Derek Pain: Nighthawk may be flying towards a happier horizon

No Pain, No Gain

My in-tray indicates that the performance of Nighthawk Energy is worrying some readers who follow the no pain, no gain portfolio. They are not alone; I am deeply disappointed, and have on several occasions contemplated cutting and running.

As I write the shares are around 27p, against 44p paid by the portfolio in 2007 and a 116p peak. Last month they were down to 20p.

But perhaps happier days are on the horizon. This week the US-focused oil and gas group said it was seeking to sell a stake, presumably a minority one, in its star US field, the Jolly Ranch in Colorado. A previous attempt ended in humiliating failure. Nevertheless, if Nighthawk can clinch the sort of cash mentioned last time, then the group's valuation would be transformed.

There is little doubt that it has some intriguing prospects on the Jolly Ranch and elsewhere. And the US, despite the commercial and political rants over BP's misfortunes, should remain one of the most attractive lands in the world for UK companies.

The stock market can be an impatient place, and although Nighthawk is already producing, progress has, in the view of many pundits, been painfully slow. They expected a more robust display.

Among the analytical community the group still commands support, with some analysts suggesting that the shares should be much higher, although it is apparent that earlier forecasts, often exceeding 200p, have been quietly dropped.

But, as I explained to an email correspondent, I believe much of Nighthawk's malaise has been self-inflicted by its insatiable desire to raid investors for cash. It has satisfied its hunger by raising £58m (against an £88m capitalisation) through private placings at prices ranging from 46p to 20p.

Placings may be a relatively cheap and quick method of financing but often spell instability for the shares. Too many placing shares end up in the possession of spiv traders and other short-termers. In the main buy and hold investors, who would be more inclined to hang on to any new shares, are left out in the cold. I favour rights issues where all existing shareholders, most long term, have the opportunity to subscribe. A more stable environment is therefore established.

Exploration and setting up production facilities burns cash at a ferocious rate. So Nighthawk's hunger is understandable. When last year it attempted to sell a stake in Jolly Ranch the deal, which would have produced nearly $40m, was abandoned when, mysteriously, the cash failed to arrive. The latest sale move lifted the shares a few coppers. After the earlier fiasco caution is bound to prevail.

Another constituent, Printing.com, has delighted shareholders by holdings its year's dividend, despite a profits retreat. The shares consequently enjoy a yield of around 8 per cent, compared with the abysmal rates offered to many high-street savers.

Although trading has been tough, the printer, operating mainly through franchisees who dispatch orders to its Manchester plant, has found the British market reasonably resilient. It is the Irish operation, as the Celtic Tiger died, that is responsible for much of the decline as profits emerged at £1.7m against nearly £2.1m.

I would guess that profits this year could be similar to those just reported, and with £2.1m in the bank another unchanged dividend is on the cards. In the past five years little Printing.com, capitalised at £17.7m, has returned more than £6m to shareholders. No wonder it is probably the best income stock on AIM.

Another constituent, Clarity Commerce Solutions, has splashed out £150,000 for 80 per cent of Cyntergy Services, a company it sold for £500,000 two years ago. At that time Clarity was struggling. Since then it has enjoyed a remarkable resurgence and is expected to have achieved profits of £1.8m last year. Clarity, which provides software to leisure and retail groups, is expected to continue to progress this year and the stockbroker Arbuthnot is looking for profits of £2.5m.

Finally, I was disappointed to see a flurry of director share sales at Booker, another portfolio member. After the cash and carry group's splendid results, four directors offloaded 30 million shares, worth more than £12m. I realise directors sometimes need to crystallise their assets, but I am invariably encouraged when they buy shares in their employer. An array of sales must, therefore, be unwelcome.

yourmoney@independent.co.uk

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

PROMOTED VIDEO
Arts and Entertainment
Babysitter Katie and Paul have terse words in the park
tvReview: The strength of the writing keeps viewers glued to their seats even when they are confronted with the hard-hitting scenes
News
i100
Arts and Entertainment
American singer, acclaimed actor of stage and screen, political activist and civil rights campaigner Paul Robeson (1898 - 1976), rehearses in relaxed mood at the piano.
filmSinger, actor, activist, athlete: Paul Robeson was a cultural giant. But prejudice and intolerance drove him to a miserable death. Now his story is to be told in film...
Sport
England’s opening goalscorer Alex Oxlade-Chamberlain battles with Scotland’s Charlie Mulgrew
FootballEngland must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
Life and Style
Make-up artists prepare contestants for last year’s Miss World, held in Budapest
fashion
Sport
Wigan Athletic’s back-of-the shirt sponsor Premier Range has pulled out due to Malky Mackay’s arrival
Football
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

    SThree: Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

    Ampersand Consulting LLP: Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Carlton Senior Appointments: Director, Private Bank - San Francisco, CA

    $175 - $200 per annum, Benefits: full benefits: Carlton Senior Appointments: P...

    Carlton Senior Appointments: San Diego, CA – Tier 1 House - Senior MD FA

    Not specified: Carlton Senior Appointments: Senior MD Financial Advisor - San ...

    Day In a Page

    US immigration: President Obama ready to press ahead with long-promised plan to overhaul 'broken system' - but will it get past a Republican-controlled Congress?

    Immigration: Obama's final frontier

    The President is ready to press ahead with the long-promised plan to overhaul America's 'broken system' - but will it get past a Republican-controlled Congress?
    Bill Cosby rape allegations explained: Why are these allegations coming out now? Why didn’t these women come forward earlier? And why has nobody taken legal action?

    Bill Cosby rape allegations explained

    Why are these allegations coming out now? Why has nobody taken legal action? And what happens next for the man once thought of as 'America's Dad'
    Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain

    You know that headache you’ve got?

    Four years of excruciating seizures caused by the 1cm tapeworm found burrowing through a man's brain
    Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?

    Scoot commute

    Travelling to work by scooter is faster than walking and less sweaty than cycling, so why aren’t we all doing it?
    Paul Robeson: The story of how an American icon was driven to death to be told in film

    The Paul Robeson story

    How an American icon was driven to death to be told in film
    10 best satellite navigation systems

    Never get lost again: 10 best satellite navigation systems

    Keep your vehicle going in the right direction with a clever device
    Paul Scholes column: England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil

    Paul Scholes column

    England must learn to keep possession and dictate games before they are exposed by the likes of Germany and Brazil
    Michael Dawson: I’ll thank Spurs after we win says defender as he prepares to return with Hull

    Michael Dawson: I’ll thank Spurs after we win

    Hull defender faces his struggling former club on Sunday ready to show what they are missing. But he says he will always be grateful to Tottenham
    Frank Warren column: Dr Wu has big plans for the professionals yet he should stick to the amateur game

    Frank Warren column

    Dr Wu has big plans for the professionals yet he should stick to the amateur game
    Synagogue attack: Fear unites both sides of Jerusalem as minister warns restoring quiet could take 'months'

    Terror unites Jerusalem after synagogue attack

    Rising violence and increased police patrols have left residents of all faiths looking over their shoulders
    Medecins sans Frontieres: The Ebola crisis has them in the headlines, but their work goes far beyond West Africa

    'How do you carry on? You have to...'

    The Ebola crisis has Medecins sans Frontieres in the headlines, but their work goes far beyond West Africa
    Isis extends its deadly reach with suicide bombing in Kurdish capital

    Isis extends its deadly reach with suicide bombing in Kurdish capital

    Residents in what was Iraq’s safest city fear an increase in jihadist attacks, reports Patrick Cockburn
    Underwater photography competition winners 2014 - in pictures

    'Mysterious and inviting' shot of diver wins photography competition

    Stunning image of cenote in Mexico takes top prize
    Sir John Major: Negative West End portrayals of politicians put people off voting

    Sir John Major hits out at theatres

    Negative West End portrayals of politicians put people off voting
    Kicking Barbie's butt: How the growth of 3D printing enabled me to make an army of custom-made figurines

    Kicking Barbie's butt

    How the growth of 3D printing enabled toy-designer to make an army of custom-made figurines