Derek Pain: Nighthawk sale looks a Jolly good deal to me
No Pain, No Gain
Saturday 06 June 2009
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 Printing.com, 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.
Printing.com 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, Printing.com 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.
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
iJobs Money & Business
£350 - £400 per day: Orgtel: PMO Analyst - Banking - London - £350 -£400 per d...
£300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...
£35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...
£475 - £525 per day: Orgtel: Test Lead, London, Investment Banking, Technical ...
Day In a Page
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
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar