Derek Pain: My attempt to cash in on oil is faltering

No Pain, No Gain

I may be forced to drop Northern Petroleum from the no pain, no gain portfolio. The shares, as I write, have lost around half their value since recruited in the summer of 2011. They have, on occasions, performed quite well as its interest in a field off the South American coast captured the imagination of oil followers. But in the past week or so questions have been asked about the strength and availability of the resources lurking below the sea bed, and quite suddenly the perceived riches no longer look so obtainable.

To pile on the agony Northern is in a state of transition. As I mentioned earlier this month the group is thinking of selling its Dutch and English operations, leaving it with promising assets in Italy and newly acquired leases in Canada as well as the South American stake. Although its reshaping came as something of a dampener on stock market sentiment, valuations of Northern's interests should offer some comfort. But if the share price reaction to the South American doubt is any guide, its tiny interest – a mere 1.25 per cent – is not worth the £60m or so that has been bandied around.

Even allowing for any diminishing price down South America way, Northern's shares still look, on asset grounds, invitingly cheap. Unfortunately the stock market has not warmed to the company in recent years and it seems destined to remain undervalued.

For the time being I am sticking with the shares. As Bernstein, the investment group, point out, a single misadventure does not indicate a complete failure. Indeed one sortie has already been successful giving rise to the hopes that a major and hugely lucrative oil play had been discovered. But the second drilling has been unresponsive and abandoned. Still, there must be continuing hopes that exploration in other parts of the block will be rewarding.

If I do decide to end Northern's portfolio membership, I have a ready made replacement: Amerisur, the South American oil and gas group. It has just rolled out profits of $20.1m (£13.2m) – up from $3.5m – and is increasing production. The shares are 51p, a few pence higher than when I discussed the group last month.

Should I descend on Amerisur it would represent the portfolio's third attempt to cash in on an oil stock. Nighthawk was a huge loss maker and Northern is not looking too encouraging.

Other constituents have been making waves. Mears, the support services group, embarked on another intriguing takeover, with the brewer Marston's and insurance group Brightside contributing upbeat trading bulletins.

Shares of Mears have been in retreat since it became apparent that last year's acquisition of Morrison Facilities Services would take time – and money – to integrate. The price, around 380p earlier this year, fell to 320p before the group, already the major social housing player, increased its home care side through the £22.5m takeover of ILS, a leading Scottish group. A share placing at 310p will largely fund the deal.

The stockbroker Peel Hunt is enthusiastic. It describes the move as a "logical and attractive step" and forecasts current year's adjusted group profits of £35.5m against £29m. The Scottish adventure halted the share decline and lifted the price to 345p at one time. The portfolio paid 272p.

Marston's shares benefited from the trading statement. Not surprisingly the cold weather hit turnover in the first half year to end-March, indicating an outcome "slightly below" last year's corresponding display. But trading has perked up since then, and the group remains confident about the full year's performance. The shares were 95p when the portfolio arrived. The price a few weeks ago hit 142p, but ahead of the trading update was down to 130p. Following the statement the shares were 136p.

Finally, Brightside. For the 10th successive year it has achieved record profits. The pre-tax figure came out at £17.5m, up 28.7 per cent, from a £91.2m turnover (£80.4m). The group announced a maiden interim dividend in October, and has followed with a 0.28p final payment, making 0.5p a share.

The stockbroker FinnCap has a 31p target price on the shares, and believes profits will hit £19m this year. The portfolio arrived at 18.5p in August. The price is now around 24.5p. Like FinnCap, I expect further progress.

yourmoney@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Life and Style
Britons buy more than 30 million handsets each year, keeping them for an average of 18 months
tech
Arts and Entertainment
Alloysious Massaquoi, 'G' Hastings and Kayus Bankole of Young Fathers are the surprise winners of this year's Mercury Music Prize
musicThe surprise winners of the Mercury Prize – and a very brief acceptance speech
Arts and Entertainment
TV Presenters Ant McPartlin and Dec Donnelly. Winners of the 'Entertainment Programme' award for 'Ant and Dec's Saturday Night Takeaway'
musicAnt and Dec confirmed as hosts of next year's Brit Awards
Arts and Entertainment
Orson Welles made Citizen Kane at 25, and battled with Hollywood film studios thereafter
film
News
video
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Finance Assistant - Part time - 9 month FTC

    £20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

    Marketing Manager

    £40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

    Market Risk Manager - Investment Banking - Mandarin Speaker

    £45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Day In a Page

    Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

    A Syrian general speaks

    A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
    ‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

    ‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

    Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
    Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

    Fall of the Berlin Wall

    History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
    How to turn your mobile phone into easy money

    Turn your mobile phone into easy money

    There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
    Independent writers remember their Saturday jobs:

    Independent writers remember their Saturday jobs

    "I have never regarded anything I have done in "the media" as a proper job"
    Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

    11-step recipe for creating a West End hit

    Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
    Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

    Buried treasure: The Letter for the King

    The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
    Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

    The school that means business

    Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
    10 best tablets

    The world in your pocket: 10 best tablets

    They’re thin, they’re light, you can use them for work on the move or keeping entertained
    Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

    Lutz Pfannenstiel interview

    The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
    Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

    Pete Jenson's a Different League

    Popular Klopp can reignite Dortmund’s season with visit to Bayern
    John Cantlie video proves that Isis expects victory in Kobani

    Cantlie video proves that Isis expects victory in Kobani

    The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
    The killer instinct: The man who helps students spot potential murderers

    The killer instinct

    Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
    Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

    Clothing the gap

    A new exhibition celebrates women who stood apart from the fashion herd
    Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

    The Fall of the Berlin Wall

    Goodbye to all that - the lost world beyond the Iron Curtain