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Views from the Trading Floor Thursday 26th January
Saints & Sinners
Oil & Gas
Max Petroleum (LON:MXP) the Independent Oil & Gas exploration, development and production company, focused on Kazakhstan announced yesterday that it has commenced drilling the SAGW-3 appraisal well on the Sagiz West Field in Block E. Total depth of the well will be approximately 1,400 metres, targeting Triassic reservoirs, and we would anticipate this to take approximately 15 to 21 days to drill. This is an appraisal well to test the geology of the structure, which will help them gain a better understanding of the potential pay zone. The real focus for the company over the next few months will be the Pre Salt drilling programme, and an update on operations should be around April. Major support looks to be around 10p to 10.25p and first line resistance looks to be around 12p. We will be watching the news wires very closely over the next few weeks for the update.
Circle Oil (LON:COP) started to get a little active again today, after French newspaper Les Echos posted a report that said the company had been awarded the Gaddari South licence in Morocco. Now nothing has been said via the official news wires yet, but if this article is true, we would expect the company to be updating us shortly. Shares were 2% better by lunch.
Leni Gas (LON:LGO) jumped another 10% to 1.42p before lunch, on huge volume of 150 million shares, after the company announced the imminent arrival of the Ocean Columbia jack-up rig at the Eugene Island Field in the US Gulf of Mexico. As previously announced in December 2011 the Company has approved additional drilling at the Eugene Island-184 leases operated by Marlin Energy LLC ("Marlin") where LGO holds a 7.25% working interest. Marlin has informed LGO that the rig is now being released by the previous operator and it is expected to be mobilized to the Eugene Island platform shortly. The rig move is weather dependent; however, the operator anticipates commencing drilling operations next week. The shares have had a fantastic run over the last week or so of trading, jumping from 0.56p to a high of 1.5p today. 2012 has already started as a very active one for this company, so it won’t be a surprise to se e investors glued to the news wires here.
Magnolia Petroleum (LON:MAGP) has been catching the eye over the last few trading sessions, and volumes have been through the roof. The stock has moved from 0.52p to its current high of 1.6p as I type. The company, which is focused on Oil & Gas exploration in the U.S announced it has received a proposal from, and has elected to participate with, the operator, Slawson Exploration Co Inc., in the drilling of the Drone No.2 well, located in Sections 27 and 34-145N-93W, Dunn Co., North Dakota. These same sections of the Middle Bakken were successfully drilled by the Drone No.1 well and resulted in an increase in production attributable to Magnolia across all its interests from seven to around 20 barrels of oil equivalent a day. And drilling is expected to start on the 15th of February. Now for a company with a market cap just over £8 million, to be partnered with Marathon Oil on any project is a hu ge deal. We will have this one firmly on the watch list from now on.
Woburn Energy (LON:WBN) the Oil & Gas exploration company, focused on Colombia, started to get very active today. For a stock the trades less than 50,000 shares a day, 850,000 changing hands before lunch did get my attention. The stock traded as high as 2.95 before lunch (+45%) before settling back at around 2.25p. Possibly the market is getting ready for an update on this little snippet from the update on the 1st of September last year “UK - Southern North Sea P1147 licence. The Company has a 15% interest in Block 49/8c, in the Southern North Sea, operated by Wintershall Noordzee, which contains the undeveloped Monterey gas field. Little progress has been since the AGM. Development of Monterey is realistically unlikely to take place before the end of 2011 as further technical work will be required to determine the precise development scenario for this
Carboniferous tight gas sand fie ld and gas prices remain depressed as a result of the weak economic conditions in the UK. Woburn Energy continues to seek a buyer for our interest or to farm out to a company who will carry us through any future work obligations required to take Monterey into development. Currently, the Joint Venture is operating on a care and maintenance basis until a buyer or farm-in partner(s) can be found. We will be keeping a close watch here.
The large volume continued again today in Solo Oil (LON:SOLO), trading 30 million before lunch. Shares were flat on the day at 0.74p, but the market is expecting an update on operations in Tanzania with its partner Aminex (LON:AEX) hence why even after the Canadian update, the volumes continue to stick around.
Sefton Resources (LON:SER) pushed 3% better today, after the company issued a trading update. The company said “it now has in place a solid base of assets which will generate long term and visible earnings from both California and Kansas, positioning it well to achieve continued organic growth and to accelerate this through selected further acquisitions. Three new wells on the Tapia oil field in California are in production, with initial flows improving as expected which should stabilize within next 30 days. A work over program of certain wells at Tapia and recommencement of cyclic steaming is expected to provide a further increase in oil production. Vintage Production LLC, an Occidental Petroleum Corporation subsidiary, is about to drill a fourth well in the oil field adjacent to Sefton's Tapia Canyon oil field. Kansas pipeline project remains on track for completion with first gas sales expected by mid -year 2012.” Shares were trading at 2.35p just before lunch, and holders will be looking for an update on the Tapia oil field and stabilised flow rates over the next month or so.
Kea Petroleum (LON:KEA) jumped another 10% to 6p by lunch, on 3 times the average daily volume. Holder here are waiting for the company to spud the Mauka-1 well, and the anticipation of what this may bring to the table has continued to keep investors interested in the story. We will be watching the news wires for any sign of this spudding.
Mining
ENK (LON:ENK) the emerging mid-tier Nickel laterite produce, has been very quiet recently. Shares have been slipping from 15p in the summer last year, to its current level of 11p. One of the reasons for the slip could be that the market is still waiting for a JORC report update from the company, and until they get the update, investors could remain cautious to step in. Volumes have been painfully thin for a stock that once traded a few million a day. We will be watching this one closely for the JORC report or any update, as any positive news flow, could get retail investors buzzing about the stock. Another point to note is that ENK have not taken part in the recent rally of base metal stocks, or the 15% rally in Nickel from $18,000 P/T to $20,800 P/T.
Sticking with the Nickel Theme, a stock that has started to run on the back of the Nickel price move is Horizonte Minerals (LOM:HZM). The stock has been moving very nicely since the turn of the year, moving from 10.5p to its current level of 17p. The stock gained another 7% today, on 4 times the average daily volume. If the underlying metal continued to rally, it will be interesting how far these can run.
Another base metal that has been going great guns of late is Zinc, The base metal has jumped 19% in the last month from $1800 to $2165. Zincox Resources (LON:ZOX) has been pushing full steam ahead, running from 50p to 70p since the turn of the year. Investors are also getting ready for the company to go into production, which will remove the technology execution risk which has been weighing on the stock since inception, adding even more weight to the bullish story.
EMED Mining (LON:EMED) started to show signs of life, gaining 7.25% on the day to 9.25p. Despite the broader market rally, the stock has languished below 10p. Yesterday we upgraded our target price to 48p as we updated our commodity and currency assumptions. The stock provides great optionality and all hinges on the approval of the various outstanding permits to trigger the restart of the large scale Rio Tinto copper mine in Southern Spain. With over 585,000t of contained copper in reserve, 940,000t in resource, significant upside resource potential and endemic unemployment rates within the region, surely it is only a matter of time until the restart is triggered.
African Copper (LON:ACU) jumped 7% today, to 2.25p after the company announced Steve Georgia had been appointed as Non-Executive Director. The company has been largely uneventful over the last few months, so any news here is welcomed by holders.
Angel Mining (LON:ANGM) have been stuck to 3p for the last few weeks, since the company announced a record gold pour. The last update said “It is pleased to announce that a further 16.1 kilograms (517.8 ounces) of gold dore was successfully poured at Nalunaq on Monday, 9 January 2012. This is the largest single pour to date and is another significant milestone as production continues to rise towards the target of between 1,500 and 2,000 ounces per month, which it hopes to achieve in early this year. For the three weeks since the last pour the mine and plant operated with a skeleton crew over the holiday period and had to deal with very severe weather, which at points disrupted production. Access to the mine was hampered at times, due to blizzard conditions, as was access to fuel supplies from the harbour.” And yesterday the company announced this in a newsletter to shareholders “As the initial stoc kpiles have begun to be depleted, production of ore from the mine has been ramped up, with tonnage and grades now sufficient to fully feed the process plant. The plant aims to increase its operational efficiency and reduce its costs by extending the interval between shipments. This will give the plant a longer, more regular processing cycle which will reduce chemical and energy consumption and reduce shipment costs of dore bars to the refinery whilst yielding the same amount of gold from fewer production cycles. Accordingly, the next pour of gold at Nalunaq is scheduled for Monday, 30th January.” So the next pour is scheduled for Monday, if they can continue to increase the size of the pours, holders here will continue to back the story. Stand by your beds!
ECR Minerals (LON:ECR) slipped a touch today after the company announced “West Wits has agreed to sell to a South African consortium the West Wits Lease, West Rand Consolidated Lease, Luipaardsvlei Lease and East Champ D'Or Lease for A$9 million on milestones. First A$4 million will be received as an upfront payment on completion of the 30 day due diligence period and signing of definitive agreements. West Wits will retain the DRD Lease and Rand Leases which contain JORC 287,000oz Au and the major uranium targets. West Wits is now well funded to complete its initial alluvial circuit and begin its exploration programs at Derewo River, Indonesia.” Shares were trading 3% easier to 1.08p by the end of lunch. Major support looks to be 1p and headline resistance looks to be 1.17p.
From the trading floor
European markets jumped early doors after last night’s statement from the Federal Reserve (FED), highlighting that they will have to keep interests rates at all-time lows until late 2014 due to the current problems with the world economy. The FTSE is trading 57 points higher (+1.01%) to 5780, after briefly testing long term resistance at 5800. Volumes were a little on the light side, with only 500 million shares changing hands by the end of lunch. The FTSE AIM All-Share was 1.16% better on volumes of 1.3 billion shares.
A lot of economic data to chew through from the US this afternoon, starting with the Durable goods Orders which was expected to hit the wires 2% higher in the December read. The actual number came out better than expected at +3%, and we even got a slightly more positive revision to the November reading, from 3.8% to 4.3%. Initial jobless claims hit the wires pretty much in-line with expectations at 377k. New home sales were a touch below the consensus, coming in at 307k versus expectations of 321k.
Talks between Greek officials and its major creditors will resume later today, with all eyes on any press cutting coming out. The market it sitting on major resistance at 5800, any positive developments here will be enough to get the market over the hump.
Tomorrow we will be looking closer at the recent moves in the base metals, especially Zinc, Copper, Nickel and lead. With a view to sending across a slightly more details note.
Commodities Corner
Gold – ↑Trading at $1726, up $17 (+1.03%)
Silver – ↑Trading at $33.47, up 25c (+0.77%)
Copper – ↑Trading at $8562, up $112 (+1.33%)
Zinc – ↑ Trading at $2203, up $21 (+0.96%)
WTI Crude – ↑Trading at $100.95, up $1.57 (+1.58%)
Brent Crude – ↑Trading at $111.42, up $1.63 (+1.48%)
Natural Gas (HH) – ↓ Trading at $2.68, down 5c (-1.79%)
FX
GBP vs USD = 1.5681
GBP vs EUR = 1.1923
Written by Steven Asfour, Sales Trader at Fox-Davies
