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Views from the Trading Floor - 2nd February 2012

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Saints & Sinners
 
Oil & Gas


Max Petroleum (LON:MXP) jumped 6% to 10.85p just before lunch, on almost 3 times the average daily volume. The shares jumped after the company said that it has begun testing a second Triassic reservoir in the SAGW-1 well in the Sagiz West Field at depths between 1,243 to 1,255 meters. Flowing 43 API gravity oil at a stable rate of 430 barrels of oil per day, or bopd, over a 17-hour period. Company has begun testing a second Jurassic reservoir in the ASK-1 well in the Asanketken Field at depths between 1,271 to 1,277 meters, flowing 36 degree API gravity oil at a stable rate of 1,005 bopd over a 24-hour period. Both wells are connected to temporary production facilities and will be placed on long-term test production for up to 90 days. First line resistance sits at 10.75p, but if the shares can break and close above that level, a retest of r esistance at 12p could be on the cards.


Gulfsands Petroleum (LON:GPX) slipped 8% in trading to 160p, after the company said it will suspend exploration work in Syria for the duration of European Union sanctions on the country, despite not being legally required to do so. The company holds a 50% stake and is operator in Block 26 in northeast Syria, partnered with Chinese petrochemical giant Sinochem, who holds the remaining stake. Production from the 5,414 square kilometre block is currently around 100,000 barrels of oil a day from several fields, operated mainly by the state-owned Syrian Petroleum Company. The company also said they are owed approximately $25 million for delivered oil. Another interesting point to note is The Group at present has unrestricted cash balances in excess of US$120 million, substantially all of which are held in diversified short term money market fund s in the UK, and has no debts. Gulfsands' share of outstanding accounts payable in Syria in respect of obligations arising prior to the date of declaration of force majeure amounts to approximately $5 million while the "burn rate" inherent in continuing to pay our Syrian staff and maintain a local presence, absent any exploration activity, is estimated at approximately at US$500,000 per month (to the Company's 50% interest.) Major support sits at 160p, and first line resistance looks to be 180p.


Caza Oil & Gas (LON:CAZA) finally gave its elusive update this morning, helping push the shares 8% to 11p on 4 times the average daily volume before lunch. The update highlighted the Hite Offset Property, Caza McMillan #1, Wharton County, Texas. As previously announced, re-entry operations on the Caza McMillan #1 well to test the Yegua 9,650 sand have been successful. The well has been placed online, all frac fluids have been recovered and production rates are being maintained at 1.13 million cubic feet of natural gas, 45 barrels of oil and 14 barrels of water per day on a 12/64th choke. After performing a detailed reservoir study, the well is producing as modeled, and management believes the current rates represent the most efficient and effective production rates for the Yegua 9,650 reservoir. Caza currently has a 42.53% working inter est and a 31.05% net revenue interest in the Caza McMillan #1 well. San Jacinto Property, Midland County, Texas. As previously announced, the Caza Elkins 3401 and 3402 wells have been successfully completed and placed into production. The wells have combined to produce approximately 15,000 barrels of oil and 23 million cubic feet of natural gas since August 2011. As highlighted yesterday, the stock had resistance at 10.5p that it has sailed through today, so that should now act as a support line, with 12.5p looking to be the next area of resistance.


Tower Resources (LON:TRP) jumped 7% to 4p on a decent slab of volume before lunch, after the company said that the Mvule-1 well in Uganda is now expected to spud within six to nine days. Tower's subsidiary, Neptune Petroleum (Uganda) Limited, has begun mobilization of OGEC K900 drilling rig to the Mvule-1 site; preparation of the site is near completion and rigging up is about to begin. Well is anticipated to reach a total drilled depth of about 600 meters within two weeks of spud; well is evaluating estimated recoverable resource potential of 80 million barrels of oil. According to this, they should be spudding the well several weeks ahead of schedule. The major resistance at 4.4p to 4.5p looks to be the area to keep an eye on, as any break and close above, could give the green light for a retest of 5p.


Urals Energy (LON:UEN) jumped 5% again to 9p on, and volumes continue to catch the eye. The stock traded almost 10 times the average daily volume yesterday, and another 4 times the average before lunch today. I am a big believe that volumes can be a great indicator, and if they continue to jump like they have been, holders could be in store for a retest of resistance at 10p. We will be watching closely here.


Aminex (LON:AEX) slipped another 3% to 5p today, as investors were left waiting for the update on drilling reaching target depth, which was scheduled for the end of January. The longer they go one without giving the update, the more these will swing. Could we be in store for this update at the 7AM hour tomorrow? We will be watching closely, along with the rest of the small cap world.


3Leg Resources (LON:3LEG) slipped another 4% to 55p today, albeit on thin volume. Looking through the recent updates I found this “Extensive coring, wireline logging, production and other data have been gathered and are being analysed in order to advance further the Company's understanding of the target formations, for reservoir assessment and for future drilling and completion designs; these analyses are expected to be completed in the first quarter of 2012” Now I know we are only just in to February, but I always like to keep these potential news dates in the diary. Support at 54p and the 48p will be the main areas to watch for, and I will be keeping a close eye on 3Leg over the next few weeks for any signs of an update on analyses.


Oilex (LON:OEX) jumped 10% to 14.5p during trading today, after the company issues its interim financial report for the half year ending December 2011. The company highlighted a narrower pre-tax loss for the half year ended Dec. 31 despite lower revenue. Revenue for half year ended Dec. 31 A$147,315 (2010: A$870,985). Gross loss A$85,926 (2010 profit: A$696,548). Pretax loss A$2.62 million (2010: A$8.5 million). Cash and cash equivalents at Dec. 31 $10.46 million (2010: $19.07 million). Major support sits at 12.5p and first line resistance looks to be 15.5p.


Petro Matad (LON:MATD) the Oil explorer operating in Mongolia, pushed 7% better to 32p just before lunch, on 2 times the average daily volume. Possibly the move could be attributed to the stock bouncing off of major support at 30p, or possibly holders are getting ready for an update to elaborate on this little snippet from the last operational update “A second, 1,600m deep stratigraphic core hole is being drilled by Major Drilling in the Biger Basin (Block IV). Ongoing interpretation of seismic and other work will continue over winter. Further 2-D seismic planned in 2012. Possibility of exploration drilling in 2012, subject to the results of the seismic studies and budget approval.


Mining


Possibly the largest bit of news from the mining sector for some time officially hit the news wires this morning, when Xstrata (LON:XTA) announced that it has received an approach from and is in discussions with Glencore International plc. (LON:GLEN) regarding an all share merger of equals which may or may not lead to an offer being made by Glencore for Xstrata. The did sign off saying that there can be no certainty that any offer will be made, but the news did put a rocket up the backside of a number of the big board miners. Xstrata were 11% better at 1240p on huge volume. I will leave the morning press to speculate a little more on price, and we will sit and watch how this one plays out.


Another stock that should be on the watch list for anyone interested in the merger above is Lonmin (LON:LMI). If we cast our memory back a long long way, almost  to when dinosaurs roamed the earth, Xstrata did try buy Lonmin, but were unsuccessful, and just retained a near 25% holding in the company. If this deal does actually go through, could we see the new combined company make a fresh pass at Lonmin? One for the watch list nonetheless.


Central Asia Metals (LON:CAML) jumped 15% to 75p just after lunch, even though volume was very thin. Yesterday the stock traded just over 4 million shares, and for a stock that tends to trade less than 100,000 a day that was a big day. The shares jumped after the company announced operational update on the  Kounrad Copper Project in Kazakhstan and an increase of its ownership of the Project to 100% conditional upon documentation. Construction of the Project plant is materially complete with capital expenditure below budget. Commissioning of the Solvent Extraction-Electro Winning ("SX-EW") plant commences at the end of February 2012. First copper production expected April 2012 with production for the year scheduled to be approximately 5,000 tonnes of copper cathode. The next major resistance level looks to be 80p, and the previous resis tance at 70p should now act as support.
Arian Silver (LON:AGQ) jumped another 5% to 23p today, as the cracking run continued. Shares have jumped up from 15p to the current levels, and volumes have been steadily increasing. If shares can break and close above the major resistance at 23.5p, then they could be on course for a retest of resistance at 26p.


After the recent bullish announcement and rally from 1p to 1.2p in ECR Minerals (LON:ECR), it was no surprise to see a little bit of profit taking going on. Shares were 4% easier at 1.12p, albeit on thin volume. Support at 1.1p looks like the first area to watch for here.


Ariana Resources (LON:AAU) recently tested major support at 3.6p, which is a support area that long term holders have historically jumped aboard and backed the company. 4 trading sessions after touching that support line, the shares rallied aggressively to almost 5p, helped by an exploration update that said “Drilling  in the Arzu South/Arzu North "gap  zone" returns a first result of 8.7m (drilled)  @  2.03 g/t  Au  and  9.9 g/t  Ag  from  15m down  hole  and demonstrates potential for multiple parallel vein and breccia zones. Further  exploration drilling  planned for  the wider  Kiziltepe area, which demonstrates potential for additional economic vein systems to feed into the current  Red Rabbit Project resource of 448,000oz gold equivalent ('Au eq'). A deep drilling campaign at Kiziltepe is being planned to determine the long term  underground potential of  the project to  extend the current projected mine life of 8 years. Completion  of an extensive review of licences available at upcoming licence auctions  beginning  in  February  2012 -  40 licences identified as showing potential for gold and 14 are considered high priority for Ariana.” After the recent rally it was no really surprise to see a few profit takers turn up to the party, and shares were 3% easier at 4.5p.


African Eagle (LON:AFE) continued to rally today, jumping another 17% to 7p in trading, on 3 times the average daily volume. Shares have been threatening to break the resistance at 6.6p over the last few weeks, as the company have issued a number of announcements that have all added weight to the bullish story. The next two resistance levels I can see are 7.3p and 8p.


From the trading floor


Today had all the makings of a great day when the news of the potential tie up between Glencore and Xstrata hit the news wires, but the excitement soon fizzled out and saw the FTSE 100 trading in negative territory. The main board was flirting between positive and negative all day, and volumes were nothing to shout about, with the main board trading only 450 million shares before the US open, and the index was 3 points better at 5794 (+0.06%) as we headed into the US open. The FTSE AIM All-Share index was 0.78% better, and for the first time we had not seen over 1 billion shares traded by 2:30 in a long time. The index had traded 848 million shares by the time the US bell rang for the open.


US Jobless claims were the order of the day across the pond, with expectations of 371k. The actual number it the wires a tiny bit better than forecast at 367k. Continuing claims were also a little better than expected, hitting the wires at 3437k versus the 3535k expected.


Royal Dutch Shell (LON:RDSA) has said it will launch a major investment drive in an effort to boost failing production. Shell have said they will pump up to $30 billion in to new oil and gas projects over the next 12 months.


Commodities Corner
 
Gold – ↑Trading at $1746, up $1 (+0.05%)
Silver – ↑Trading at $33.68, up 2c (+0.06%)
Copper – ↓Trading at $8361, down $65 (-0.77%)
Zinc – ↓ Trading at $2111, down $5 (-0.21%)
WTI Crude – ↓Trading at $96.50, down 55c (-0.67%)
Brent Crude – ↑Trading at $111.94, up 40c (+0.36%)
Natural Gas (HH) – ↓ Trading at $2.38, down 4c (-2.51%)
 
FX


GBP vs USD = 1.5822
GBP vs EUR = 1.2057
        
Any questions please don’t hesitate to contact me at [email protected]
Written by Steven Asfour, Sales Trader at Fox-Davies

Quick facts: Archer Daniels Midland

Price: 45.2 USD

NYSE:ADM
Market: NYSE
Market Cap: $25.16 billion
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