China has US$786B of borrowed money riding on stocks. That is why it pays to be a little bit more patient and not rush into any buying frenzy until the dust settles.
Link: http://www.bloomberg.com/news/articles/2015-08-30/if-the-options-market-is-right-china-s-stock-rescue-is-doomed
Monday, August 31, 2015
Saturday, August 29, 2015
HOPEWELL INFRASTRUCTURE FY 2015 RESULTS
Revenue decreased 7.6% vs 2014
Net Profit (excluding FOREX gain) decreased 6.6% vs 2014
Net profit (including FOREX gain) increased 11.3% vs 2014
Current Ratio 5.94
Debt to Equity Ratio 0.05
Dividend for FY 2015 HK$0.42589 vs FY 2014 HK$0.226396, representing a 88.1% increase over 2014
Based on it present price of HK$3.74, the Dividend Yield is 11.4%
The drop in revenue is a concern as the full opening of the Coastal Expressway diverts traffic from Hopewell's GS Superhighway. However, the management is optimistic that the traffic diversion has been fully realised as the toll revenue from the GS Superhighway rebounded 2% in the H2 of FY2015 vs the 6% fall in H1 of FY2015.
The registered car population of Guangdong increased by 13% and reached a new record high of 13.3 million at the end of 2014, in which over 70% was accounted for the cities where Hopewell's expressways run through
It is noteworthy that Hopewell's Total Borrowings has dropped from HK$872.4 million in 2014 to HK$295.7 million in 2015. This represents a drop of 66.1% in borrowings, an great achievement indeed!
At is present price of of HK$3.74 and its attractive yield, Hopewell is a BUY purely for its recurring income, but investors should note that its capital appreciation is slow. Therefore it is only suited for investors looking for low risk exposures with good dividend yield.
My disclosure: I own shares of Hopewell Infrastructure.
Net Profit (excluding FOREX gain) decreased 6.6% vs 2014
Net profit (including FOREX gain) increased 11.3% vs 2014
Current Ratio 5.94
Debt to Equity Ratio 0.05
Dividend for FY 2015 HK$0.42589 vs FY 2014 HK$0.226396, representing a 88.1% increase over 2014
Based on it present price of HK$3.74, the Dividend Yield is 11.4%
The drop in revenue is a concern as the full opening of the Coastal Expressway diverts traffic from Hopewell's GS Superhighway. However, the management is optimistic that the traffic diversion has been fully realised as the toll revenue from the GS Superhighway rebounded 2% in the H2 of FY2015 vs the 6% fall in H1 of FY2015.
The registered car population of Guangdong increased by 13% and reached a new record high of 13.3 million at the end of 2014, in which over 70% was accounted for the cities where Hopewell's expressways run through
It is noteworthy that Hopewell's Total Borrowings has dropped from HK$872.4 million in 2014 to HK$295.7 million in 2015. This represents a drop of 66.1% in borrowings, an great achievement indeed!
At is present price of of HK$3.74 and its attractive yield, Hopewell is a BUY purely for its recurring income, but investors should note that its capital appreciation is slow. Therefore it is only suited for investors looking for low risk exposures with good dividend yield.
My disclosure: I own shares of Hopewell Infrastructure.
Friday, August 28, 2015
REM WENT UP 13.33% ON FRIDAY
REM, a UK company listed on the AIM, saw its share price went up 13.3% on Friday after a reort came out that Tesla Gigafactory will buy Lithium from a soon to be built Lithium mine in North Mexico.
The companies that own the mine are Bacanora Minerals and rare earth Minerals (REM).
Follow the link here:
http://fortune.com/2015/08/28/tesla-lithium-mine-mexico/
I made a BUY call on REM on April 23, 2015. After languishing below 1.0 pence, REM seems to be in for a steady climb north.
My disclosure: I do not own any shares of REM.
The companies that own the mine are Bacanora Minerals and rare earth Minerals (REM).
Follow the link here:
http://fortune.com/2015/08/28/tesla-lithium-mine-mexico/
My disclosure: I do not own any shares of REM.
LGO PRODUCTION UPDATE
LGO yesterday announced that the production testing on well GY676 and GY677 is now underway. Initial flow rates at GY676 and GY677 delivered 240 bopd and 380 bopd respectively.
GY675 had earlier delivered a flow rate of 240 bopd. This marked the combined initial flow rate at Pad 5 at 860 bopd.
On Pad 4, only well GY674 had so far reported its initial flow rates which stood at 240 bopd. GY672 and GY673 had encountered some problems, and until these are sorted out, we would not have their flow rates reported. There is oil in these to wells, but most notably the problems are related to pressure.
Together with the 951 bopd reported at the end of Q2, LGO production now stands at:
951 + 240 + 860 = 2,051 bopd.
The final well GY678 is nearing TD and we should have an announcement of the completion of drilling next week.
Meanwhile, LGO's share price continues to be weighed down by the price of crude oil. With a two day rally in crude, I am optimistic that LGO should see its share price trending north next week.
My disclosure: I am long LGO.
.
GY675 had earlier delivered a flow rate of 240 bopd. This marked the combined initial flow rate at Pad 5 at 860 bopd.
On Pad 4, only well GY674 had so far reported its initial flow rates which stood at 240 bopd. GY672 and GY673 had encountered some problems, and until these are sorted out, we would not have their flow rates reported. There is oil in these to wells, but most notably the problems are related to pressure.
Together with the 951 bopd reported at the end of Q2, LGO production now stands at:
951 + 240 + 860 = 2,051 bopd.
The final well GY678 is nearing TD and we should have an announcement of the completion of drilling next week.
Meanwhile, LGO's share price continues to be weighed down by the price of crude oil. With a two day rally in crude, I am optimistic that LGO should see its share price trending north next week.
My disclosure: I am long LGO.
.
Wednesday, August 26, 2015
CROESUS RETAIL TRUST FY 2015 RESULTS
Revenue increased 21.9% vs 2014
Net Profit increased 58.1% including Net Gains in Property and Financial Instruments
Net Profit decreased 13.5% before Net Gains in Property and Financial Instruments
Net Profit increased 72.1% before Net Gains in Property and Financial Instruments but after adjustments for Net Gains in Cash Flow Hedge
Current Ratio 12.2
Gearing 22.3%
Distribution is S$0.0392 for H2 2014 vs S$0.0372 in H2 2014. This represents an increase of 5.4%.
Total Distribution for FY 2015 is S$0.0808
At current price of S$0.895, this represents a yield of 9.0%.
Occupancy remained strong with 3 malls having more than 98% occupancy while the other 4, 100% occupancy.
Based on the yield and strong financials, Croesus retail Trust is a BUY.
My disclosure: I am long Croesus Retail Trust.
Net Profit increased 58.1% including Net Gains in Property and Financial Instruments
Net Profit decreased 13.5% before Net Gains in Property and Financial Instruments
Net Profit increased 72.1% before Net Gains in Property and Financial Instruments but after adjustments for Net Gains in Cash Flow Hedge
Current Ratio 12.2
Gearing 22.3%
Distribution is S$0.0392 for H2 2014 vs S$0.0372 in H2 2014. This represents an increase of 5.4%.
Total Distribution for FY 2015 is S$0.0808
At current price of S$0.895, this represents a yield of 9.0%.
Occupancy remained strong with 3 malls having more than 98% occupancy while the other 4, 100% occupancy.
Based on the yield and strong financials, Croesus retail Trust is a BUY.
My disclosure: I am long Croesus Retail Trust.
NAGACORP H1 2015 RESULTS
Revenue increased 39.0% vs 2014
Net Profit increased 49.4% vs 2014
Current Ratio 6.52
Debt to Equity Ratio 0.05
Dividend HK$0.2069, an increased of 30% over 2014
Visitors to Cambodia grew 4.6% vs same period last year. Top three countries were Vietnam (21%), China (15%) and South Korea (10%).
Macau’s Gross Gaming Revenue (“GGR”) declined 37% for the first half of 2015. NagaWorld in contrast, recorded GGR growth of 42%.
However, the much touted NagaCity Walk's opening has been delayed by 6 months to Q3 2016.
Naga2, the new hotel cum casino complex remained on target to open by 2017.
There were no new development on the Russian front. I expect work to only commence in late 2016 or early 2017.
However, due to the recent rout of HK shares, Nagacorp is a compelling BUY.
Based on its present price of HK$4.83, the H1 dividend declared would have already contributed a 4.3% yield. Full year yield could touch 7% - 8%.
My disclosure: I am long Nagacorp.
Net Profit increased 49.4% vs 2014
Current Ratio 6.52
Debt to Equity Ratio 0.05
Dividend HK$0.2069, an increased of 30% over 2014
Visitors to Cambodia grew 4.6% vs same period last year. Top three countries were Vietnam (21%), China (15%) and South Korea (10%).
Macau’s Gross Gaming Revenue (“GGR”) declined 37% for the first half of 2015. NagaWorld in contrast, recorded GGR growth of 42%.
However, the much touted NagaCity Walk's opening has been delayed by 6 months to Q3 2016.
Naga2, the new hotel cum casino complex remained on target to open by 2017.
There were no new development on the Russian front. I expect work to only commence in late 2016 or early 2017.
However, due to the recent rout of HK shares, Nagacorp is a compelling BUY.
Based on its present price of HK$4.83, the H1 dividend declared would have already contributed a 4.3% yield. Full year yield could touch 7% - 8%.
My disclosure: I am long Nagacorp.
HOW THE DEBT BURDEN COULD CAUSE THESE 5 SHALE OIL COMPANIES TO COLLAPSE
These report was written on 18 August but since then oil price has fallen below US$40 per barrel.
We could continue to see a long line of shale oil companies in distress in October, when banks will review the credit lifeline to these companies.
Link: http://www.forbes.com/sites/christopherhelman/2015/08/17/as-oil-goes-down-bankruptcies-go-up-these-5-frackers-could-be-the-next-to-fall/2/
We could continue to see a long line of shale oil companies in distress in October, when banks will review the credit lifeline to these companies.
Link: http://www.forbes.com/sites/christopherhelman/2015/08/17/as-oil-goes-down-bankruptcies-go-up-these-5-frackers-could-be-the-next-to-fall/2/
Tuesday, August 25, 2015
CHINA JUST LOWERED ITS INTEREST RATE
China just lowered its interest rate today and reduced the banks reserve ratio. This sends a strong signal to the market that China is determined to maintain its growth trajectory. The news of course resulted in the Shanghai futures surging even as I write, but on the other end of the spectrum we are confronted once again by a Yuan which could see its value falling vs the US$. This could spark a domino effect on all emerging markets currencies and we may yet see another fall in value of these currencies vs the US$.
Here's an interesting article in Bloomberg which is worth a read. Some researches are expecting the Yuan to fall to 7 Yuan to the US$ by year end and to 8 Yuan by the end of 2016. We can only imagine the repercussion across all emerging markets currencies.
http://www.bloomberg.com/news/articles/2015-08-25/china-agencies-said-to-assume-yuan-at-7-to-dollar-in-research-idqx3oae
Here's an interesting article in Bloomberg which is worth a read. Some researches are expecting the Yuan to fall to 7 Yuan to the US$ by year end and to 8 Yuan by the end of 2016. We can only imagine the repercussion across all emerging markets currencies.
http://www.bloomberg.com/news/articles/2015-08-25/china-agencies-said-to-assume-yuan-at-7-to-dollar-in-research-idqx3oae
Monday, August 24, 2015
PPHM TO COLLABORATE WITH ASTRAZENECA
PPHM released news that it will collaborate with Astrazeneca, combining PPHM's PS_ targeting drug Bavituximab and Astrazdeneca's investigational anti PD-L1 immune checkpoint inhibitor Durvalumab. The planned Phase I/Ib trial will evaluate the safety and efficacy of Bavituximab in combination with Durvalumab in multiple solid tumours
In the course of less than a year, PPHM has secured collaboration with several prominent establishments, including MSK and BMS.
This goes to show that gradually Bavituximab is gaining acceptance as an important combination in imunotheraphy drugs targeting cancer and tumours.
My disclosure: I am long PPHM.
In the course of less than a year, PPHM has secured collaboration with several prominent establishments, including MSK and BMS.
This goes to show that gradually Bavituximab is gaining acceptance as an important combination in imunotheraphy drugs targeting cancer and tumours.
My disclosure: I am long PPHM.
Friday, August 21, 2015
COMPARING UKOG AND LGO
Based on Friday's closing, UKOG share price was 1.84 pence vs LGO's 1.33 pence.
Some might wonder why UKOG, a negligible producer, has a share price which is above LGO, which is producing more than 1,000 bopd (951 bopd + Pad 4 240 bopd + Pad 5 325 bopd).
I will attempt to differentiate between the two.
UKOG is more stable and less volatile due to the following reasons:
2) UKOG has a large reserve of Oil In Place. Easily more than 10 times LGO's. There is a value to this asset and in a stock broker note recently, easily command a value of 13 pence
3) UKOG has the following news due
2) LGO has a loan with BNP. This give shorters opportunity to short the stock by claiming the fall in revenue is insufficient to serve the loan and that a new placing of shares will come further diluting the shareholders base. This is scare mongering but it works to the benefit of the shorters.
3) LGO's production is restricted by its infrastructure. The good news is that LGO is upgrading the infrastructure, so this is a sign that they are going to expand production.
4) So far 7 wells have been drilled but only 2 put on production. This could be due to the lack of infrastructure to further improve its production.
Some might wonder why UKOG, a negligible producer, has a share price which is above LGO, which is producing more than 1,000 bopd (951 bopd + Pad 4 240 bopd + Pad 5 325 bopd).
I will attempt to differentiate between the two.
UKOG is more stable and less volatile due to the following reasons:
1) It has not ready started on any well development leading to production. It costs money when a well is developed. This include drilling, completing and maintaining it. So at this juncture UKOG cash burn is very little.
2) UKOG has a large reserve of Oil In Place. Easily more than 10 times LGO's. There is a value to this asset and in a stock broker note recently, easily command a value of 13 pence
3) UKOG has the following news due
- Horse Hill flow test
- Oil In Place reserve in the Isles of Wight
- Drilling at Brockham which is next to Horse Hill
4) All of UKOG's activities will reinforced the view that it holds billions of barrels of oil in areas which it hold licenses.
Conversely, LGO's price is undervalued due to the heavy shorting by traders in view of the depressed oil price. Also the vendor of the Taba oilfield, TRIN with whom LGO signed an agreement in 2014 is threatening to sue LGO as LGO had not gone ahead with the deal. According to LGO, this is because TRIN had not met the conditions vital to the execution of the contract. TRIN is now going into administration due to heavy losses. This is the negative news that provide the opportunity for shorters to short LGO.
LGO current challenges are:
1) Continue to operate amidst the low price of oil. LGO's lifting cost is less than US$10 per barrel but the low crude price it impacting its ability to generate high revenue.
2) LGO has a loan with BNP. This give shorters opportunity to short the stock by claiming the fall in revenue is insufficient to serve the loan and that a new placing of shares will come further diluting the shareholders base. This is scare mongering but it works to the benefit of the shorters.
3) LGO's production is restricted by its infrastructure. The good news is that LGO is upgrading the infrastructure, so this is a sign that they are going to expand production.
4) So far 7 wells have been drilled but only 2 put on production. This could be due to the lack of infrastructure to further improve its production.
5) LGO is restricting the output from previous wells to better managed the reserve due to the depletion of pressure. So that is why there is a sharp decline in production. But many interpret is a a natural depletion. I believe LGO wants to preserve the natural flow of the oil and thus better managed the resource.
At this juncture the price of crude oil will continue to weigh on LGO and provide shorters with opportunity to bring down the price of the stock due to its high liquidity.
Owing to this, it is best to stay on the sidelines rather than having additional capital tied up. The price war between OPEC and US shale oil producers will continue indefinitely and as long as oil remains bearish, it is unlikely we will see an uplift of LGO's share price.
Owing to this, it is best to stay on the sidelines rather than having additional capital tied up. The price war between OPEC and US shale oil producers will continue indefinitely and as long as oil remains bearish, it is unlikely we will see an uplift of LGO's share price.
However, the OPEC countries and US shale oil producers are hurting. So we can expect that oil price will eventually turn positive. My view would be towards year end 2015. In 2016, LGO will start a pilot water flood project and drill the Cedros. This could potentially lead to an increase in the production massively.
My disclosure: I am long LGO and UKOG.
My disclosure: I am long LGO and UKOG.
LGO DRILLING UPDATE
LGO recently announced that Well GY675, the first well on Pad 5 has started production at 325 bopd and is now undergoing further test. The drilling of the final well, GY678, is in progress.
For the past one year, LGO has successfully drilled 14 wells bearing oil net pay of several hundred feet each. Many were producing several hundred bopd each but in the Q2 production announcement, we have seen the production dropping to 951 bopd.
I suspect that LGO is choking the flow to better increase the life span of the well so that it continue to flow naturally. Perhaps this has something to do with the depressed oil price that it is better to manage the resource as efficiently as possible.
I would also expect that LGO will eventually choke the flow from GY678 to allow it to flow at a more manageable rate while preserving the lifespan of the well.
My disclosure: I am long LGO. However, always do your own research as our risk appetite differs.
For the past one year, LGO has successfully drilled 14 wells bearing oil net pay of several hundred feet each. Many were producing several hundred bopd each but in the Q2 production announcement, we have seen the production dropping to 951 bopd.
I suspect that LGO is choking the flow to better increase the life span of the well so that it continue to flow naturally. Perhaps this has something to do with the depressed oil price that it is better to manage the resource as efficiently as possible.
I would also expect that LGO will eventually choke the flow from GY678 to allow it to flow at a more manageable rate while preserving the lifespan of the well.
My disclosure: I am long LGO. However, always do your own research as our risk appetite differs.
Monday, August 17, 2015
RINGGIT AND THE UNCERTAIN TIMES AHEAD FOR THE BURSA
The Ringgit will be facing severe volatility in coming weeks. At this juncture, it is best to abstain from buying any shares in the Bursa. Rather than looking at an entry point based on the KLCI, look out for stability in the Ringgit vs other currencies. A period of stability in the Ringgit will indicate that the worst could be over.
Oil could continue to cast a shadow over the Ringgit so keep an eye on oil as well. Oil price could dip below US$40 per barrel as the summer driving season ends and refineries go into maintenance mode in autumn. This could increase the storage at Cushing and further depress the price of oil.
Weakness in China's economy will also increase weakness in emerging markets currencies, including the Ringgit. China's economy could perform below expectations as exports have fallen, and consumption could worsen in Q3 and Q4 brought on by the stock market rout which wiped off US$4 trillion in wealth.
Oil could continue to cast a shadow over the Ringgit so keep an eye on oil as well. Oil price could dip below US$40 per barrel as the summer driving season ends and refineries go into maintenance mode in autumn. This could increase the storage at Cushing and further depress the price of oil.
Weakness in China's economy will also increase weakness in emerging markets currencies, including the Ringgit. China's economy could perform below expectations as exports have fallen, and consumption could worsen in Q3 and Q4 brought on by the stock market rout which wiped off US$4 trillion in wealth.
IMPACT OF LOW OIL PRICE ON US SHALE OIL COMPANIES
Following the earlier article on the cost of the oil price war on Saudi Arabia, across the Atlantic in the US, shale oil companies had not fared any better as well as many reported huge losses in Q2 results. barely a few were cash flow positive.
Collectively the top ten largest shale oil companies earned combined profits of nearly US$3.5B in Q2 2014. In Q2 2015, the same companies reported losses of nearly US$15B. How would they perform in Q3 2015 given that oil price has fallen to US$41 - US$42 per barrel? Definitely worse than Q2.
Read the articles here:
http://www.reuters.com/article/2015/08/12/usa-shale-kemp-idUSL5N10M3HA20150812
http://www.wallstreetdaily.com/2015/08/17/u-s-shale-oil-overproduction/
Collectively the top ten largest shale oil companies earned combined profits of nearly US$3.5B in Q2 2014. In Q2 2015, the same companies reported losses of nearly US$15B. How would they perform in Q3 2015 given that oil price has fallen to US$41 - US$42 per barrel? Definitely worse than Q2.
Read the articles here:
http://www.reuters.com/article/2015/08/12/usa-shale-kemp-idUSL5N10M3HA20150812
http://www.wallstreetdaily.com/2015/08/17/u-s-shale-oil-overproduction/
OIL PRICE WAR AND THE COST OF IT TO SAUDI ARABIA
This is a very interesting article. OPEC declaration of war on US shale oil companies comes with a hefty price, almost US$140B for Saudi Arabia.
Saudi Arabia simply cannot sustain at current oil price as the country could burn a big and deep hole in its foreign reserves. Whether it is a miscalculation or a misjudgement on the resolve of the US shale oil companies, it has one option available to it. To hasten the the collapse of oil price to put and quick end to the shale oil revolution, but at a startling cost to its economy.
This could be the reason why despite the low oil price, OPEC countries are increasing production while several of OPEC's sovereign funds were reported to be shorting oil.
http://www.albawaba.com/business/saudi-going-broke-as-it-burns-through-foreign-reserves-731602
Saudi Arabia simply cannot sustain at current oil price as the country could burn a big and deep hole in its foreign reserves. Whether it is a miscalculation or a misjudgement on the resolve of the US shale oil companies, it has one option available to it. To hasten the the collapse of oil price to put and quick end to the shale oil revolution, but at a startling cost to its economy.
This could be the reason why despite the low oil price, OPEC countries are increasing production while several of OPEC's sovereign funds were reported to be shorting oil.
http://www.albawaba.com/business/saudi-going-broke-as-it-burns-through-foreign-reserves-731602
Friday, August 14, 2015
US OIL RIGS COUNT
US oil rigs count increased for the fourth consecutive week to 672 despite oil staying in the low US$40s. Oil could possibly trend below the psychological US$40 per barrel int he coming weeks due tot he following reasons:
1) No clear sign of the production in the US and OPEC countries abating significantly to support a higher oil price, OPEC production reached its highest at 31.4M barrels in July, eroding gains in oil price in anticipation of the summer driving season.
2) A refinery outage in Indiana reignite the fear that storage in Cushing could quickly rise
3) August will mark the the final month of the summer driving season and in the following months could see storage in Cushing rise again as the refineries go in maintenance mode in autumn
4) Continued focus on Iran and how it will add on to the global glut of oil
However, I am of the opinion that price could recover towards the fourth quarter if Saudi Arabia decides to cut back on it production by 200,000 - 300,000 bopd as reported recently and the continued financial strain among US shale oil producers which could force some into bankruptcy or mergers.
The silver lining is of course, OPEC can't continue to maintain oil at the current price as it is also causing financial strain to the respective countries' budget. most OPEC countries require oil to be above US$100 per barrel to sustain their budgets.
I see oil hovering at US$50 - US$60 by year end, lower than my earlier projection of US$55 - US$65.
1) No clear sign of the production in the US and OPEC countries abating significantly to support a higher oil price, OPEC production reached its highest at 31.4M barrels in July, eroding gains in oil price in anticipation of the summer driving season.
2) A refinery outage in Indiana reignite the fear that storage in Cushing could quickly rise
3) August will mark the the final month of the summer driving season and in the following months could see storage in Cushing rise again as the refineries go in maintenance mode in autumn
4) Continued focus on Iran and how it will add on to the global glut of oil
However, I am of the opinion that price could recover towards the fourth quarter if Saudi Arabia decides to cut back on it production by 200,000 - 300,000 bopd as reported recently and the continued financial strain among US shale oil producers which could force some into bankruptcy or mergers.
The silver lining is of course, OPEC can't continue to maintain oil at the current price as it is also causing financial strain to the respective countries' budget. most OPEC countries require oil to be above US$100 per barrel to sustain their budgets.
I see oil hovering at US$50 - US$60 by year end, lower than my earlier projection of US$55 - US$65.
Thursday, August 13, 2015
INTERESTING ARTICLE ON PPHM
Investors however should be mindful of the risks with bio-tech companies. PPHM's immense upside hinges on securing the FDA's approval for its Bavituximab drug in the Sunrise Phase 3 Trial.
Read it here:
http://www.fool.com/investing/small-cap/2015/08/11/5-things-peregrine-pharmaceuticals-wants-you-to-kn.aspx
Read it here:
http://www.fool.com/investing/small-cap/2015/08/11/5-things-peregrine-pharmaceuticals-wants-you-to-kn.aspx
Wednesday, August 12, 2015
LGO DRILLING UPDATE
LGO today announced that its latest well, GY677 has reached total depth and encountered 355 feet of net oil pay at the Goudron Sandstone and another 130 feet of net oil pay at the C-Sands. Total net oil pay is 485 feet.
This is in line with the Management's expectations.
Some important key points in the announcement are:
1) Drilling times have been shortened significantly.
2) Management will allocate capital efficiently in view of the current depressed price which could continue for a long period. A low operating cost combined with careful deployment of capital will allow the Goudron field to be developed profitably despite the low oil price.
3) All production infrastructure necessary for the production from Pad 5 is already in place and production is expected to commence in late August.
4) Company hopes to commence a pilot water flood project in 2016.
The share price continued to stay in the 1.50 - 1.70 pence range, due to the depressed oil price but LGO is a low cost producer so this is the plus point. Besides that, it is sitting on a large oil field with 800m barrels of oil in reserve. I am expectant that the reserves will be upgraded as more drilling takes place.
The fundamentals remain sound but patience is required as LGO puts more wells into production.
I would expect a wave of mergers and bankruptcies happening after October upon completion of the semi annual assessment of US oil companies by financial institutions. Many are already facing a cash crunch in the current situation.
Things to look forward to for LGO:
1) Completion of the 2 x 250 and 2 x 5,000 barrels tanks
2) Commencement of production from the Goudron Sandstones (12 - 15 wells)
3) Approval by the Ministry to drill an additional 30 wells in the Goudron field
4) Positive development in the drilling campaign in the Cedros which LGO has earmarked to commence in 2016.
My disclosure: I am long LGO.
This is in line with the Management's expectations.
Some important key points in the announcement are:
1) Drilling times have been shortened significantly.
2) Management will allocate capital efficiently in view of the current depressed price which could continue for a long period. A low operating cost combined with careful deployment of capital will allow the Goudron field to be developed profitably despite the low oil price.
3) All production infrastructure necessary for the production from Pad 5 is already in place and production is expected to commence in late August.
4) Company hopes to commence a pilot water flood project in 2016.
The share price continued to stay in the 1.50 - 1.70 pence range, due to the depressed oil price but LGO is a low cost producer so this is the plus point. Besides that, it is sitting on a large oil field with 800m barrels of oil in reserve. I am expectant that the reserves will be upgraded as more drilling takes place.
The fundamentals remain sound but patience is required as LGO puts more wells into production.
I would expect a wave of mergers and bankruptcies happening after October upon completion of the semi annual assessment of US oil companies by financial institutions. Many are already facing a cash crunch in the current situation.
Things to look forward to for LGO:
1) Completion of the 2 x 250 and 2 x 5,000 barrels tanks
2) Commencement of production from the Goudron Sandstones (12 - 15 wells)
3) Approval by the Ministry to drill an additional 30 wells in the Goudron field
4) Positive development in the drilling campaign in the Cedros which LGO has earmarked to commence in 2016.
My disclosure: I am long LGO.
Monday, August 10, 2015
CHINA WEAKENS REMIMBI (YUAN) BY 1.9%
Today, China weakened the Remimbi (Yuan) by 1.9% amidst slowing exports and growth. This immediately caused a tremor across all emerging markets currencies, which fell in unison.
This action by the POBC only reaffirms what the market has known all along - that China's economy continues to weaken despite all the stimulus added in the past one year. This will continue to impact the prices of commodities, and I anticipate that oil could stay in the low US$40s for a longer term period.
Stock markets in Asia will continue to weaken but it could provide the best opportune time to invest as the markets trend lower. My favourite markets markets remain Singapore and Hong Kong due to their tax free dividends. But I am in no rush to buy as yet.
Do keep an eye on Nagacorp, Bossini, Capital Retail China and Croesus Retail Trust as they offer good dividend yields. Dvidend stocks are the midst play in the midst of global uncertainties as the lower entry price allows you to enjoy better yields.
However, you evaluate your own tolerance for risks as yours could differ from mine. Always do your own research.
http://www.bloomberg.com/news/articles/2015-08-11/china-weakens-yuan-reference-rate-by-record-1-9-amid-slowdown
This action by the POBC only reaffirms what the market has known all along - that China's economy continues to weaken despite all the stimulus added in the past one year. This will continue to impact the prices of commodities, and I anticipate that oil could stay in the low US$40s for a longer term period.
Stock markets in Asia will continue to weaken but it could provide the best opportune time to invest as the markets trend lower. My favourite markets markets remain Singapore and Hong Kong due to their tax free dividends. But I am in no rush to buy as yet.
Do keep an eye on Nagacorp, Bossini, Capital Retail China and Croesus Retail Trust as they offer good dividend yields. Dvidend stocks are the midst play in the midst of global uncertainties as the lower entry price allows you to enjoy better yields.
However, you evaluate your own tolerance for risks as yours could differ from mine. Always do your own research.
http://www.bloomberg.com/news/articles/2015-08-11/china-weakens-yuan-reference-rate-by-record-1-9-amid-slowdown
Thursday, August 6, 2015
POSSIBLE REASON WHY LGO'S PRODUCTION DROPPED TO 951 BOPD IN Q2
Recent news has surfaced that an application has been submitted to the Trinidad authorities on 11 June, 2015 for the drilling of an additional 30 wells.
On another note, there is a Gathering Station, GS207 which receives and treats produced oil before being piped along to Gathering Station 134. GS207 has a capacity of 1,500 barrels But in LGO's application to construct 2 x 5,000 barrels sales tank, it also also include an application to construct 2 x 250 barrels tanks to replace existing tanks at GS207 due to poor deterioration in the condition of the tanks. This could be reason why the production as been scaled down to less than 1,000 bopd owing to the capacity at GS207 which has now been reduced to 1,000 barrels.
Interestingly, in LGO's application, the reason has been stated as thus' "The production of the field now exceeds current capacity of the gathering stations, leading to the Company to restrict its production."
Projected timeline for the 2 x 250 barrels tanks is 6 weeks, while the projected timeline for the first 5,000 barrels sales tank is at the end of October, 2015 while the other, at the end of January, 2016.
The above information was disclosed by a LGO investor in Trinidad after searching through the public records. In the absence of any verifiable confirmation by the Company it should be taken with a grain of salt, but it does sound reasonable enough as LGO production has dropped almost 50% which cannot be solely due to natural depletion of the flow rate. Other onshore producers recorded depletion rate of less than 10%.
So whilst, the price of oil has entered into bear territory, I think the future for LGO remains great. In the coming months, expect to see a wave of mergers in the US shale oil industry with several bankruptcies which will result in lower production. Also, with the closing of short position by several OPEC's sovereign wealth funds, I would expect oi to finally trend higher to the US$50s. But short term price volatility could see oil testing the US$40 to US$43 per barrel.
My disclosure: I an long LGO.
On another note, there is a Gathering Station, GS207 which receives and treats produced oil before being piped along to Gathering Station 134. GS207 has a capacity of 1,500 barrels But in LGO's application to construct 2 x 5,000 barrels sales tank, it also also include an application to construct 2 x 250 barrels tanks to replace existing tanks at GS207 due to poor deterioration in the condition of the tanks. This could be reason why the production as been scaled down to less than 1,000 bopd owing to the capacity at GS207 which has now been reduced to 1,000 barrels.
Interestingly, in LGO's application, the reason has been stated as thus' "The production of the field now exceeds current capacity of the gathering stations, leading to the Company to restrict its production."
Projected timeline for the 2 x 250 barrels tanks is 6 weeks, while the projected timeline for the first 5,000 barrels sales tank is at the end of October, 2015 while the other, at the end of January, 2016.
The above information was disclosed by a LGO investor in Trinidad after searching through the public records. In the absence of any verifiable confirmation by the Company it should be taken with a grain of salt, but it does sound reasonable enough as LGO production has dropped almost 50% which cannot be solely due to natural depletion of the flow rate. Other onshore producers recorded depletion rate of less than 10%.
So whilst, the price of oil has entered into bear territory, I think the future for LGO remains great. In the coming months, expect to see a wave of mergers in the US shale oil industry with several bankruptcies which will result in lower production. Also, with the closing of short position by several OPEC's sovereign wealth funds, I would expect oi to finally trend higher to the US$50s. But short term price volatility could see oil testing the US$40 to US$43 per barrel.
My disclosure: I an long LGO.
Saturday, August 1, 2015
US OIL RIGS INCREASED BY 4 TO 664
Despite the the pressure on oil price, US oil companies added another 4 rigs to work, adding the count to 664 last week.
This further depressed the oil price to US$46.77 per barrel. With the US$48 level broken, oil could trend towards, US$43 to US45 per barrel in the absence of positive news to left the price higher.
Link: http://www.wsj.com/articles/u-s-oil-rig-count-increases-to-664-1438365481
This further depressed the oil price to US$46.77 per barrel. With the US$48 level broken, oil could trend towards, US$43 to US45 per barrel in the absence of positive news to left the price higher.
Link: http://www.wsj.com/articles/u-s-oil-rig-count-increases-to-664-1438365481
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