Derek Pain: Nighthawk shares may be scraping the barrel but don't flee the nest

No Pain, No Gain

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.

yourmoney@independent.co.uk

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

Suggested Topics
PROMOTED VIDEO
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
News
i100
News
people
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
arts + entsSam Smith’s Mobo triumph is just the latest example of a trend
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

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

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

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker