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Beaufort Securities Breakfast Today including Nostra Terra Oil & Gas

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The Markets

Market opening: Markets could open lower today. FTSE 100 futures were trading 12 points down at 7:00 am.

New York: Wall Street traded higher, as investors are slowly grasping the idea of probable stimulus cutback by the Fed, but ended the week in the red. The S&P 500 was 0.3% up.

Asia: Markets traded lower amid worries about a severe cash crunch in China. In Japan, Prime Minister Shinzo Abe received a vote of confidence for his policies. However, the early positive sentiment driven from the news subsided over investor worries about the US Fed’s likely cut down in asset purchases later this year. The Nikkei closed 1.3% lower, while Hang Seng was trading 2.1% down at 7:00 am.

Continental Europe: Markets traded lower, as the US Fed’s announcement on likely tapering in monetary stimulus continued to unnerve investors. The sell-off due to expiry of three types of options and futures contracts added to the losses. Germany’s DAX and France’s CAC 40 closed 1.8% and 1.1% lower, respectively.

UK small caps: The FTSE AIM All-Share index closed 0.3% lower on Friday.

Today’s news

China’s central bank says liquidity ‘Reasonable’

The People’s Bank of China (PBOC) said in a report published today that there were reasonable levels of liquidity in the financial markets and urged banks to manage risks from credit expansion. The central bank said that changing dynamics in financial markets and mid-year stage led to higher liquidity management requirements for commercial banks.

EU banking union talks fail; UK government cuts budget 

EU leaders failed to set up a unified banking union that was agreed on almost a year ago, as they were unable to reach an agreement on which creditors would face write-downs when banks fail, as part of the proposed rules on bank resolution and recovery. Separately, UK Chancellor of the Exchequer George Osborne reached an agreement with his ministry to slash £11.5bn in spending for the year beginning April 2015.

Company News

Nostra Terra Oil & Gas (LON:NTOG)

On Friday, Nostra Terra Oil & Gas announced that it has raised £750,000 through the issue of 187.5m new shares at a price of 0.4p per share. The net proceeds from the placement, which was at a discount of 10% from the underlying price at the time, would be used for drilling more wells in the Chisholm Trail Prospect in Oklahoma and for leasing in the High Plains Prospect in Texas. Following encouraging results at the High Plains prospect, which led Nostra Terra to increase its stake in the asset to 20%, the company has now commenced reprocessing the proprietary 3D seismic data. Leasing is expected to begin during H2 2013, which in turn will result in the formation of several prospects, each with multiple drilling locations.

Our view: Attaining the backing of Institutional investors following recent success at the Chisholm Trail and High Plains prospect is positive news for Nostra Terra. The company plans to utilise the funds raised to further develop its Chisholm Trail prospect, which is housed in the Hunton Limestone Play, considered to be a highly prospective region that continues to attract large investments. Nostra Terra’s recent participation in the sixth well on the Chisholm Trail prospect would enable the company to further accelerate oil production. Over the past few months, all the previous four wells at Chisholm Trail play have produced oil ahead of expectations. The early encouraging results from the High Plains venture in Texas, where Nostra Terra has raised its interest to 20% from the original working interest of 5%, augurs well for the company. With the company approaching its initial target of 125 barrels of oil per day, it is now aiming towards its next target of 250 barrels. Given Nostra Terra’s successful track record, we remain optimistic that the company is likely to generate rapid payouts with continued strong production. We maintain a Speculative Buy for the stock.

Economic News

Eurozone current account

The Eurozone current account surplus, on an unadjusted basis, fell sharply to €15.3bn in April from €24.9bn in the previous month, the European Central Bank said on Friday. On a seasonally adjusted basis, the current account surplus dipped to €19.5bn from €25.9bn in March owing to a steep decline in the trade surplus and rising deficits on cash transfers. Trade surplus for goods and services were down to €18.1bn and €8.2bn from €22.5bn and €8.4bn, respectively.


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