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; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
Joe Cocker performing on the Stravinski hall stage during the Montreux Jazz Festival, in Montreux, Switzerland in 2002
musicHe 'turned my song into an anthem', says former Beatle
News
Clarke Carlisle
sport
Sport
footballStoke City vs Chelsea match report
Arts and Entertainment
theatreThe US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
News
Coca-Cola has become one of the largest companies in the world to push staff towards switching off their voicemails, in a move intended to streamline operations and boost productivity
peopleCoca-Cola staff urged to switch it off to boost productivity
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
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

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    SThree: Graduate Recruitment Consultant

    £20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

    Day In a Page

    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there