No Pain, No Gain: Nighthawk's not soaring, but no reason to flap

Maiden figures from Nighthawk Energy, the most recent addition to the No Pain, No Gain portfolio, may, at first glance appear rather depressing.

But they are deceptive. Although the US-focused oil and gas group is deep in the red, it is progressing as planned, and could even be profitable in a year or so.

I am, as I have said many times, not a fan of small exploration companies. Too many of them merely jog along, offering little, except an excruciating ability to tap shareholders for cash.

I decided to make an exception with Nighthawk, and although the shares are a little below the portfolio's buying price, I am far from disheartened. The year's loss, including flotation costs, was £1.1m. Turnover was infinitesimal – at just £66,000.

But there should soon be something of a sales explosion: more gas is becoming available, and the group is in the process of improving distribution by tapping into a pipeline system that should allow a dramatic increase in sales.

With oil and gas prices continuing to advance, Nighthawk seems well placed to enjoy the American dream. It now has interests in five properties in the US, mainly in Utah and Kansas, but also stretching into Colorado and Illinois.

The group has expanded rapidly, gobbling up land that it thinks conceals rewarding deposits. Its biggest asset is an 18,000-acre site in Utah known as Cisco Springs in which it has a 37.5 per cent interest.

Running Foxes, led by an established American oil man, Steven Tedesco, has the rest of the equity, and acts as operator of the field which is already in production. Running Foxes is also involved in other Nighthawk ventures.

Oil and gas is known to exist under other Nighthawk territory. Many wells were abandoned in the years following the Second World War because difficult terrain and low fuel prices made them unprofitable. But in these days of high-octane prices – with modern technology making extraction much easier – old drillings can have rich futures.

The company's stockbroker, HansonWesthouse, says the explorer is worth 75.9p a share "with substantial upside potential".

Growth Equities & Company Research suggests a sum-of-the-parts valuation of 96p. I have also seen an estimate of more than 100p. So, at 41.5p, Nighthawk, with a £10m cash pile, seems undervalued. GE&CR, which provides paid-for research, has a 96p share target.

Two weeks ago, I suggested that portfolio member Wyatt, an on-line support services group, had held its 22p price because its shares had not been traded during the stock market turmoil. They were suspended as reverse takeover talks with an unidentified party took place.

Well, the shares are back in the firing line and the price is 14p, and to add insult to injury, the proposed acquisition was aborted.

Still, the group has put through a consolation deal – and has acquired a company called Health & Safety Department for up to £2m. Wyatt is merging H&S with its PES employment consultancy, and more acquisitions could be near. Chairman Bob Holt also sugars the pill by describing trading in the first half year as "buoyant".

Another constituent, Lennox, supplying British food and drink to ex-pats and holidaymakers in Spain, has, despite higher finance charges, trimmed its losses at the interim stage to £856,000 from just over £1m. Considering the company's unhappy history, the interim trading statement is moderately encouraging.

Blue chip constituent Scottish & Newcastle will soon have a new chief executive, John Dunsmore, a former stockbroker analyst, who is due to replace Australian Tony Froggatt. Some think the change reduces the chance of take-over action. I am not so sure. Any deal – and Scottish still looks ripe for a bid – would be governed by price. The board of Britain's biggest brewer could have difficulty convincing shareholders to reject an offer, say, in the 700p-800p range. Besides a hostile bid, some form of friendly get-together with Carlsberg of Denmark is a growing possibility. However, merger terms could disappoint.

The Dunsmore elevation means that two ex-drink analysts run leading drink companies. Tim Clarke, once at Panmure Gordon, has been chief executive of pubs chain Mitchells & Butlers since it was drawn off from former constituent, Six Continents. And don't forget Alan Millar, who also made his name as a stockbroker analyst. He is finance director at another constituent, Prezzo, a restaurant chain.

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

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
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    Timeless drama of Championship race in league of its own - Michael Calvin

    Michael Calvin's Last Word

    Timeless drama of Championship race in league of its own
    Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

    The secret CIA Starbucks

    The coffee shop is deep inside the agency's forested Virginia compound
    Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

    How the Establishment closed ranks over fallout from Nessie 'sighting'

    The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
    One million Britons using food banks, according to Trussell Trust

    One million Britons using food banks

    Huge surge in number of families dependent on emergency food aid
    Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

    2,500 years of history in 3,000 amazing objects

    Excavation at Italian cafe to fix rising damp unearths trove
    The Hubble Space Telescope's amazing journey, 25 years on

    The Hubble Space Telescope's amazing journey 25 years on

    The space telescope was seen as a costly flop on its first release
    Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

    Did Lord Ashcroft quit the House of Lords to become a non-dom?

    A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
    Apple's ethnic emojis are being used to make racist comments on social media

    Ethnic emojis used in racist comments

    They were intended to promote harmony, but have achieved the opposite
    Sir Kenneth Branagh interview: 'My bones are in the theatre'

    Sir Kenneth Branagh: 'My bones are in the theatre'

    The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
    The sloth is now the face (and furry body) of three big advertising campaigns

    The sloth is the face of three ad campaigns

    Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
    How to run a restaurant: As two newbies discovered, there's more to it than good food

    How to run a restaurant

    As two newbies discovered, there's more to it than good food
    Record Store Day: Remembering an era when buying and selling discs were labours of love

    Record Store Day: The vinyl countdown

    For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
    Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

    Mary J Blige and Will.i.am to give free concert

    The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
    10 best tote bags

    Accessorise with a stylish shopper this spring: 10 best tote bags

    We find carriers with room for all your essentials (and a bit more)
    Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

    Paul Scholes column

    I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England