch, albeit on small volume. I previously highlighted the currency arb in the name, and the following day the stock played catch up. We the stock closed last night in OZ at 12c, and at the exchange rate as I type that would equate to approximately 8.12p, a difference of 15%. So unless the Australian line dips by that much over night, it would be no surprise to see the currency arb traders taking a closer look at this one again. Interesting nonetheless.

Sunrise Resources (LON:SRES) a stock spoken about favourably here over the last few days. I highlighted the volume increase Thursday of last week, when the stock was trading at 1.03p, and it continued its very impressive run today, jumping a whopping 45% in trading to 1.95p, with over 10 million shares changing hands by the end of lunch. The stock has defied gravity and broken many resistance levels in just one week. Resistance at 2p and 2.5p look to be the next major resistance levels, with 1.75p looking to be support. One can only assume that retail investors are getting ready for the assay results due.

Scotgold (LON:SGZ) dropped 6% in trading to 4p on 4 times the average daily volume. The gold mining and exploration company has been very quiet recently, so if the volumes continue to rise it might be one for the watch list. 4p has been support for  a while now, any break of that would not be a good sign, as 3.5p would be the next level of support. However, if the stock can get some positive momentum from the volume, it could test resistance at 5p.

From the trading floor

A very quiet day on the Economic front, with no major data out from the UK or the US. The FTSE 100 took that as a chance to rally once again, pushing 54 points higher as I type to 5782 (+0.97%). Volume was a little on the light side, with a short 600 million shares changing hands by 3:30pm. The FTSE AIM All-Share was trading 1.43% better on volumes of over 2 billion at the same point in time.

Continued talks surrounding the Falkland drillers and the likes of Anadarko petroleum was all the weekend press wanted to talk about. The main question here would be, how would anyone looking at the region get the Argentinian’s onside? as they have already said they would black ball any company seen trying to do business in the disputed waters. Maybe a heavy weight like Anadarko could help oil the wheels a little.

The market has taken the fact that talks between top officials and Greece have not yet broken down, as a bullish sign. I am sure we will get a better idea of the nuts and bolts of negotiations in tomorrow mornings press.

Commodities Corner 

Gold – ↑Trading at $1675, up $10 (+0.59%) 

Silver – ↑Trading at $32.45, up 30c (+0.97%) 

Copper – ↑Trading at $8367, up $116 (+1.42%) 

Zinc – ↑ Trading at $2041, up $28 (+1.39%) 

WTI Crude – ↑Trading at $99.47, up $1.07 (+1.09%) 

Brent Crude – ↑Trading at $110.99, up $1.17 (+1.08%) 

Natural Gas (HH) – ↑ Trading at $2.41, up 7c (+3.16%) 

FX 

GBP vs USD = 1.5582

GBP vs EUR = 1.1951

Written by Steven Asfour, Sales Trader at Fox-Davies