Tuesday, June 30, 2015
Monday, June 29, 2015
LGO - WHAT NEXT
The "CPR" has come and gone, but there was just a brief spike before a sell down. Perhaps many were disappointed that the 1P and 2P reserves were not high enough as many were expecting 20x more for 1P reserves at the very least.
Admittedly, I was also expecting similar results; ie: 20x increase in 1P reserves.
However, when Challenge Energy's CPR (2012) is compared against the recent Synergy's CPR, there exist a deep contrast between the two (a fact that was highlighted by an LSE member).
First an foremost, there is no mention of any contingent reserves in the Synergy report.
Secondly, the new report is only based on the 8 wells drilled in 2014 and ignored the 30-well fully funded programme in Goudron.
Perhaps those were the reasons why the Synergy's Report is described as an Upgrade in Reserves and not a full CPR.
Nevertheless, the most positive indication is the potential of Goudron Field which has a five fold increase in oil in place, amounting to 805 million barrels.
But what does this mean actually?
LGO's current net back per barrel is in the region of US$14 per barrel. Let us take a very conservative approach and assume US$10 per barrel.
We adopt a 10% potential recovery by conventional means and 18% recovery via water flood. The 18% is based on the previous recovery method via water flood estimated by Challenge Energy in 2012
So 28% of 805 million x US$10 = US$2.254 billion
The Pound equivalent is 2.254 billion/1.52 = 1.483 billion Pounds
This is equivalent to 14.3x current market cap or 45.76 pence
This value will gradually increase if the price of oil increases. Not to forget that the high estimate could be 1.335 billion barrels instead of 805 million barrels. Also this is solely based on the Goudron Field. LGO has an oilfield in Spain which could have its licence renewed prior to 2017 and of course, the ever tempting Cedros Peninsula which rests right in the middle of the rich Venezuelan Basin.
Therefore, ignore the current noise from the Greece crisis, and the CPR setback (which has been explained above) and concentrate on the potential prize.
Important news in coming weeks and months:
1) Pad 4 production. There are 3 wells on the pad.
2) Pad 5 drilling update and production. There are 4 wells on this pad.
3) Completion and commissioning of of 5,000 barrels storage tank at Goudron
4) Progress report on permission to construct Pad 6 and 7 (5 wells per pad), LACT meter, 4" pipeline, additional 5,000 barrels storage tank and commencing on drilling and production from the upper Goudron Sandstones.
So you can imagine the many positives that could potentially raise LGO's share price. At the end of the day, you look at the massive infrastructures underway to support a boost in production. Total storage capacity to increase to 12,750 barrels from 2,750 barrels, new 4' pipeline besides existing 2.5" pipeline, and inclusion of LACT meter to ensure continuous flow of oil to Petrotrin.
To really reap the rewards from LGO you need to have a longer time view in investment of 2- 3 years.
My disclosure: I am long LGO.
Admittedly, I was also expecting similar results; ie: 20x increase in 1P reserves.
However, when Challenge Energy's CPR (2012) is compared against the recent Synergy's CPR, there exist a deep contrast between the two (a fact that was highlighted by an LSE member).
First an foremost, there is no mention of any contingent reserves in the Synergy report.
Secondly, the new report is only based on the 8 wells drilled in 2014 and ignored the 30-well fully funded programme in Goudron.
Perhaps those were the reasons why the Synergy's Report is described as an Upgrade in Reserves and not a full CPR.
Nevertheless, the most positive indication is the potential of Goudron Field which has a five fold increase in oil in place, amounting to 805 million barrels.
But what does this mean actually?
LGO's current net back per barrel is in the region of US$14 per barrel. Let us take a very conservative approach and assume US$10 per barrel.
We adopt a 10% potential recovery by conventional means and 18% recovery via water flood. The 18% is based on the previous recovery method via water flood estimated by Challenge Energy in 2012
So 28% of 805 million x US$10 = US$2.254 billion
The Pound equivalent is 2.254 billion/1.52 = 1.483 billion Pounds
This is equivalent to 14.3x current market cap or 45.76 pence
This value will gradually increase if the price of oil increases. Not to forget that the high estimate could be 1.335 billion barrels instead of 805 million barrels. Also this is solely based on the Goudron Field. LGO has an oilfield in Spain which could have its licence renewed prior to 2017 and of course, the ever tempting Cedros Peninsula which rests right in the middle of the rich Venezuelan Basin.
Therefore, ignore the current noise from the Greece crisis, and the CPR setback (which has been explained above) and concentrate on the potential prize.
Important news in coming weeks and months:
1) Pad 4 production. There are 3 wells on the pad.
2) Pad 5 drilling update and production. There are 4 wells on this pad.
3) Completion and commissioning of of 5,000 barrels storage tank at Goudron
4) Progress report on permission to construct Pad 6 and 7 (5 wells per pad), LACT meter, 4" pipeline, additional 5,000 barrels storage tank and commencing on drilling and production from the upper Goudron Sandstones.
So you can imagine the many positives that could potentially raise LGO's share price. At the end of the day, you look at the massive infrastructures underway to support a boost in production. Total storage capacity to increase to 12,750 barrels from 2,750 barrels, new 4' pipeline besides existing 2.5" pipeline, and inclusion of LACT meter to ensure continuous flow of oil to Petrotrin.
To really reap the rewards from LGO you need to have a longer time view in investment of 2- 3 years.
My disclosure: I am long LGO.
REM - FY RESULTS 2014
REM recently reported its Full Year 2014 results.
The company has not started and production yet, so there is no Revenue for the year.
The Loss widened from 0.04 pence in 2013 to 0.06 pence in 2014, resulting in an increase in Loss of 50%. The Loss was mainly due to the non-cash charge associated with share-based payments to directors, staff and consultants for 2014. It also reflected the significant increase in corporate and investment activity throughout the year.
Current Ratio is 10.4
Debt to Equity Ratio is 0.08
Corporate Activity since 2014 year end:
Sonora projects consisting of 40.78% share in El Sauz/Fleur and 15.40% share in La Venata is advancing to its fully funded Pre-Feasibility Study.
2.5 million Pounds raised via a share placing with an institutional investor (Standard Life).
The Yangibana project in Australia which REM has a 30% stake is progressing rapidly with several updates.
Western Lithium which REM has a 3.05% stake has produced its first high purity lithium from its demonstration plant.
REM acquired a 6.65% interest in the Cinovec project in the Czech Republic which has one of the largest lithium deposits in Europe.
REM is a long play,3 -5 years but t is at this current price which you will reap your rewards. I have a BUY rating n REM.
Two main developments which could support lithium price in the future is the completion of Tesla's gigafactory in US, a mere few hundred miles away from the Sonora project, and China's proposal to limit export of rare minerals.
For the uninitiated, Tesla is also developing the Powerwall which is a home battery that charges using solar power.
My disclosure: I presently do not own any REM shares, but have intention to accumulate at a later date.
The company has not started and production yet, so there is no Revenue for the year.
The Loss widened from 0.04 pence in 2013 to 0.06 pence in 2014, resulting in an increase in Loss of 50%. The Loss was mainly due to the non-cash charge associated with share-based payments to directors, staff and consultants for 2014. It also reflected the significant increase in corporate and investment activity throughout the year.
Current Ratio is 10.4
Debt to Equity Ratio is 0.08
Corporate Activity since 2014 year end:
Sonora projects consisting of 40.78% share in El Sauz/Fleur and 15.40% share in La Venata is advancing to its fully funded Pre-Feasibility Study.
2.5 million Pounds raised via a share placing with an institutional investor (Standard Life).
The Yangibana project in Australia which REM has a 30% stake is progressing rapidly with several updates.
Western Lithium which REM has a 3.05% stake has produced its first high purity lithium from its demonstration plant.
REM acquired a 6.65% interest in the Cinovec project in the Czech Republic which has one of the largest lithium deposits in Europe.
REM is a long play,3 -5 years but t is at this current price which you will reap your rewards. I have a BUY rating n REM.
Two main developments which could support lithium price in the future is the completion of Tesla's gigafactory in US, a mere few hundred miles away from the Sonora project, and China's proposal to limit export of rare minerals.
For the uninitiated, Tesla is also developing the Powerwall which is a home battery that charges using solar power.
My disclosure: I presently do not own any REM shares, but have intention to accumulate at a later date.
MY SECOND BOOK: INVEST IN REITs - BUILDING A GLOBAL PORTFOLIO OF PRIME REAL ESTATE
This is the second of my "Invest In" series.
Learn about the types of REITs available in the global market, how to anlayse REITs, mange your portfolio and make use of a REIT Reinvestment Plan to potentially earn a return of more than 600%.
To be available in all Popular bookstores, Malaysia from mid July, 2015
I will also be having a book sharing session on 14 July, 12.00 noon at the Popular Bookfest at KLCC.
Feel free to drop by.
Saturday, June 27, 2015
SECOND HALF VIEW ON OIL
Oil price has been hovering between the range of US$55 - US65 per barrel for the greater part of this year. But what will the second half hold? Let us look at some known factors that could influence the oil price positively.
1) Iran's parliament just voted against giving the UN inspectors access to their military sites. This in effect will delay the lifting of sanctions by the international community against Iran. So in the short to medium term, Iran will unlikely to export more than permitted by the existing sanctions.
2) The ongoing crisis in the Middle East. Limited to Yemen, Syria and Iraq currently, but could deepen, as Saudi Arabia opposes the new Yemeni Government while Iran supports it.
3) Most of the US shale oil producers managed to survive the oil crash through hedging, but as the hedges run dry, they will face greater difficulty in generating the required cash flow to service their heavy debts. To begin with, many were already operating with negative cash flow in the first place and rely on debts to finance their continuous drilling. This could put many at risk of bankruptcy.
4) In a Bloomberg article, it was reported that many shale oil producers used their huge untapped reserves to draw investors and lenders. A big portion of this reserves will be written off if oil price still hovers in the US$55 - US$65 because they are not profitable to be brought to production at this price range. This will affect the companies' balance sheet and damage their capacity to continue to tap into the debt market. Which lender would want to lend to a company with declining assets? Without additional capital, the potential for bankruptcy increases. Some have opted to selling shares but fund raising through placement of new shares will do little to staunch the steady bleed of cash.
5) Production from the most prolific shale regions are showing signs of slowing down.
6) US oil rigs count has fallen more than 60% since peaking in October 2014. This could impact the future production of oil negatively in the US
7) The oil crash has caused as much as US$200 billion worth of investment being deferred globally and caused more than 100,000 jobs being lost. With 1 new barrel of oil being discovered for every 2 barrels consumed, continued investment in exploration is necessary to keep oil price in check. With investment being deferred, we could possibly see demand outstripping supply in the next 2 -3 years.
However, several factors could damp any positive movements in the oil price, such as:
1) An increase in the interest rate by the Federal Reserve which will strengthen the US$ and thus, potentially putting a damper on the price of oil.
2) Many of the US producers have drilled thousands of wells but have not completed them, pending a more favourable price before completing and producing.
3) The improvement in technology and ingenuity in techniques which will lover the breakeven price for US shale oil producers. This will allow them to achieve profitability even at the present price range.
4) A change in policy affecting the Middle East that puts and end to the conflict or Iran's meeting the UN guidelines pertaining to the inspection restriction currently placed on the UN inspectors.
5) A US ruling which allow US producers to export their light sweet crude. This will effectively push more oil into the global market and putting additional pressure on the price of oil. It is expected in this regard that the price war between US producers and OPEC will intensify.
The is just my opinion. But having weighed in both the positive and negative factors, I think oil will likely to remain in the US$55 - US$65 in the next 6 months. The first signs of positive movement will be likely when substantial number of shale oil companies fail and file for bankruptcy. A rise in interest rate will also cut of funding from the debt market as the cost is likely to be high. Nevertheless, for successful shale oil companies which can survive at the current price range, I would expect them to ramp up production as soon as the price increases. So my personal estimate is that oil could only move marginally in Q1 2016, possibly, in the US$65 - US$70.
1) Iran's parliament just voted against giving the UN inspectors access to their military sites. This in effect will delay the lifting of sanctions by the international community against Iran. So in the short to medium term, Iran will unlikely to export more than permitted by the existing sanctions.
2) The ongoing crisis in the Middle East. Limited to Yemen, Syria and Iraq currently, but could deepen, as Saudi Arabia opposes the new Yemeni Government while Iran supports it.
3) Most of the US shale oil producers managed to survive the oil crash through hedging, but as the hedges run dry, they will face greater difficulty in generating the required cash flow to service their heavy debts. To begin with, many were already operating with negative cash flow in the first place and rely on debts to finance their continuous drilling. This could put many at risk of bankruptcy.
4) In a Bloomberg article, it was reported that many shale oil producers used their huge untapped reserves to draw investors and lenders. A big portion of this reserves will be written off if oil price still hovers in the US$55 - US$65 because they are not profitable to be brought to production at this price range. This will affect the companies' balance sheet and damage their capacity to continue to tap into the debt market. Which lender would want to lend to a company with declining assets? Without additional capital, the potential for bankruptcy increases. Some have opted to selling shares but fund raising through placement of new shares will do little to staunch the steady bleed of cash.
5) Production from the most prolific shale regions are showing signs of slowing down.
6) US oil rigs count has fallen more than 60% since peaking in October 2014. This could impact the future production of oil negatively in the US
7) The oil crash has caused as much as US$200 billion worth of investment being deferred globally and caused more than 100,000 jobs being lost. With 1 new barrel of oil being discovered for every 2 barrels consumed, continued investment in exploration is necessary to keep oil price in check. With investment being deferred, we could possibly see demand outstripping supply in the next 2 -3 years.
However, several factors could damp any positive movements in the oil price, such as:
1) An increase in the interest rate by the Federal Reserve which will strengthen the US$ and thus, potentially putting a damper on the price of oil.
2) Many of the US producers have drilled thousands of wells but have not completed them, pending a more favourable price before completing and producing.
3) The improvement in technology and ingenuity in techniques which will lover the breakeven price for US shale oil producers. This will allow them to achieve profitability even at the present price range.
4) A change in policy affecting the Middle East that puts and end to the conflict or Iran's meeting the UN guidelines pertaining to the inspection restriction currently placed on the UN inspectors.
5) A US ruling which allow US producers to export their light sweet crude. This will effectively push more oil into the global market and putting additional pressure on the price of oil. It is expected in this regard that the price war between US producers and OPEC will intensify.
The is just my opinion. But having weighed in both the positive and negative factors, I think oil will likely to remain in the US$55 - US$65 in the next 6 months. The first signs of positive movement will be likely when substantial number of shale oil companies fail and file for bankruptcy. A rise in interest rate will also cut of funding from the debt market as the cost is likely to be high. Nevertheless, for successful shale oil companies which can survive at the current price range, I would expect them to ramp up production as soon as the price increases. So my personal estimate is that oil could only move marginally in Q1 2016, possibly, in the US$65 - US$70.
Thursday, June 25, 2015
PPHM GRANTED KEY EUROPEAN PATENT FOR ITS CLiNICAL DRUG BAVITIXIMAB
PPHM announced that the European Patent Office(EPO) has granted Patent Number 2,269,656 titled "Selected Antibodies Binding to Aminophospholipids and their Use in Treatment such as Cancer."
This important patent covers Bavi as a combination of matter and for use in treating cancer, including radiotherapy, chemotherapy and Docetaxel.
The new patent covers Bavi as a composition matter in antibodies, , antibody drug conjugates. diagnostic and imaging construct and liposomal.
Wednesday, June 24, 2015
UKOG H1 2015 RESULTS
UKOG just announced its six months results, ending 31 March 2015.
Company has cash and equivalent of 8 million Pounds (Including 6 million Pounds raised recently).
Revenue totaled 200,000 Pounds. Loss of 2 pence for the period.
Balance of 9.6 million Pounds debt facility with YA Global master available for drawing.
No comparable period for Revenue Growth
EPS increased from -5 pence in 2014 to -2 pence in 2015 (60% improvement)
Current Ratio 2.63
Debt to Equity Ratio 0.14
Current Licences/Interest held
Horse Hill Approx 20.3%
Avington 5% (producing asset)
Horndean 10% (producing asset)
Baxters Copse 50%
Markwells Wood 100%
Isle of Wight 77.5% (offshore)
Angus Energy 6%
Jointly applied for a 200 km square onshore licence (65% interest) adjacent to the Isle of Wight licence. Awaiting for award.
Next Period
Planning a flow test for Horse Hill.
Continue to pan for an appraisal well for Baxters Copse.
Appraise and develop Markwells Wood.
Undertake well design to drill the M prospect in the Isle of Wight.
New production well being palnned for Angus Energy's Lidsey and Brockham licences.
New static and dynamic reservoir modelling studies will be completed for the Horndean and Avington oil fields.
To expand licence position in Uk onshore exploration.
Still a lot remain to be done but the potential remains huge. Also the coming estimation of oil in place to the isle of Wight should give deeper insight on the potential of the area.
My disclosure: I am long UKOG
Company has cash and equivalent of 8 million Pounds (Including 6 million Pounds raised recently).
Revenue totaled 200,000 Pounds. Loss of 2 pence for the period.
Balance of 9.6 million Pounds debt facility with YA Global master available for drawing.
No comparable period for Revenue Growth
EPS increased from -5 pence in 2014 to -2 pence in 2015 (60% improvement)
Current Ratio 2.63
Debt to Equity Ratio 0.14
Current Licences/Interest held
Horse Hill Approx 20.3%
Avington 5% (producing asset)
Horndean 10% (producing asset)
Baxters Copse 50%
Markwells Wood 100%
Isle of Wight 77.5% (offshore)
Angus Energy 6%
Jointly applied for a 200 km square onshore licence (65% interest) adjacent to the Isle of Wight licence. Awaiting for award.
Next Period
Planning a flow test for Horse Hill.
Continue to pan for an appraisal well for Baxters Copse.
Appraise and develop Markwells Wood.
Undertake well design to drill the M prospect in the Isle of Wight.
New production well being palnned for Angus Energy's Lidsey and Brockham licences.
New static and dynamic reservoir modelling studies will be completed for the Horndean and Avington oil fields.
To expand licence position in Uk onshore exploration.
Still a lot remain to be done but the potential remains huge. Also the coming estimation of oil in place to the isle of Wight should give deeper insight on the potential of the area.
My disclosure: I am long UKOG
LGO - RESERVES UPGRADE
LGO just announced the CPR undertaken by Synergy Ltd.
1P reserves increased 110% from 0.7m barrels to 1.54m barrels
2P reserves increased 60% to 11.37m barrels
3P reserves flat at 23.58m barrels
What draws me to the report is the increase in oil in place, from 350m barrels to 800m barrels on a best estimate and 1.335b barrels on a high estimate. This is a massive upgrade in oil in place!
In the 2012 CPR report by Challenge Energy, it was estimated that a water flood will deliver 63.2m barrels or 18% of the oil in place total of 350m barrels. Although the report by Synergy did not mention any water flood, assuming the same delivery of 18% of 1.335b barrels, we would have the prospect of recovering 240.3m barrels of oil!
Also the 1P and 2P reserves are based on only 8 wells drilled in 2014. One is for certain though. The more wells drilled, the better will be the upgrade of reserves. LGO has another 22 wells to go and has meanwhile applied for additional permit to drill another 30 wells at least. So you can imagine the reserves upgrade that LGO will have as more wells are drilled.
Also in the same report, LGO announced that it will soon embark on extracting oil form the Goudron Sands in the short to medium term - and that means within a year's time.
All this point to more oil being recovered from the Goudron Field and more revenue for LGO.
And by the way the CPR only covered the Goudron Field. we have not even touched on the Cedros Peninsula and Spain yet.
My disclosure: I am long LGO
1P reserves increased 110% from 0.7m barrels to 1.54m barrels
2P reserves increased 60% to 11.37m barrels
3P reserves flat at 23.58m barrels
What draws me to the report is the increase in oil in place, from 350m barrels to 800m barrels on a best estimate and 1.335b barrels on a high estimate. This is a massive upgrade in oil in place!
In the 2012 CPR report by Challenge Energy, it was estimated that a water flood will deliver 63.2m barrels or 18% of the oil in place total of 350m barrels. Although the report by Synergy did not mention any water flood, assuming the same delivery of 18% of 1.335b barrels, we would have the prospect of recovering 240.3m barrels of oil!
Also the 1P and 2P reserves are based on only 8 wells drilled in 2014. One is for certain though. The more wells drilled, the better will be the upgrade of reserves. LGO has another 22 wells to go and has meanwhile applied for additional permit to drill another 30 wells at least. So you can imagine the reserves upgrade that LGO will have as more wells are drilled.
Also in the same report, LGO announced that it will soon embark on extracting oil form the Goudron Sands in the short to medium term - and that means within a year's time.
All this point to more oil being recovered from the Goudron Field and more revenue for LGO.
And by the way the CPR only covered the Goudron Field. we have not even touched on the Cedros Peninsula and Spain yet.
My disclosure: I am long LGO
Tuesday, June 23, 2015
INVESTING IN FOREIGN SHARES - FROM A MALAYSIAN PERSPECTIVE
Watch my brief why you should invest in foreign shares by clicking on the link below:
http://investforeignshare.com/
http://investforeignshare.com/
Friday, June 19, 2015
STANDARD LIFE JUST ACQUIRED 6.56% OF UKOG
Standard Life one of UK's biggest fund managers announced that they have acquired a 6.56% interest in UKOG.
Read it here:
https://www.directorstalk.com/standard-life-one-of-the-uks-biggest-fund-managers-has-just-announced-it-holds-6-56-of-ukog/
Read it here:
https://www.directorstalk.com/standard-life-one-of-the-uks-biggest-fund-managers-has-just-announced-it-holds-6-56-of-ukog/
Wednesday, June 17, 2015
UKOG INDEPENDENT REPORT OF OIL IN PLACE AT HORSE HILL
UKOG today announced that NUTECH has provided the company with an independent report of the oil in place contained in the 55 square miles covered by Horse Hill licences PEDL 137 and PEDL246. UKOG has a 20.358% interest in the Horse Hill consortium.
The study details that the Horse Hill licences contain a best estimate of oil in place of 9.245 billion barrels.
The above does not include the Portland Sandstones.
This is indeed good news.
My disclosure: I am long UKOG
UKOG ISLES OF WIGHT OFFSHORE LICENCE EXTENSION
UKOG announced that the offshore licence for the Isles of Wight has been extended to January 2017 from January 2016.
This is good news as it gives more time for UKOG to pan their drilling campaign.
My Disclosure: I am long UKOG.
This is good news as it gives more time for UKOG to pan their drilling campaign.
My Disclosure: I am long UKOG.
LGO UPDATE
LGO today announced that a total of 556 feet will be perforated for Wells GY 672, 673 and 674. This works out to an average perforation of 185.3 feet per well.
In December, 2014, Well GY670 was perforated a total of 177 feet and delivered a flow rate of 1,085 bopd. You can roughly do the math yourself. Another factor which will come into play will be the pressure. Stronger the pressure greater the flow rates. I am optimistic however than the combined flow rate from the 3 wells will exceed 1,500 bopd which surpassed my previous estimate of 600 bopd.
LGO has also been granted the approval of 2 x 5,000 barrels tanks at the Goudron field. This will add the storage capacity to 12,750 barrels on site. The construction of the first 5,000 barrels tank will commence soon. Now, if LGO is not planning to increase production to more than 10,000 bopd in the near future, there is no need to increase the storage capacity either.
Meanwhile the new 4" is still pending the approval from other agencies to cross over existing lines. The LACT meter will be delayed until Q4. meanwhile, LGO intends to pump the oil into the exiting pipeline by having a pump facility and a new generator on site which will resolve the issue of bottlenecks.
I see the announcement as both progressive and positive.
My disclosure: I am long LGO.
In December, 2014, Well GY670 was perforated a total of 177 feet and delivered a flow rate of 1,085 bopd. You can roughly do the math yourself. Another factor which will come into play will be the pressure. Stronger the pressure greater the flow rates. I am optimistic however than the combined flow rate from the 3 wells will exceed 1,500 bopd which surpassed my previous estimate of 600 bopd.
LGO has also been granted the approval of 2 x 5,000 barrels tanks at the Goudron field. This will add the storage capacity to 12,750 barrels on site. The construction of the first 5,000 barrels tank will commence soon. Now, if LGO is not planning to increase production to more than 10,000 bopd in the near future, there is no need to increase the storage capacity either.
Meanwhile the new 4" is still pending the approval from other agencies to cross over existing lines. The LACT meter will be delayed until Q4. meanwhile, LGO intends to pump the oil into the exiting pipeline by having a pump facility and a new generator on site which will resolve the issue of bottlenecks.
I see the announcement as both progressive and positive.
My disclosure: I am long LGO.
Monday, June 15, 2015
Thursday, June 11, 2015
ASIAN ECONOMIES ARE GETTING CLOSER TO THE EDGE OF A FINANCIAL CLIFF
In a spate of weeks, Central Banks in New Zealand and South Korea have reduced their interest rates to help overcome a slowdown in their respective economies. Australia and China too have indicated they might have to do the same in order to bolster growth as recent economic indicators have shown continued weakness.
It is indeed an irony because on one hand, there is a need to control the escalation of corporate and consumer debt levels, but now in order to bolster growth the Central Banks are releasing more liquidity into the market by lowering the interest rates to prompt more borrowing and spending. This also runs contrary to the objectives of the various governments to reign in property speculation.
Already, the debt bubble in most Asian economies is at a very dangerous level. And when it burst it can cause great financial damage to the economies concerned. Economic growth cannot be in a straight line, sometimes you have to allow market forces to play their role. Rather than propping up a bubble and inflating it, perhaps it pays to manage the economy towards a soft landing.
My guess? There is a reason why this cannot be done. The bubble has gotten too big to manage.
Let's take a look back into the past and see where we are heading:
1987 Global Recession and the infamous Black Monday
1997 Asia Financial Crisis
2007 US Sub-prime Mortgage Crisis
2017 ????
I am not saying that definitely a major crisis will happen in 2017, but looking at the trends, you have to be vigilant. So it pays to prepare yourself by making the right financial decisions in investments and savings, besides managing your personal debt levels well.
Here's an interesting article:
http://www.bloomberg.com/news/articles/2015-06-11/there-they-go-again-asian-central-banks-cut-rates-spur-bubbles
It is indeed an irony because on one hand, there is a need to control the escalation of corporate and consumer debt levels, but now in order to bolster growth the Central Banks are releasing more liquidity into the market by lowering the interest rates to prompt more borrowing and spending. This also runs contrary to the objectives of the various governments to reign in property speculation.
Already, the debt bubble in most Asian economies is at a very dangerous level. And when it burst it can cause great financial damage to the economies concerned. Economic growth cannot be in a straight line, sometimes you have to allow market forces to play their role. Rather than propping up a bubble and inflating it, perhaps it pays to manage the economy towards a soft landing.
My guess? There is a reason why this cannot be done. The bubble has gotten too big to manage.
Let's take a look back into the past and see where we are heading:
1987 Global Recession and the infamous Black Monday
1997 Asia Financial Crisis
2007 US Sub-prime Mortgage Crisis
2017 ????
I am not saying that definitely a major crisis will happen in 2017, but looking at the trends, you have to be vigilant. So it pays to prepare yourself by making the right financial decisions in investments and savings, besides managing your personal debt levels well.
Here's an interesting article:
http://www.bloomberg.com/news/articles/2015-06-11/there-they-go-again-asian-central-banks-cut-rates-spur-bubbles
PLAYING LGO
In the coming weeks we would have the flow rates for the 3 wells on Pad 4. I would conservatively estimate the production at 600 bopd (200 bopd a well).
The current production is at 1,550 bopd with a value of 2.5 pence in March 2015 prior to the beginning of the drill in Pad 4. This works out to about 1.6 pence per 1,000 bopd. Since then oil price has increased 12%. Applying the 12% increase to our 1.6 pence per 1,000 bopd, the current price should be 1.79 pence per 1,000 bopd.
Therefore 600 bopd will effectively contribute 1.79 x 600/1,000 = 1.07 pence to the current share price.
So it is expected that once Pad 4 begins production, the share price should be at a minimum of 3.97 (Current) + 1.07 (Future) = 5.04 pence. If the combined flow rates rises above 600 bopd, then expect this price to rise as well.
It is expected that the CPR will effect a 50 % - 100% increase in the share price.
Therefore we will have:
5.04 x 150% = 7.56 pence
5.04 x 200% = 10.08 pence
The above are just my own opinion. But I will definitely sell a quarter of my portfolio at 8.00 pence. My BUY call was from a base of 3.60 pence, therefore it will deliver me a profit of 4.40 pence (122%) per share. all within a year's time frame. This will free up some money for me to invest elsewhere (UKOG because flow test will start at the end of summer or PPHM because the Phase III trial will complete recruitment in December 2015).
For the remaining, I will keep for another 12 months because I am confident that LGO could reach 15 pence by then.
I MUST reiterate that this is just my opinion. You should always evaluate your own option(s). Always do your own research because our risk appetite differs.
The current production is at 1,550 bopd with a value of 2.5 pence in March 2015 prior to the beginning of the drill in Pad 4. This works out to about 1.6 pence per 1,000 bopd. Since then oil price has increased 12%. Applying the 12% increase to our 1.6 pence per 1,000 bopd, the current price should be 1.79 pence per 1,000 bopd.
Therefore 600 bopd will effectively contribute 1.79 x 600/1,000 = 1.07 pence to the current share price.
So it is expected that once Pad 4 begins production, the share price should be at a minimum of 3.97 (Current) + 1.07 (Future) = 5.04 pence. If the combined flow rates rises above 600 bopd, then expect this price to rise as well.
It is expected that the CPR will effect a 50 % - 100% increase in the share price.
Therefore we will have:
5.04 x 150% = 7.56 pence
5.04 x 200% = 10.08 pence
The above are just my own opinion. But I will definitely sell a quarter of my portfolio at 8.00 pence. My BUY call was from a base of 3.60 pence, therefore it will deliver me a profit of 4.40 pence (122%) per share. all within a year's time frame. This will free up some money for me to invest elsewhere (UKOG because flow test will start at the end of summer or PPHM because the Phase III trial will complete recruitment in December 2015).
For the remaining, I will keep for another 12 months because I am confident that LGO could reach 15 pence by then.
I MUST reiterate that this is just my opinion. You should always evaluate your own option(s). Always do your own research because our risk appetite differs.
LGO DRILLING UPDATE
LGO today announced that the third well of Pad 4, GY674 encountered 769 feet of net oil pay, of which 492 ft of net oil pay was encountered on the Goudron Sands and another 277 ft of net oil pay in the deeper C-Sands.
A poster by the name of Phil, put it on the LGO board, This is the best net pay to be discovered in the C-Sands. The combined net pay from the 3 wells on Pad 4 EXCEEDS the total net pay of all the 8 wells drilled in 2014 (2,062 ft vs 1,866 ft)
This is very good news indeed. It goes to show that the Goudron oilfield is not only getting larger but deeper as well.
All the wells on Pad 4 have been cased and production will start in the next few weeks.
Lest we forget, the long awaited CPR will be announced in the next two weeks.
My disclosure: I am long LGO.
A poster by the name of Phil, put it on the LGO board, This is the best net pay to be discovered in the C-Sands. The combined net pay from the 3 wells on Pad 4 EXCEEDS the total net pay of all the 8 wells drilled in 2014 (2,062 ft vs 1,866 ft)
This is very good news indeed. It goes to show that the Goudron oilfield is not only getting larger but deeper as well.
All the wells on Pad 4 have been cased and production will start in the next few weeks.
Lest we forget, the long awaited CPR will be announced in the next two weeks.
My disclosure: I am long LGO.
Wednesday, June 10, 2015
UKOG ANNOUNCED PLACEMENT OF 266,666,667 NEW SHARES TO RAISE 6 MILLION POUNDS
Yesterday UKOG announced it raised 6 million Pounds by the placing 266,66,667 new shares at 2.25 pence a piece.
Originally, the target was to raise 4.5 million Pounds via the placement of 200 million new shares but it seemed the placement was oversubscribed. On top of that the subscription was done inside of an hour upon announcement, beating the 24 hour period alotted. This means that there are new investors coming abroad and they are fully researched on the potential of UKOG otherwise the placement would not have been snapped out within the hour. Shares of UKOG is in DEMAND.
According to the press release, the 6 million Pounds will be used for the following:
1) To further the company's interest in Horse Hill and the Weald Basin
2) To invest into new oil and gas companies that fall within the company's investment strategy
3) For general purposes
1) is interesting. It means that the company may be increasing its stake in Horse Hill by buying out a partner. With the potential oil in place measuring up to 15 billion barrels, it would mean that UKOG will have a bigger share of the bounty
2) means that UKOG may be acquiring some stakes in existing and productive oil fields within the Weald Basin. This should potentially increase its revenue base.
In my opinion, some parts of the money will be used to conduct the flow test at Horse Hill and perhaps to start the first drill at Isle of Wight as its licence will expire on 31 January, 2016.
In Horse Hill, it is fortunate that NUTECH and Schlumberger are assisting UKOG in determining the right spot from which to conduct the flow test.
The share price might fall a bit at the open on Thursday, 11 June, 2015, but I think it should recover strongly as UKOG reveals in detail its intentions.
My disclosure: I am long UKOG.
Originally, the target was to raise 4.5 million Pounds via the placement of 200 million new shares but it seemed the placement was oversubscribed. On top of that the subscription was done inside of an hour upon announcement, beating the 24 hour period alotted. This means that there are new investors coming abroad and they are fully researched on the potential of UKOG otherwise the placement would not have been snapped out within the hour. Shares of UKOG is in DEMAND.
According to the press release, the 6 million Pounds will be used for the following:
1) To further the company's interest in Horse Hill and the Weald Basin
2) To invest into new oil and gas companies that fall within the company's investment strategy
3) For general purposes
1) is interesting. It means that the company may be increasing its stake in Horse Hill by buying out a partner. With the potential oil in place measuring up to 15 billion barrels, it would mean that UKOG will have a bigger share of the bounty
2) means that UKOG may be acquiring some stakes in existing and productive oil fields within the Weald Basin. This should potentially increase its revenue base.
In my opinion, some parts of the money will be used to conduct the flow test at Horse Hill and perhaps to start the first drill at Isle of Wight as its licence will expire on 31 January, 2016.
In Horse Hill, it is fortunate that NUTECH and Schlumberger are assisting UKOG in determining the right spot from which to conduct the flow test.
The share price might fall a bit at the open on Thursday, 11 June, 2015, but I think it should recover strongly as UKOG reveals in detail its intentions.
My disclosure: I am long UKOG.
Monday, June 8, 2015
Friday, June 5, 2015
UKOG REVISED ESTIMATE OF OIL IN PLACE
Yesterday UKOG requested for voluntary suspension which caught many off guard. During the period of suspension, there were a host of positive and negative speculations offered as reason(s) for the suspension. On the night before, UKOG rose 18%.
Here, I would like to share with you my analysis:
1) Never believe in any speculations. Speculators are NOT privy to the company's reason(s)
2) UKOG's shares went up 18% prior to the suspension. Hence, any news before resumption of trading ought to be good.
3) Prior to the suspension there was no indication of an impending problem or issue which could damage the company's growth or prospects.
That is why it is important to know the company you invested in.
Today, UKOG announced that Schlumberger, a world renowned oil services company, estimated that the Upper Portland holds 16 million barrels of oil in place per sq mile whereas the Kimmeridge Clay holds 255 million barrels of oil in place. This works out to almost 15 billion barrels of oil in place in the licence area vs an earlier estimate by NUTECH which amounted to 8.5 billion barrels of oil in place.
This is indeed a huge upgrade of the resources. Still UKOG needs to conduct a flow test to estimate the amount oil recoverable from the Horse Hill area.
My disclosure: I am long UKOG.
Here, I would like to share with you my analysis:
1) Never believe in any speculations. Speculators are NOT privy to the company's reason(s)
2) UKOG's shares went up 18% prior to the suspension. Hence, any news before resumption of trading ought to be good.
3) Prior to the suspension there was no indication of an impending problem or issue which could damage the company's growth or prospects.
That is why it is important to know the company you invested in.
Today, UKOG announced that Schlumberger, a world renowned oil services company, estimated that the Upper Portland holds 16 million barrels of oil in place per sq mile whereas the Kimmeridge Clay holds 255 million barrels of oil in place. This works out to almost 15 billion barrels of oil in place in the licence area vs an earlier estimate by NUTECH which amounted to 8.5 billion barrels of oil in place.
This is indeed a huge upgrade of the resources. Still UKOG needs to conduct a flow test to estimate the amount oil recoverable from the Horse Hill area.
My disclosure: I am long UKOG.
Thursday, June 4, 2015
LGO 2014 FINANCIAL YEAR RESULTS
LGO Financial Year End 2014 Results:
Revenue increased 55.8% in 2014 vs 2013
Loss widened 89.8% in 2014 vs 2013
Current Ratio 0.56
Debt to Equity Ratio 0.51
Analysis of a small cap growth company is very different when comparing to other mid and large cap. More often than not, you can hardly expect any profit. This is because all earnings are reinvested into the business. LGO is not different.
Much of the profit decline has been due to Administrative Expenses and Depreciation.
Administrative Expenses include the settlement of a suit in 2014 amounting to 1.2 million Pounds. Also included is the payment to rig services provider for the drilling of 8 wells. In 2013 there were no drilling, only re-completion of existing wells.
LGO invested in 2 storage tanks in 2014 which increased the Depreciation charges for 2014.
I would expect LGO to improve its Current Ratio and bottom line 2015.
In the past, LGO would set off its debt through the placement of new shares, but this should stop in 2015 as they entered into an oil for debt swap with BNP Paribas.
Major improvements expected in 2015 vs 2014:
1) Lower cost of drilling and man days required per drill. This is due to the smaller Rig 70 which improved the drilling performance per well. Almost 40% savings per well.
2) Deployment of a 3 casing method vs the previous 2 casing method to improve well integrity and reduce high depletion rate among the wells. This will ensure the wells flow naturally over a longer period of time.
3) Production in 2015 is expected to increase by 1,400 bopd vs 2014 (200 bopd x 7 new wells).
4) The improvement in production will set off against the US2 million payment due to the previous vendor and licence holder of Goudron in the event production is maintained above 2,000 bopd over a 30 day period.
5) As production increases, the cost of Admin per barrel of oil is expected to decline drastically. Most of the Admin costs are fixed.
6) Inclusion of the new 4" pipeline, LACT meter and additional 5,000 storage tank to ensure continuous delivery of oil to Petrotrin. This will also improve the revenue stream and provide the infrastructure support for LGO to increase its production.
7) LGO will now embark on a continuous drilling programme with Pad 5 & 6 now under construction. Pad 6 will be drilled this year but production will likely be in January 2016. Application made to increase the number of wells from 30 to AT LEAST 60.
Besides the keypoints above, the much awaited CPR will be released in June 2015.
My disclosure: I am long LGO.
Revenue increased 55.8% in 2014 vs 2013
Loss widened 89.8% in 2014 vs 2013
Current Ratio 0.56
Debt to Equity Ratio 0.51
Analysis of a small cap growth company is very different when comparing to other mid and large cap. More often than not, you can hardly expect any profit. This is because all earnings are reinvested into the business. LGO is not different.
Much of the profit decline has been due to Administrative Expenses and Depreciation.
Administrative Expenses include the settlement of a suit in 2014 amounting to 1.2 million Pounds. Also included is the payment to rig services provider for the drilling of 8 wells. In 2013 there were no drilling, only re-completion of existing wells.
LGO invested in 2 storage tanks in 2014 which increased the Depreciation charges for 2014.
I would expect LGO to improve its Current Ratio and bottom line 2015.
In the past, LGO would set off its debt through the placement of new shares, but this should stop in 2015 as they entered into an oil for debt swap with BNP Paribas.
Major improvements expected in 2015 vs 2014:
1) Lower cost of drilling and man days required per drill. This is due to the smaller Rig 70 which improved the drilling performance per well. Almost 40% savings per well.
2) Deployment of a 3 casing method vs the previous 2 casing method to improve well integrity and reduce high depletion rate among the wells. This will ensure the wells flow naturally over a longer period of time.
3) Production in 2015 is expected to increase by 1,400 bopd vs 2014 (200 bopd x 7 new wells).
4) The improvement in production will set off against the US2 million payment due to the previous vendor and licence holder of Goudron in the event production is maintained above 2,000 bopd over a 30 day period.
5) As production increases, the cost of Admin per barrel of oil is expected to decline drastically. Most of the Admin costs are fixed.
6) Inclusion of the new 4" pipeline, LACT meter and additional 5,000 storage tank to ensure continuous delivery of oil to Petrotrin. This will also improve the revenue stream and provide the infrastructure support for LGO to increase its production.
7) LGO will now embark on a continuous drilling programme with Pad 5 & 6 now under construction. Pad 6 will be drilled this year but production will likely be in January 2016. Application made to increase the number of wells from 30 to AT LEAST 60.
Besides the keypoints above, the much awaited CPR will be released in June 2015.
My disclosure: I am long LGO.
Tuesday, June 2, 2015
PPHM NEWS RELEASE AFTER ASCO 2015
Following the ASCO Round table discussion held on 31 May, 2015, PPHM released the following updates:
Sunrise Phase III Trial
Completion of enrollment is anticipated by calendar year-end 2015.There will be two planned interim efficacy analyses which will be reviewed by the trial's Independent Data Monitoring Committee (IDMC). The first interim analysis, which will be conducted when 33% of the targeted overall survival events reached, is for futility and the second interim analysis, for futility or superiority, will be conducted at 50% of events. As these analyses are event driven, the exact timing of each is unknown, however the company plans to provide updates as these events are reached.
What can we know from this? The Sunrise Phase III trial has been ongoing for 18 months now. It lends credence that the patients are surviving longer, surpassing the 33% target for futility. This means that there is a likelihood that the first look-in if it happens could be a deciding factor to end the trial and grant approval. Just my opinion of course.
Exploring Checkpoint Inhibitor Combinations For Lung Cancer
PPHM plans to initiate an open -label multi-centre, randomised PHase II Trial of the anti-PD-1 monoclonal antibody nivolumab (Opdivo) vs nivolumab + Bavituximab in patients with previously treated locally advanced metastatic NSCLC. Enrollment will iclude patients with squamous and non-squamos NSCLC who have not received a prior PD-L1 or PD-! inhibitor.The primary endpoint of this trial will be overall response rate (ORR) with secondary endpoints including tumour response and duration, progression free survival, overall survival (OS) and safety.The trial is in the final stages of design and the details of which will be made available once details are completed. Trial initiation is anticipated in H2 2015.
My opinion. Nivolumab is a drug marketed by Bristol Myers Squibb (BMY). Previously PPHM conducted a trial combining Yervoy + Bavituximab for advanced melanoma (a type of deadly Skin Cancer). Yervoy is also a BMY drug. The involvement of BMY drugs may give hint of a potential partnership perhaps? Just my opinion but it is an interesting prospect to consider.
Leveraging Positive data In Breast Cancer
PPHM plans to initiate a Phase II/III open-label trial of either docetaxel or paclitaxel with or without Bavituximab in patients with locally advanced or metastatic HER2 negative breast cancer. The primary endpoint for the for the Phase II trial will be ORR. Results from this trial are expected to inform decisions on future studies in breast cancer and add value to the overall programme. The initiation of this trial is anticipated in H2 2015.
Fiscal Year End Cash Position
As at 30 April 2015, PPHM has cash and equivalents of US$68 million.
Avid Bioservices' Expansion On Track And Strongly Positioned To Meet Demand
The new facility is anticipated to be ready for cGMP production of biotechnology prodcuts in July 2015.
My disclosure: I am long PPHM
Sunrise Phase III Trial
Completion of enrollment is anticipated by calendar year-end 2015.There will be two planned interim efficacy analyses which will be reviewed by the trial's Independent Data Monitoring Committee (IDMC). The first interim analysis, which will be conducted when 33% of the targeted overall survival events reached, is for futility and the second interim analysis, for futility or superiority, will be conducted at 50% of events. As these analyses are event driven, the exact timing of each is unknown, however the company plans to provide updates as these events are reached.
What can we know from this? The Sunrise Phase III trial has been ongoing for 18 months now. It lends credence that the patients are surviving longer, surpassing the 33% target for futility. This means that there is a likelihood that the first look-in if it happens could be a deciding factor to end the trial and grant approval. Just my opinion of course.
Exploring Checkpoint Inhibitor Combinations For Lung Cancer
PPHM plans to initiate an open -label multi-centre, randomised PHase II Trial of the anti-PD-1 monoclonal antibody nivolumab (Opdivo) vs nivolumab + Bavituximab in patients with previously treated locally advanced metastatic NSCLC. Enrollment will iclude patients with squamous and non-squamos NSCLC who have not received a prior PD-L1 or PD-! inhibitor.The primary endpoint of this trial will be overall response rate (ORR) with secondary endpoints including tumour response and duration, progression free survival, overall survival (OS) and safety.The trial is in the final stages of design and the details of which will be made available once details are completed. Trial initiation is anticipated in H2 2015.
My opinion. Nivolumab is a drug marketed by Bristol Myers Squibb (BMY). Previously PPHM conducted a trial combining Yervoy + Bavituximab for advanced melanoma (a type of deadly Skin Cancer). Yervoy is also a BMY drug. The involvement of BMY drugs may give hint of a potential partnership perhaps? Just my opinion but it is an interesting prospect to consider.
Leveraging Positive data In Breast Cancer
PPHM plans to initiate a Phase II/III open-label trial of either docetaxel or paclitaxel with or without Bavituximab in patients with locally advanced or metastatic HER2 negative breast cancer. The primary endpoint for the for the Phase II trial will be ORR. Results from this trial are expected to inform decisions on future studies in breast cancer and add value to the overall programme. The initiation of this trial is anticipated in H2 2015.
Fiscal Year End Cash Position
As at 30 April 2015, PPHM has cash and equivalents of US$68 million.
Avid Bioservices' Expansion On Track And Strongly Positioned To Meet Demand
The new facility is anticipated to be ready for cGMP production of biotechnology prodcuts in July 2015.
My disclosure: I am long PPHM
NAGACORP'S NET PROFIT ALERT
Nagacorp issued a Net Profit alert on 1 June, 2015 in anticipation that its H1 2015 Net Profit could surge and potentially exceed US$100 million. This is on the back of an upfront payment of US$40 million received pursuant to a JV with an electronic gaming machine operator.
My disclosure: I am long Nagacorp.
My disclosure: I am long Nagacorp.
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