Derek Pain: My attempt to cash in on oil is faltering
No Pain, No Gain
Friday 26 April 2013
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.
- 1 Tourist films plane's descent just metres above packed Caribbean beach
- 2 Kate Moss: Previously unpublished nude photo revealed by Mert and Marcus
- 3 Indian woman creates 'Marriage CV' after parents put her on dating site: 'Definitely not marriage material. Won’t grow long hair, ever'
- 4 World Book Day: Boy 'excluded' from school after dressing up as Fifty Shades' Christian Grey
- 5 Bad Jews poster 'censored' on London Tube
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Durham Free School: 'Creationism taught at' free school facing closure
End of the licence fee: BBC to back radical overhaul of how it is funded
Elif Shafak: Turkish author warns against rise of British nationalism
Most people think legal tax avoidance is just as wrong as illegal tax evasion, poll suggests
Nigel Farage promises Ukip will not 'stigmatise' would-be migrants – and says he wants 'everyone to speak the same language'
iJobs Money & Business
£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...
£8 per hour: Recruitment Genius: This Pension Specialist was established early...
Day In a Page
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads