Derek Pain: Nighthawk sale looks a Jolly good deal to me

No Pain, No Gain

It has taken a long time but, this week, Nighthawk Energy finally completed the sale of a minority stake in its highly prized Jolly Ranch oil and gas field in Colorado. The initial share reaction represented a huge thumbs down. But it looked a pretty good deal to me.

The group, with a stock market capitalisation of £122m, is one of the most actively traded shares on AIM.

Unlike, the company I discussed last week, Nighthawk stock enjoys a heady turnover. More than one million shares a day is a frequent occurrence, while two or three million is not unusual. On the day of the Jolly deal, volume was nearly 22 million.

Build-up to the sale must have been a factor in the reaction. When David Bramhill, the group's managing director, revealed that sale talks were going on, the shares brushed 60p from a 20p year's low.

So astute short-term traders – and, perhaps, some City institutions that acquired shares at 20p in fund-raising placings – were tempted to cash in. In a few days the shares fell 20p to 40p – a far cry from the 116p once hit, but stockbroker Daniel Stewart is advocating a 102p target. The no pain, no gain portfolio alighted on the shares at 44p.

A Swiss-based, largely Italian-owned investment company called San Severina is buying the minority stake. It is paying nearly $11m each to Nighthawk and its 50 per cent US partner, Running Foxes, for a 20 per cent interest in the core 50,000 acres of the Jolly spread.

Twenty per cent options have been acquired on an additional 230,000 acres. If they are all exercised, the partners stand to collect an extra $29m each. They each retain 40 per cent interests.

The deal, negotiated when the crude oil price was nearer $40 a barrel rather than the current $60, puts a near $400m valuation on the spread. There is talk that an influential review could enhance the price tag even further.

The group's cash hunger should be satisfied, at least for some considerable time, although the cost of exploration is high.

Leila Reddy, an analyst at Daniel Stewart, expects another loss this year but has predicted a small profit next year. With the options, the Jolly deal is worth 47p a share to Nighthawk. It also has around 5p cash a share. The US adventure could, therefore, be in the equation at near to zero. A 102p target price is far from outrageous.

Jolly is by some distance Nighthawk's biggest operation. It has half-a-dozen other US developments, some of which could be used to realise cash. Upgrades can be expected at two other fields and there is also talk of a US share listing. San Saverina has a joint operation with AIM-traded Ascent Resources, a largely European focused oil group. As a result, Ascent will acquire 4 per cent of Jolly. is another portfolio constituent showing a profit although, like Nighthawk, its shares are a long way below their peak of 75p. Monday's results proved the doubters wrong. Profits emerged at £2.06m – in line with expectations – and the year's dividend was increased 5 per cent to 3.15p a share.

In addition, £887,000 of its cash pile is now being used to pay a special dividend of 2p a share. Not surprisingly, the shares quickly moved back to 37p with 360,000 traded; something of an active session for what is normally a quiet performer.

The extra payment is a consequence of the rather somnolent share action. The group has a share buy-back scheme, although chairman George Hardie says buying "a material volume of shares has proved impractical due to lack of market liquidity". As the group is in a "position to return additional funds to shareholders" it decided to opt for the dividend bonus.

In these cash-strapped times such a policy is highly unusual. The already high yielding shares, with the 2p enhancement, now offer a return in the region of a staggering 16 per cent.

Certainly, currently appears to be more than holding its own in a tough environment. Trading, although below the levels ruling for much of last year, is described as "stable". I expect profits this year to emerge near to those just announced.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
A voter placing a ballot paper in the box at a polling station
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

    £20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

    Ashdown Group: Marketing Executive - 6 month FTC - Central London

    £25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

    Ashdown Group: Junior Project Manager (website, web application) - Agile

    £215 per day: Ashdown Group: Junior Project Manager (website, web application ...

    Guru Careers: Software Engineer / Software Developer

    £40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

    Day In a Page

    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'
    Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

    Flesh in Venice

    Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
    11 best anti-ageing day creams

    11 best anti-ageing day creams

    Slow down the ageing process with one of these high-performance, hardworking anti-agers
    Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

    Juventus vs Real Madrid

    Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
    Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

    Ashes series looks a lost cause for England...

    Whoever takes over as ECB director of cricket, says Stephen Brenkley
    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power