viewArcher Daniels Midland

Views from the Trading Floor - 9th February 2012


 Saints & Sinners
Oil & Gas

Tower Resources (LON:TRP) slipped 10% to 3.55p after the company announced has raised GBP5.41 million before expenses through a conditional placing of 180.33 million new ordinary shares at 3 pence per share. As previously announced, the Mvule-1 well, which is the third and final commitment well on Tower's EA5 license in Uganda in which Tower holds a 100% working interest, is testing an estimated recoverable resource potential of 80 million barrels. The Company also said that the Mvule-1 well is expected to spud during the course of Thursday 9 February or Friday 10 February, and a further announcement of the actual spud will follow. So holders here can look forward to the spudding announcement in the coming days. Now the funds have been raised and a SEDA facility in place, it would seem all funds are in place and any potential sniff of oil at the Mvule-1 well could set these alight. Strong support looks to be 3.5p now, with thin resistance at 4p.

Andes Energia (LON:AEN) should be one for the radar, after Repsol raised its estimate for potentially recoverable oil and gas at its Vaca Muerta asset in Argentina. They now believe the basin could contain nearly 23 billion barrels, indicating a total shale deposit sizeable enough for Argentina to challenge the US on the non-conventional petroleum production. Shares have had a fantastic run over the last 4 or 5 months, jumping from 18p to its current level of 52.5p at the time of typing, and with the news from Repsol overnight, this could potentially add weight to the bullish vibe surrounding the stock. We will be watching closely here over the next few sessions to see how the market reacts to the news.

I am beginning to run out of superlatives for Gulf Keystone (LON:GKP), as the bullish run continues. Shares were another 6.5% better to 337p, and on decent volume to boot. The shares rallied after the company said it has appointed corporate advisers to help it sell its 20% stake in the Akri-Bijeel block in Kurdistan, northern Iraq, almost five months after putting it on the market. Gulf Keystone has been trying to sell its stake to focus on its Shaikan oil discovery, which is estimated to contain around 8 billion barrels of oil. Gulf Keystone holds 75% of Shaikan, MOL has 20% and U.S.-based Texas Keystone Inc. has the remaining 5%. The shares seem to be moon bound, and with the market expecting an update on Shaikan-5 and Shaikan-6 any day now, anything even remotely positive can on add fuel to this str ong burning fire.

Quadrise (LON:QFI) jumped 18% to 6p in trading today, on just over 5 times the average daily volume. The market has had no updates from the company since the last programme update back on the 13th of December. Bulletin boards were speculating that one could well be on the way soon, and with volumes like this, it would be no surprise to see one. We will be keeping an eye on this one.

Range Resources (LON:RRL) and Red Emperor (LON:RMP) have both been rallying over the last few sessions, and volumes have continued to move better. The market seems to be looking for an update on drilling, not that they would be at target depth by now, but the market will be looking for updates along the way to make sure everything is going to plan. One point to note is that these two are not the operator of the Puntland well in Somalia, so would have no influence on the timings of any updates on it. Either way we will be keeping a close eye on the pair.

Roxi Petroleum (LON:RXP) started to recover a little from the recent delay due to adverse weather conditions. Shares were 6% better by the end of to 4.7p. The company said they plan to resume drilling the BNG well 136 within the next few days following disruptions due to harsh weather conditions. So it is no surprise to see these starting to move better, as the market gets ready for the company to say they have resumed drilling.

Victoria Oil & Gas (LON:VOG) the AIM quoted oil and gas exploration and production company with assets in Cameroon and the FSU, have slowly eased back to major support at 3.75p to 3.8p, on slightly increasing volume. There has been market chatter that two sellers have recently finished here, and if that proves to be true, we could see these making their way back up to test resistance at 4.2p. One for the watch list.

Providence Resources (LON:PVR) issued preliminary results from the drilling of the 48/24-10z well indicate that the well’s secondary objective had good hydrocarbon shows and a number of potential secondary units, some in communication with the nearby 48/24-3 well. Further study and a drill stem test of the primary basal sands target will be conducted to in order to ascertain flow rates and productivity of the reservoirs. While the news does not provide an uplift to the company’s valuation (YET), it takes the asset one step closer to the point at which commerciality can be declared, or not. Irrespective it is good news for the basin and its operators, and is a stock for the watch list, along with Lansdowne Oil & Gas (LON:LOGP) who have a 20% interests in the asset, and San L eon (LON:SLE) who also have interests in the basin.


Kenmare Resources (LON:KMR) has been in focus over the last couple of days on rumours of a £1.10 bid from Rio Tinto. We’re not sure Rio are a likely bidder as a deal wouldn’t push the needle for them and would give Rio perhaps too large a slice of the mineral sands pie to be agreeable to their customers. But we certainly think a bid for Kenmare could come from other players such as Iluka, who are currently looking to add to their production profile. Even without a bid we think Kenmare offers good value as the mineral sands sector continues to hot up with constrained supply and increasing demand from emerging markets wanting white goods (mineral sands are used to produce paint pigment). Kenmare continues to push ahead with 50% expansion and seem to have overcome the ramp up problems of yesteryear.

I mentioned Angel Mining (LON:ANGM) a few days ago when the shares were approaching the 2.2 to 2.1p level. I highlighted they fact the company said they would be looking to do another gold pour in approximately 2 weeks’ time, and that would lead us to roughly Wednesday of next week. Shares moved 10% better in trading today to 2.45p at the mid-price as investors align themselves ahead of the next gold pour.
Volume in Mwana Africa (LON:MWA) has jumped significantly over the last few sessions, trading over 6 times the average daily volume on both occasions. Shares were another 6% better at 5.7p by the end of lunch, and shares look to be on course for a test of major resistance at 6p.

Kibo Mining (LON:KIBO) slipped back to 2.25p today, albeit on thin volume, as holders continued to sell them down after the recent fund raising. The company announced on Tuesday that Mzuri Gold Limited has agreed to subscribe for a total of 37,500,000 new Ordinary Shares in the capital of the Company at a placing price of 2 pence per new Share to raise GBP750,000, before expenses. 2p looks like it could act as a major support level on that basis, with 2.65p looking to be first line resistance.

After the recent fall, Gemfields (LON:GEM) bounced a little today, pushing 6% to 22p on almost 6 times the average daily volume. 20p does now look like it could be a major support level, with 22p as the potential first line resistance. If shares can break and close above that, then a retest of 24p could be on the cards.

Forte Energy (LON:FTE) continued to rally, pushing another 11% to 4.5p in trading. Volumes have been increasing since the company announced that it has been granted two new uranium exploration permits in Mauritania,  West  Africa Licences 1588 - Nord Tmeimichat Rhall Amane and 1173 - Bir Ould Ben Nasser.  The licences cover an  area of 1,325km2 and are located near the Company's existing licences in the north of the country. First line resistance looks to be 5p here, and we will be watching to see if they can test it over the coming sessions.

From the trading floor

The FTSE 100 started to rally this afternoon on speculation a deal may be close over in Greece. The index was 26 points better (+0.44%) at 5901, on volume of 625 million shares by the US open. The FTSE AIM All-Share was 0.77% better on volume of 1.2 billion shares.

American Jobless claims were the main order of the day across the pond this afternoon, and hit the wires at 358k versus expectations of 370k. Continuing claims were pretty much in line with the consensus of 3500k, coming in at 3515k. The only other bit of economic data of interest was Wholesale Inventories which hit the wires better than expected at +1% versus a consensus of +0.4%.

The Bank of England (BOE) has agreed to extend its quantitative easing programme by £50 billion, to give an additional boost to the struggling economy.

The European Central Bank (ECB) decided to leave the benchmark interest rate unchanged at 1% as expected this afternoon, and I am sure the press with have a lot to update us on from the post rate decision meeting with Mario Draghi.

Commodities Corner
Gold – ↑Trading at $1747, up $15 (+0.88%)
Silver – ↑Trading at $34.17, up 23c (+0.76%)
Copper – ↑Trading at $8699, up $33 (+0.39%)
Zinc – ↑Trading at $2140, up $1 (+0.06%)
WTI Crude – ↑Trading at $99.85 up $1.15 (+1.17%)
Brent Crude – ↑Trading at $118.06, up 86c (+0.73%)
Natural Gas (HH) – ↑Trading at $2.46, up 1c (+0.69%)
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: 42.93 USD

Market: NYSE
Market Cap: $23.85 billion


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