No Pain, No Gain: Torment and ballyhoo won't stop Nighthawk
Saturday 27 September 2008
The once high-flying shares of Nighthawk Energy, the US-focused oil and gas explorer and producer, have failed to respond to what can only be described as encouraging developments in some of the more remote corners of America.
A few months ago, the price hit 116p. As I write, it is around 60p, after briefly touching 48p last week. Why the weakness? I doubt those infamous short-sellers are responsible.
The seemingly never-ending stock-market torment is, of course, a major factor in the decline. So is the fall in the price of crude oil. It is now some distance from its peak, helping to strip many fuel shares, particularly small caps, of the glamour ratings they once enjoyed. There is also talk, which I don't support, that resource stocks should be abandoned as demand could falter. And another possible influence behind the price fall is disappointment that the group has yet to deliver a rumoured upbeat appraisal of its flagship Cisco Springs development.
Even so, I am surprised that Nighthawk's shares have not displayed more resilience. After all, it is not often that an energy group produces back-to-back cheer. The first announcement dealt with its Jolly Ranch projects in Colorado, where one well is already spurting oil and two others near to production. Oil from the producing well is being trucked to a nearby refinery. The second report covered the group's operations in Missouri and Kansas.
Here again, hopes run high. In Missouri, oil and gas are flowing in smallish quantities. The company's stockbroker, Hanson Westhouse, believes the Missouri upside could be as high as 100 million barrels for Nighthawk. And it is a similar story in Kansas, where there are high hopes that modest production levels will swell significantly. In addition, the group continues to expand its US acreage. So, what about that Cisco Springs assessment? I wouldn't be surprised if a positive statement appears soon. David Bramhill, the group's managing director, says: "US refining demand remains robust, and we expect these projects to provide significant and growing long-term cash flow for Nighthawk."
Many of the areas where Nighthawk is active are, in effect, abandoned energy fields. Once, oil and gas flowed from them in large quantities. But that was in the days when fuel cost very little. As extraction became more difficult and expensive, the fields lost their appeal, with losses replacing profits. Nowadays, with prices, despite the recent fall, still high by historic standards, and equipment much more sophisticated, the old fields where fuel remains can again be worked profitably.
Like most junior explorers, Nighthawk has yet to roll out profits. But such a day may not be too far away. I would guess that it could be in the money this year. It is, unlike many explorers, not short of cash, with an estimated £11m in the bank.
The No Pain, No Gain portfolio descended on the shares at 44p in August last year. Naturally, I was delighted when they romped ahead. At 60p, the gain has been watered down, but I am not planning to sell. I draw comfort from some of the predictions flying around. Stockbroker Daniel Stewart has a 130p target price, and researcher GE&CR offers an impressive 173p valuation. Hanson regards the shares as "materially undervalued". Nighthawk, capitalised at £120m, is the portfolio's first – and only – exploration stock. Indeed, I have always avoided junior players in what is often an investment minefield. Mike Wagstaff, the chief executive of Venture Production, the North Sea oil group, probably summed up my attitude when he said recently: "Exploration for small oil and gas companies is a bit like going to a casino and putting all your chips on double zero."
I was attracted to Nighthawk because of the track records of its directors. Many explorers operate in some of the more hostile areas of the world where military and political unrest reign. Nighthawk concentrates on the US. Although the financial implosion could make life difficult for UK and US businesses, it will not have the dramatic impact that a political upheaval could have on an explorer seeking riches in some distant, unstable country.
Nighthawk has the advantage of operating in an environment where the political excitement is confined to orchestrated election ballyhoo.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 The secret report that helps Israel hide facts
- 4 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 5 Israel's propaganda machine is finally starting to misfire
The secret report that helps Israel hide facts
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...
£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...
£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...
£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...
Day In a Page
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
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