Derek Pain: Nighthawk shares may be scraping the barrel but don't flee the nest
No Pain, No Gain
Saturday 09 October 2010
David Bramhill's sudden departure from Nighthawk Energy came as a shock to many, although I was not entirely surprised. Shares of the US-focused oil and gas group have performed lamentably in the past year – falling from around 50p to the 20p ruling before he resigned.
I gather my article last month threatening to ditch Nighthawk from the No Pain, No Gain portfolio was one influence in the boardroom upheaval. Like most shareholders, I have become increasingly concerned about the group's declining shares. The portfolio paid 44p, and saw the price rise to 116p before the slump, frequently interrupted by rallies, set in.
During its life time Nighthawk has promised much. Surveys suggest riches lurk below its US land. They certainly do. The trouble is they are not easily reached and are terribly expensive to extract. The group has also, in my view, over-indulged in cash-raising private placings which often destabilise a share register.
Nighthawk and Mr Bramhill have been subjected to somevicious attacks on bulletin boards. In fact there has been a violent internet campaign often couched in questionable language. Nighthawk has said it will take action against the cyber crowd, although, with Mr Bramhill no longer at the helm, I would not be surprised if the company's initial response is discreetly abandoned. However, Mr Bramhill could be so incensed by his treatment that he could continue what he sees as a crusade against internet abuse.
It is not quite clear whether Mr Bramhill – and Joe O'Farrell, who also quit – jumped or were pushed. There was, it wouldappear, increasing boardroom tension. The fact no replacements have been announced suggests rather hasty action.
Mr Bramhill, as chief executive, has given way to the commercial director, Tim Heeley, a former City analyst. Mr O'Farrell, who founded the company with Mr Bramhill, was an executive. One reason being put forward for the departures is that the duo's strength is in creation and exploration, rather than managing. In view of their track record (and the simple fact that a US company, Running Foxes, is responsible for day-to-day site operations), such a claim seems unjustified.
The upheaval smashed the shares. In bruising and heavy trading they slumped 6p to a low of 14p in just three days. Turnover on AIM totalled 57.4 million shares with another 8.3 million changing hands on Plus. Normally turnover is one or two million a day.
So what now? Should the portfolio sweat it out – or sell? It is not an easy decision. Obviously I wish I had relegated the shares last month. Still, there is little doubt that Nighthawk is rich in assets; it is the cost factor that is worrying and the ability of the remaining managers to produce the goods.
Interestingly, just prior to the Bramhill bombshell, City stockbroker Matrix Corporate Capital assumed that, although Nighthawk had "many operational and financial hurdles" to overcome, "the potential for a very significant commercial development of perhaps two billion barrels oil-in-place can be seen".
The cash-hungry group is planning the sale of a stake in its star field, the Jolly Ranch in Colorado. According to various testimonies, there is no shortage of would-be buyers. Of course, the all-important consideration is price. And shareholders will not have forgotten the last attempted stake sale ended in humiliating failure.
Matrix argues that Nighthawk is worth 44p a share if it retains a 50 per cent interest in Jolly. The Jolly field is largely a shale oil project that is technically more difficult – and more expensive – than traditional gushers. An evaluation, due later this year, should indicate the extent of Jolly's riches. But positive past studies have left little lasting impression.
There has also been a deluge of favourable analytical assumptions. I have seen estimates that Nighthawk is worth more than 200p a share. Well, maybe such projections were over the top. But the group has potential. As I write the shares are 17p; they must be worth more. And there is always the possibility that Nighthawk is now a sitting duck for a bid. Perhaps predators are already circling. The portfolio is sticking with this particular bird – hanging on is risky but could be rewarding.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Mark Dampier: Don't panic. Canny investors sit tight when the stock market falls
Shareholders can hold a company to account
Derek Pain: Dividends ease the suffering in a moribund stock market
Questions of Cash: Payment woes with Barclays overshadow Cornish holiday
Bank-beating exchange rates on your international payments
- 1 Revolutionary lost Caravaggio painting 'Mary Magdalen in Ecstasy' identified
- 2 McKamey Manor: This 'extreme' haunted house is the stuff of nightmares
- 3 Russell Brand says he will 'probably' give up acting to focus on his revolution
- 4 Watch what happened when food critics were unknowingly served McDonald's
- 5 David Beckham's Haig Club whisky is exactly what’s wrong with the Highlands
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Tony Blair 'says Ed Miliband will lose 2015 general election'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Putin: The US is to blame for almost all the world's major conflicts
iJobs Money & Business
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
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
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