Optimism continues on US jobs data

Wall Street notched up its 5th straight day of gains last night as more evidence emerged that the economic recovery was on track emerged from better than expected jobs and service sector data. The Dow Jones Industrials ended at 11,723. Investors are watching and waiting for Friday’s U.S. non-farm payroll numbers to confirm the strength of the economic rebound. If these figures exceed consensus then expect a very strong day on the markets.

In the U.K., the FTSE 100 is currently up 27 to 6,071 despite some poor retail trading figures from the likes of Mothercare.

As I mentioned on a previous post, when sentiment is this strong, I tend to stay on the sidelines. As Warren Buffett once said “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”. There is a little too much greed in the air for my liking. I know a correction will come, it might be days or weeks, but this is the time I will be buying, not now. Sure opportunities will be missed on these momentum trades, but I know I can sleep at night buying on dips rather than
on peaks. When the Sunday newspapers are telling everyone to get on the equity bandwagon my advice is to be cautious.

Xcite valuation potential from LSE site

I just had to post Thales 1 excellent post from this morning on LSE.co.uk.

referring to Xcite's potential valuation. Yet again underscores the bargain

pricing of this share and the excellent upside.

"2Byron's excellent post yesterday got me thinking. I went back to the RPS
energy N151-101 report on Xcite's website from Feb 2009. Page 11 shows
success case NPV. The upside case had an NPV of $1,535m. This is more or
less £1bn sterling, so divided by 158m shares, the sp should now be £6.30,
as the flow test has confirmed commerciality. Updating the CPR should
however amend some of the assumptions in that table on page 11 - and this
is what the company must be doing now. The first assumption to change is
CAPEX. Gramacho posted (on iii) a readout of a conversation he'd had with
XEL mgt during the delays to the flow test. One thing they said was that
reservoir properties were significantly better than expected (as RNS
confirmed) and this meant they would not have to drill so many main holes,
as they could run more horizontal side drills from each vertical
penetration (I think that's what they meant). So lets assume that CAPEX can
be reduced by 10% to $2.4bn. Can't assume that OPEX will change, but price
per barrel can be moved to $90. I will leave the discount at 15% to be
ultra cautious, but it seems as if this could be reduced. Recovedrable
resources will be increased - the oil column was much higher than expected
- by over 50% as 2Byron points out. But lets be ultra conservative again,
and increase the original upside case of 166mmbbls by 20% - giving
200mmbbls. Filed life and NPV10 calculations I will leave as they were -
super cautious. Run the figures, and you get 90*200=18000, less 15%
discount gives 15300, less CAPEX and OPEX gives 10671. Apply the same NPV
factor as in the Feb 09 report and you get NPV $2.560bn. Convert to
sterling gives NPV £1.662bn, divided by 158m shares gives an sp post CPR of
£10.51. And this values the east Bentley prospects, Jurassic, and new block
allocations at zero. This is using the same valuation model the company has
already used and made public - the same one that Arbuthnot seem to be
using, and making ultra cautious assumptions using the fresh info from the
drilling and flow test. So, IMO, the sp should be £6 now, pre CPR, and
heading over £10 following. Things that will help is bokking some part to
reserves so that they are on balance sheet, and aiming to get a full market
listing - IMO Xcite should be moving off AIM now to become a mainstream
company. I would very much hope that they may give indications at the Oil
Barrel conference next week. Finally, with the company currently trading at
such a significant discount to NAV the prospect of a speculative bid for
the company has to be pretty high - I am sure Statoil for instance have run
these figures too - they look most attractive."