The Contrarian Investor UK portfolio suffered again today on the market sell off and unfortunately Imagination Technology (IMG) fell through a stop loss set 10% below buy price. The strong start to the year precipitated by some good gains in Xcite (when it went close to 400p) and Bowleven, have been marred by the Imagination loss (fortunately not a huge position) and a stupidly set stop loss on Sirius Minerals which caught me out and which was only set to control my required margin requirements (daft to do given the volatility of SXX). But still up nicely for the Month so a good start to 2011 but it could have been a lot better. Now for Xcite and Bowleven to come in February!
Monday, January 31, 2011
Good start to 2011 in U.S. and Contrarian, not so bright for FTSE 100
Despite all the tension in the Middle East, the Dow Jones Industrial Average ended up 68 points, to 11,892 making it a 2.7% rise for the month, its best January since 1997. The FTSE 100 has not been so fortunate, with the index falling 0.6% in January to 5,881. The discrepancy in performance is largely explained by the larger presence of cyclical stocks such as industrial group Caterpillar (CAT) in the DOW. Also the fact that it is a price weighted index (i.e. the higher the price of a stock the greater its weighting within the index) whereas the FTSE 100 is a market cap weighted index is not widely recognised (and hence the U.S. S&P 500 is a better measure of U.S. stock market performance).
Will tomorrow bring the long awaited Xcite Energy RNS?
A day of anticipation of an RNS from Xcite Energy relating to the rig contract came to nought. However, no panic here. Disappointing that the share price dropped 8.5p late in the day to £3.62 after holding firm despite the FTSE taking a beating in the morning but I guess some of my fellow private investors are looking for bad news even if there's no hint of one!
Oil prices rose today to their highest in more than two years with WTI Crude for March delivery gaiing 3.2%, at $92.2 a barrel (its highest sine October 2008) and Brent Crude rose to more than $1.50 to as high as $101.08 a barrel. Its all time high is $147 a barrel hit in July 2008 before the financial collapse.
The reason for the oil price hike continues to be Egypt, with 2 million barrels per day passing through the Suez Canal plus a a further 1 million barrels move through the Suez-Mediterranean pipeline.
Oil prices rose today to their highest in more than two years with WTI Crude for March delivery gaiing 3.2%, at $92.2 a barrel (its highest sine October 2008) and Brent Crude rose to more than $1.50 to as high as $101.08 a barrel. Its all time high is $147 a barrel hit in July 2008 before the financial collapse.
Xcite Energy - still no Rowan Norway rig RNS!
The deadline for the Rowan Norway jack up rig is here but no RNS so far!
As a reminder:
If they were extending negotiations I would have thought we would have an RNS by now. Issuing an RNS saying "we have extended by an additional 7 weeks day blah. blah. in order to finalise detailed elements of the contract.". It doesn't smack of the Xcite board of directors that we know. The longer the wait, the more intriguing it gets! Maybe the directors have taken a well deserved break in the Caribbean with their share sale profits and they forgot to tell the PR to send the RNS out??!!!
As a reminder:
4 January 2011
Xcite Energy Limited
("Xcite Energy" or the "Company")
Extension of Letter of Intent for "Rowan Norway" N-Class Jack-up Rig
Xcite Energy announces that its 100% subsidiary, Xcite Energy Resources Limited ("XER"), has entered into an extension to the binding letter of intent ("LOI") with British American Offshore Limited("BAOL"), part of Rowan Companies, Inc. for the N-Class "Rowan Norway" jack-up rig.
The LOI has been extended by mutual consent to 31st January 2011 with no amendment to the existing termination fee payable by XER in the event it does not enter into a definitive agreement by this date.
If they were extending negotiations I would have thought we would have an RNS by now. Issuing an RNS saying "we have extended by an additional 7 weeks day blah. blah. in order to finalise detailed elements of the contract.". It doesn't smack of the Xcite board of directors that we know. The longer the wait, the more intriguing it gets! Maybe the directors have taken a well deserved break in the Caribbean with their share sale profits and they forgot to tell the PR to send the RNS out??!!!
Sunday, January 30, 2011
Portfolio review of the week - 30th January 2011
Rioting in Egypt over the rule of President Hosni Mubarek sent shares down on Friday with the Dow Jones Industrial Average down 166 points, or 1.39%, to 11,823 (the biggest drop since November 16th 2010) The Dow fell 0.4% on the week, its first weekly drop in nine weeks. The FTSE 100 index dropped 1.4% to end at 5,88, a 0.25% drop on the week.
The issues in Egypt drove up oil by 5% to $89 (see previous post: http://contrarianinvestoruk.blogspot.com/2011/01/oil-surges-on-egypt-issues.html) and sentiment in the U.K. wasn't helped by news that a U.K. consumer confidence index dropped eight points in January to -29, the lowest figure since March 2009 and only the sixth time in 35 years it has dropped by so much. Despite the oil price surge, oil stocks were mainly in the red.
The fall in the markets was overdue since after 8 weeks of rises on the U.S. markets, a correction was to be expected and the Egyptian situation was the catalyst for a sell off and profit taking. Further volatility can be expected this week and at times like this opportunities for buying can be excellent as uncertainty and the bears take hold of sentiment. 2011 will be a volatile year in the markets.
The issues in Egypt drove up oil by 5% to $89 (see previous post: http://contrarianinvestoruk.blogspot.com/2011/01/oil-surges-on-egypt-issues.html) and sentiment in the U.K. wasn't helped by news that a U.K. consumer confidence index dropped eight points in January to -29, the lowest figure since March 2009 and only the sixth time in 35 years it has dropped by so much. Despite the oil price surge, oil stocks were mainly in the red.
The fall in the markets was overdue since after 8 weeks of rises on the U.S. markets, a correction was to be expected and the Egyptian situation was the catalyst for a sell off and profit taking. Further volatility can be expected this week and at times like this opportunities for buying can be excellent as uncertainty and the bears take hold of sentiment. 2011 will be a volatile year in the markets.
There has only been once change in the portfolio this week with the addition of Namibian copper miner, Weatherly International (WTI) (see post - http://contrarianinvestoruk.blogspot.com/2011/01/weatherly-international-namibian-copper.html).
Xcite Energy (XEL): It was good to see Xcite rising on Thursday and Friday after drifting for some many weeks following the oilbarrel.com presentation, finishing at £3.71. Given the market environment at the tail end of last week and general negative oil company sentiment it was reassuring to see a rise. There has been lots of rumours doing the rounds about Xcite this week, with FT Alphaville claiming that it was in takeover talks. The deadline for the rig signing is tomorrow and I am surprised they have left it to the wire. Director of Business Development, Charles Lucas-Clements said at the Oilbarrel conference that investors should not be worried and that the deal would be done but why wait until the 31st? Although I have dismissed the takeover rumours as just that, rumours, it does seem strange and as Lucas-Clements said at Oilbarrel, "don't sell you will see this share double or triple". Perhaps he was referring to February 2011 not a later date on a bid? I guess we'll find out soon enough! Hopefully an RNS tomorrow morning to explain what's happening. Even if a takeover is nonsense then news that they have got the Rowan Stavanger, instead of Rowan Norway, until Talisman Norway need it would be fabulous as production timings would be accelerated. If the Competent Person's report is due in February it would also be good to get an update on progress.
Bowleven (BLVN) - Wild oscillations in the share price this week with the price dropping to 330p on Thursday before rebounding to finish at 355p. News that JP Morgan had offloaded some of their stake and a feeling that this seller was out of the way took the pressure off. I am still surprised that the share price has dropped quite so much with so much good news from Cameroon but market sentiment is not as rosy as it was a few weeks ago.
Rockhopper (RKH) - Little change as the rumour mill starts on progress at the 14/10-3 exploration well. News likely later in the week. Frankly there's so much rubbish on the bulletin boards on RKH I can't even face ploughing through them!
Sirius Exploration (SXX) - A sharp sell off this week after the news from the North Dakota exploration drill (see post - http://contrarianinvestoruk.blogspot.com/2011/01/todays-sirius-minerals-action-is-par.html). The shares dropped 17% to 17.25p. I continue to hold for the reason's cited in the post above.
Imagination technology (IMG) - A 4% drop this week to 368p on no news. I continue to hold but may be one to cull this week as now close to 10% below my buy point.
Angel Mining (ANGM) - We still await the news of the dore shipment for the Nalunaq mine which was promised in January. Time running out? - news on Monday perhaps or another delay?
Weatherly International- a Namibian copper company with plenty of potential
Weatherly International (WTI) has been on my watch list for quite a while now and last week it was added to the Contrarian Investor UK portfolio on the market sell off precipitated by the Egyptian crisis. WTI is not an easy company to research with a complicated history and varied assets some in production others in development. It certainly is a turnaround story having come back from the brink in 2009 during the global financial crisis when its shares dropped to a couple of pence after being close to 30p in 2007. It has a full portfolio of assets, some already in production, so there is no exploration risk.
Background and assets
AIM listed, Weatherly International (WTI), was founded in 2005 by Australian Rod Webster (current Chief Exec).
In 2006 Weatherley bought the insolvent assets of Ongopolo, a Namibian copper producer, with the objective of turning around the performance of its mining and smelting operations. However, by 2008 a global collapse in copper prices meant the project was uneconomic despite production of 2645 tonnes of copper and the mines were mothballed or shut in October of that year with production ceasing in December 2008. Focus moved to the smelter which was subsequently converted to a stand-alone tolling business.
Weatherly has the following major mining interests in Namibia:
Copper assets :Working Otjihase, Matchless, Development: Tschudi open pit, Tsumeb West, Tsumeb Tailings
Zinc assets: Berg Aukas
It also has Manganese assets in Burkina Faso with partner Wadi but this has been put on hold due to licence and railway issues.
The existing licences and resources are sufficient to sustain a copper mining business capable of 20,000 tonnes per annum at an average industry cost of production for the next ten years. Mining was restarted in July 2010 at the Otjihase (3.2 million tonnes at 1.6% JORC) and Matchless mines (0.7 million tonnes at 1.8% JORC) (Central Operations) and full production is expected by the Second Quarter of 2011.
About Namibia
Namibia is a country in southern Africa whose western border is the Atlantic Ocean with a population of just over 2 million. It shares land borders with Angola and Zambia to the north, Botswana to the east and South Africa to the south and east. It gained independence from South Africa on 21 March 1990 following the Namibian War of Independence. Its capital and largest city is Windhoek. For an African country it is considered a stable, democratic country.
Funding
In mid 2010 a $7 million fund raising was complete with Louis Dreyfus Commodities Suisse S.A. Later in the year, the smelter (Kombat) was sold for $3.3million to Grove Export, contributing to a $9 million profit. In November 2010, the company raised further £4.4 million with a placing at 5p.Weatherly also has the benefit of $140 million of carried forward tax losses to offset agains future profits.
Major shareholders
Dundee Precious Metals 7.56%
Bank Windhoek 6.34%
RAB Special Situations Master 5.86%
Webster, Rod J 5.11% (Chief Exec. of Weatherley)
Gartmore Investment 4.73% (reduced following a disposal on January 12th)
Martinick, Dr Wolf G 3.60% (Chairman of Weatherly)
Ezenet 3.42%
Third party deals
In 2009 DPM (Dundee Precious Metals) subscribed for over 40 million shares in Weatherley at 3p per share for £2m, the company also signed a LOI (letter of Intent) with East China Mineral Exploration and Development Bureau (ECE) where they would subscribe for a 50.1% stake in WTI for £16 million. This latter deal with ECE was cancelled in 2010 when the Smelter assets were sold to DPM.
In July 2010, Weatherly signed a Memorandum of Understanding (MOU) with East China Mineral (ECE) to establish a joint venture company (ECE 65%, WTI 25%, WTI S/H 10%) to pursue development of Berg Aukas Lead/Zinc project in Namibia and set up a new UK company, China Africa Resource (CAR). In September, WTI signed a legally binding Implementation Agreement with ECE, whereby ECE will provide funding of £4.8 million for the transfer of the Berg Aukas mine to CAR. Weatherly will distribute 10% of its 35% shareholding in CAR to its shareholders as a dividend in specie.
The company entered into an off take agreement with Louis Dreyfus Commodities Metals in mid January 2011 for around 10% of total production to effectively de risk the initial start up phase. The forward sales contract entered is for 975 tonnes of copper to be delivered progressively over an 18 month period at a fixed price of $9,260 per tonne (current copper price is $9,489/tonne). Concentrate production is expected to commence in mid February and the first delivery under the forward sale contract is scheduled for the end of April.
Future development
The Tschudi open pit already already has enviromental approval. Production estimated at 11,000 tonnes of copper by 2013.
Financials
The company currently has a market capitalisation of £68 million with 535 million shares in issue. Debt is £4.6 million (as of 2010) with cash of $14.7 million (£9.2 million). The company Chairman (Martinick) and Webster (Chief Exec) own 46.6 shares, 8.7% of the company.
SWOT
Strengths
Producing copper assets at Otjihase (3.2 million tonnes at 1.6% JORC) and Matchless mines (0.7 million tonnes at 1.8% JORC) with minimum 5 year mine life
Copper price strong at close to $9500 per tonne
Low cost of production $3,258 per tonne at Otjihase and Matchless
No exploration risk
$140 million of losses able to offset future production
Good institutional shareholder base e.g. Gartmore and Blackrock
Namibian government large shareholder which may derisk licences etc.
Weaknesses
Success geared to copper price
Activity focused on one country - Namibia (but low risk for Africa)
Blighted history
AIM listed so volatile
Opportunities
Investors in Weatherley will get shares in CAR (China Africa Resource) when CAR is floated in AIM in Spring 2011- Weatherly will distribute 10% of its 35% shareholding in CAR to its shareholders as a dividend in specie.
Good development pipeline e.g. Berg Aukas, Tschudi open pit
Continued weakening of dollar boosts commodity prices priced in U.S. dollars
Threats
Delay in listing of China Africa Resources
Namibian political situation (considered low risk)
Delays in production ramp up at Otjihase and Matchless copper mines
Further fund raising (low risk due to forward selling contract with Louis Dreyfus Commodities Metals
Collapse in copper demand and price e.g. China
Outlook
If every falls into place during Q1 2011, things look very positive for Weatherly given its undemanding rating and low market capitalisation of just £68 million. With full scale production from Otjihase and Matchless of over 4000 tonnes in 2011 and close to 8000 tonnes in 2012 plus some interesting development projects such as Tschudi coming on stream in 2013 . So this should be a year to put its past mistakes behind it and look forward to 2012 and 2013. If we conservatively assume net profit of $4,500 per tonne of copper in 2012 and production of 7500 tonnes, that would make earnings of $34 million (£21.5 million).
The usual risks of investing in Africa have been reduced by Rod Webster's excellent work in getting the Namibian government to have a large shareholding and thus incentive for future success.
NOTE FOR THIS POST:
I may well have missed a pertinent fact for WTI. Please comment here or contact me directly to correct any errors or inform me of any additions. It's a complicated but compelling story. Thanks!
Background and assets
AIM listed, Weatherly International (WTI), was founded in 2005 by Australian Rod Webster (current Chief Exec).
In 2006 Weatherley bought the insolvent assets of Ongopolo, a Namibian copper producer, with the objective of turning around the performance of its mining and smelting operations. However, by 2008 a global collapse in copper prices meant the project was uneconomic despite production of 2645 tonnes of copper and the mines were mothballed or shut in October of that year with production ceasing in December 2008. Focus moved to the smelter which was subsequently converted to a stand-alone tolling business.
Weatherly has the following major mining interests in Namibia:
Copper assets :Working Otjihase, Matchless, Development: Tschudi open pit, Tsumeb West, Tsumeb Tailings
Zinc assets: Berg Aukas
It also has Manganese assets in Burkina Faso with partner Wadi but this has been put on hold due to licence and railway issues.
The existing licences and resources are sufficient to sustain a copper mining business capable of 20,000 tonnes per annum at an average industry cost of production for the next ten years. Mining was restarted in July 2010 at the Otjihase (3.2 million tonnes at 1.6% JORC) and Matchless mines (0.7 million tonnes at 1.8% JORC) (Central Operations) and full production is expected by the Second Quarter of 2011.
About Namibia
Namibia is a country in southern Africa whose western border is the Atlantic Ocean with a population of just over 2 million. It shares land borders with Angola and Zambia to the north, Botswana to the east and South Africa to the south and east. It gained independence from South Africa on 21 March 1990 following the Namibian War of Independence. Its capital and largest city is Windhoek. For an African country it is considered a stable, democratic country.
Funding
In mid 2010 a $7 million fund raising was complete with Louis Dreyfus Commodities Suisse S.A. Later in the year, the smelter (Kombat) was sold for $3.3million to Grove Export, contributing to a $9 million profit. In November 2010, the company raised further £4.4 million with a placing at 5p.Weatherly also has the benefit of $140 million of carried forward tax losses to offset agains future profits.
Major shareholders
Dundee Precious Metals 7.56%
Bank Windhoek 6.34%
RAB Special Situations Master 5.86%
Webster, Rod J 5.11% (Chief Exec. of Weatherley)
Gartmore Investment 4.73% (reduced following a disposal on January 12th)
Martinick, Dr Wolf G 3.60% (Chairman of Weatherly)
Ezenet 3.42%
Third party deals
In 2009 DPM (Dundee Precious Metals) subscribed for over 40 million shares in Weatherley at 3p per share for £2m, the company also signed a LOI (letter of Intent) with East China Mineral Exploration and Development Bureau (ECE) where they would subscribe for a 50.1% stake in WTI for £16 million. This latter deal with ECE was cancelled in 2010 when the Smelter assets were sold to DPM.
In July 2010, Weatherly signed a Memorandum of Understanding (MOU) with East China Mineral (ECE) to establish a joint venture company (ECE 65%, WTI 25%, WTI S/H 10%) to pursue development of Berg Aukas Lead/Zinc project in Namibia and set up a new UK company, China Africa Resource (CAR). In September, WTI signed a legally binding Implementation Agreement with ECE, whereby ECE will provide funding of £4.8 million for the transfer of the Berg Aukas mine to CAR. Weatherly will distribute 10% of its 35% shareholding in CAR to its shareholders as a dividend in specie.
The company entered into an off take agreement with Louis Dreyfus Commodities Metals in mid January 2011 for around 10% of total production to effectively de risk the initial start up phase. The forward sales contract entered is for 975 tonnes of copper to be delivered progressively over an 18 month period at a fixed price of $9,260 per tonne (current copper price is $9,489/tonne). Concentrate production is expected to commence in mid February and the first delivery under the forward sale contract is scheduled for the end of April.
Future development
The Tschudi open pit already already has enviromental approval. Production estimated at 11,000 tonnes of copper by 2013.
Financials
The company currently has a market capitalisation of £68 million with 535 million shares in issue. Debt is £4.6 million (as of 2010) with cash of $14.7 million (£9.2 million). The company Chairman (Martinick) and Webster (Chief Exec) own 46.6 shares, 8.7% of the company.
SWOT
Strengths
Producing copper assets at Otjihase (3.2 million tonnes at 1.6% JORC) and Matchless mines (0.7 million tonnes at 1.8% JORC) with minimum 5 year mine life
Copper price strong at close to $9500 per tonne
Low cost of production $3,258 per tonne at Otjihase and Matchless
No exploration risk
$140 million of losses able to offset future production
Good institutional shareholder base e.g. Gartmore and Blackrock
Namibian government large shareholder which may derisk licences etc.
Weaknesses
Success geared to copper price
Activity focused on one country - Namibia (but low risk for Africa)
Blighted history
AIM listed so volatile
Opportunities
Investors in Weatherley will get shares in CAR (China Africa Resource) when CAR is floated in AIM in Spring 2011- Weatherly will distribute 10% of its 35% shareholding in CAR to its shareholders as a dividend in specie.
Good development pipeline e.g. Berg Aukas, Tschudi open pit
Continued weakening of dollar boosts commodity prices priced in U.S. dollars
Threats
Delay in listing of China Africa Resources
Namibian political situation (considered low risk)
Delays in production ramp up at Otjihase and Matchless copper mines
Further fund raising (low risk due to forward selling contract with Louis Dreyfus Commodities Metals
Collapse in copper demand and price e.g. China
Outlook
If every falls into place during Q1 2011, things look very positive for Weatherly given its undemanding rating and low market capitalisation of just £68 million. With full scale production from Otjihase and Matchless of over 4000 tonnes in 2011 and close to 8000 tonnes in 2012 plus some interesting development projects such as Tschudi coming on stream in 2013 . So this should be a year to put its past mistakes behind it and look forward to 2012 and 2013. If we conservatively assume net profit of $4,500 per tonne of copper in 2012 and production of 7500 tonnes, that would make earnings of $34 million (£21.5 million).
The usual risks of investing in Africa have been reduced by Rod Webster's excellent work in getting the Namibian government to have a large shareholding and thus incentive for future success.
NOTE FOR THIS POST:
I may well have missed a pertinent fact for WTI. Please comment here or contact me directly to correct any errors or inform me of any additions. It's a complicated but compelling story. Thanks!
Friday, January 28, 2011
Oil surges on Egypt issues
Oil futures had their biggest one day increase since September 30th 2009 as the riots in Egypt raised concern that protests would spread to the rest of the Middle East and disrupt the supply of oil particularly through the Suez Canal. Opec tried to calm nerves with suggestions that it could increase output to offset any supply issues through the Canal.
After falling to a 2 month low earlier in the week, March delivery crude futures were up to $89 (a rise of $3.85 or 4.8%).
After falling to a 2 month low earlier in the week, March delivery crude futures were up to $89 (a rise of $3.85 or 4.8%).
Hosni Mubarek is refusing to resign as President of Egypt but he has dismissed his cabinet in an attempt to move public opinion in his favour.
Is the big pharma drug model broken for good?
Is the traditional "big pharma"pharmaceutical company model broken? Certainly in terms of shareholder returns excluding dividends, their share price performance has been woeful.
GlaxoSmithkline (GSK) (formed from the merger of Glaxo Wellcome of the U.K. and Smithkline Beecham of the U.S. in 2000) has seen its share price fall from around £21 at its inception to its current £11.43 (a decline of 46%). U.S. giant Pfizer (PFE) which has been on an acquisition spree over the last 10 years or so with the purchase of Warner Lambert in 2000, Pharmacia in 2003 and more recently Wyeth in 2009 has also had a torrid time. Prior to the acquisition of the Warner Lambert business (owner of the cholesterol blockbuster Lipitor (atorvastatin) in 2000 its shares were over $46, they now stand at $18.15 ( a decline of 61%). Astra Zeneca (AZN) (formed from the merger of U.K. Zeneca and Sweden's Astra in 1999) has seen its shares oscillate between £29 and £35 for the last decade, and they now sell for £30.42, £5 less than in 2001.
Astra's 2010 revenue was flat at $33.6 billion and earnings per share (EPS) rose by 5% to $6.71 driven by cost cutting. But Quarter four revenue was down 3%. Growth in emerging markets is helping to offset patent expiry issues in the short term but there is more to come and cost cutting in areas such as sales has helped to drive profitability. To keep shareholders happy, the company increased the dividend by 11%,
and having bought back $2.2 billion of its shares in 2010 the company is targeting $4bn of share repurchases in 2011 to help drive the earnings per share growth into positive territory.
Pfizer has not had much better luck. Its acquisition of Pharmacia UpJohn (formed from the merger of U.S. Upjohn and Swedish Pharmacia in 1995) for $60 billion in an all share deal went badly wrong when two of its key blockbuster arthritis drugs called COX2 inhibitors were found to be associated with potentially serious side effects relating to increaed risk of heart attack and stroke. After an FDA review in 2005, Celebrex (celecoxib) had its labelling amended and second generation COX2 Bextra (valdecoxib) was withdrawn from sale. Bextra sales were expected to be in excess of $2 billon per year. In mid 2006, Pfizer made the decision to increase its reliance on the riskier prescription pharmaceutical business by selling its over-the-counter medicine business (including Listerine, Benylin, Sudafed) to Johnson & Johnson (McNeil). On a positive note it achieved a good price of $16 billion compared with sales of $3.7 billion as it was the one of the last crown jewel over-the-counter global businesses. J&J triumphed against other bidders such as GSK, Novartis and Reckitt Benckiser. The purchase (merger) with fellow U.S group, Wyeth (formerly American Home products which was due to merge with Warner Lambert in 2000 before Pfizer acquired Warner Lambert) is seen predominantly as a cost saving marriage, although Wyeth's vaccine and consumer health business help to diversify the group back from traditional prescription products.
Investors in pharmaceuticals have traditionally been income seeking through the high dividend yields they offer e.g. Astra 5.5%, Pfizer 4.3%, GSK 5.8%. As has been illustrated by the commentary, capital growth has certainly not been delivered. The series of mega-mergers has clearly failed to deliver shareholder value despite all the promises of increased R&D productivity and cost cutting. Tougher regulation and increasing R&D costs have not helped the sector as has increased pressure from ever more nimble generics companies e.g. Teva, Sandoz (owned by Swiss Pharma Novartis). Despite spending more and more on research, pipelines look anaemic.
Part of the reason for the R&D problems is that centralisation has stifled creativity and innovation. Also easier molecular drug targets have been found and exploited. Biotechnology looks more fruitful but this is not without its problems and traditional pharmaceuticals companies have had to resort to takeovers to exploit this area in general e.g. Roche's takeover of Genentech in 2009. Although science continues to advance at an incredible pace, for example, the Human Genome project (HGP) was completed in 2003 after 13 years of work, the profit potential of these developments has yet to be truly felt by the pharmaceutical companies. New areas of science are themselves beset with issues such as how to test these new molecules on human subjects, particularly those that change the human gene to prevent or cure disease such as cancer. No doubt these problems and challenges will be solved but they will take time, maybe even decades before we see biological drugs which can prevent an at risk individual contracting a certain disease. If it could be cracked, the profit potential is incredible.
Big pharma needs to change to really deliver shareholder value. Forget the mega mergers (which have destroyed value in most cases). Companies like Novartis and GSK are ahead of the game with derisking their prescription businesses by moving into emerging markets, developing generic or over the counter divisions i.e. diversification. But even they are not going far enough. Development of a true biotechnology focus seems key in the new world. Reorganising R&D to drive true innovation rather than me-too's is also vital. I wonder how many CEO's in big pharma would be around if they were measured and remunerated on earnings per share growth (excluding share buy backs)? It is interesting that if you compare shareholder returns for an industry at polar opposite end of the spectrum such as tobacco but with similar high dividend yields, the differentials are astonishing. For example, British American Tobacco (BAT) has grown its share price from £3 to £23 since 2000. Household products company, Reckitt Benckiser (RB.) has grown its price from £8 in 2000 to £34. Enough said.
(NB. Historical earnings per share is not available but share price is used for illustrative purposes)
(NB. Historical earnings per share is not available but share price is used for illustrative purposes)
Xcite, lack of rig news
Interesting that no news on rig contract for Rowan Norway so far with deadline on Monday to avoid break fee of $4 million. Bit of speculation but could be either a) some big issue with fee or contract which has created a stumbling block and delay b) Xcite negotiating with Talisman to take early delivery of Rowan Stavanger until they need it then use Norway c) Xcite are in takeover talks and rig tied up in negotiation d) they've found another rig from another supplier
Option A seems unlikely after so many months! Intriguing indeed!
Big buyer still in background who picked up shares all day. Wonder who?
Option A seems unlikely after so many months! Intriguing indeed!
Big buyer still in background who picked up shares all day. Wonder who?
Weatherly International purchase
With a 6 percent fall today on Weatherley International (WTI) I have taken the opportunity to buy into this interesting Namibian copper play. It's been on my watch list for a while and the drop looks Market Maker driven (on general market sentiment) as the sell volume hasn't been excessive.
Momentum continues on Xcite
Xcite Energy (XEL) has had another good start, currently up 10p to 376p. Some nice buys going through, some in 25 and 50k blocks.
Rig news is due imminently, either today or Monday with rig signing deadline set for January 31st.
Going to be action packed few days. Rockhopper well results just around the corner (probably mid next week but maybe sooner) and Angel Mining due to make announcement on 1st shipment of gold dore by end of the month (barring any further delays of course!).
Rig news is due imminently, either today or Monday with rig signing deadline set for January 31st.
Going to be action packed few days. Rockhopper well results just around the corner (probably mid next week but maybe sooner) and Angel Mining due to make announcement on 1st shipment of gold dore by end of the month (barring any further delays of course!).
Thursday, January 27, 2011
Portfolio has good day on little news but plenty of rumours
The majority of the Contrarian Investor UK portfolio was well up today. The strongest performer was Xcite Energy with a 3.5% gain, but Rockhopper (+2.7%) and Bowleven (+2.8% after being as high as 5% up in the morning) all had a good day after the falls of earlier in the week. Speculation was the order of the day - Xcite takeover rumours surfaced again (seems unlikely until the field reserves have been confirmed by the Competent Persons Report), with Bowleven it was that the background seller was gone (JP Morgan) after an RNS confirmed a sale of shares by JPM over the last 6 weeks.
For Sirius Minerals it was good to see a recovery in the share price in the afternoon to move from down 5% to close up 5%. Seemed to be purely on sentiment changing that North Dakota was at its end game.
Xcite seemed exceptionally strong at the close and I have moved some funds from Bowleven to Xcite since this seems to be the most likely to move strongly upward in coming days. Interesting to note that there were two 41,000 share buys during the day, but only at a small premium to the prevailing price.
It should also be an interesting day tomorrow and Monday/Tuesday for Rockhopper given their latest well is close to reaching a potential hydrocarbon depth. It rose as much as +15p today before settling +9.5p. Again it was down first thing.
Nice investing day for a change. You would have thought the stock market ws doomed after the last week on many of the holdings!
For Sirius Minerals it was good to see a recovery in the share price in the afternoon to move from down 5% to close up 5%. Seemed to be purely on sentiment changing that North Dakota was at its end game.
Xcite seemed exceptionally strong at the close and I have moved some funds from Bowleven to Xcite since this seems to be the most likely to move strongly upward in coming days. Interesting to note that there were two 41,000 share buys during the day, but only at a small premium to the prevailing price.
It should also be an interesting day tomorrow and Monday/Tuesday for Rockhopper given their latest well is close to reaching a potential hydrocarbon depth. It rose as much as +15p today before settling +9.5p. Again it was down first thing.
Nice investing day for a change. You would have thought the stock market ws doomed after the last week on many of the holdings!
FT Alphaville Xcite bid rumour
NH
NH
Probably complete garbage and with only 715,000 shares traded the market seems to agree.
Bowleven out of doldrums too
Sense has returned at last to Bowleven (BLVN), up 5% with good volume after the days of big falls from the 400p zone. An RNS just before 9 confirmed the main reason for this fall. Major shareholder, JP Morgan, have been selling shares over the last 6 weeks. They now own just below 10% of the company, down 1% of so. Will be interesting to see if this is it or whether their stake continues to go down. The market seems to think the seller is out of the anyway.
I guess that Heritage Oil's gas, rather than oil find, in Iraq and subsequent 30% drop also knocked confidence in the small cap oil/gas sector. We know that Bowleven has oil and plenty of it. This is no Heritage.
I guess that Heritage Oil's gas, rather than oil find, in Iraq and subsequent 30% drop also knocked confidence in the small cap oil/gas sector. We know that Bowleven has oil and plenty of it. This is no Heritage.
Xcite looking good on Level 2
Steady buying of Xcite Energy this morning, just ticked up to +7p, despite the wide spread with good depth on the buy side and offer slowing rising. Seems the Market Makers don't know which way this is going - up? Volume rubbish so far.
Xcite's Lucas-Clements talking at Offshore summit on 1st February
This would be an interesting presentation to see Charles Lucas-Clements in action.
Offshore Production Technology Summit 2011
31st January - 1st February 2011
Lancaster London Hotel, London, UK
Maximising growth through innovation
31st January - 1st February 2011
Lancaster London Hotel, London, UK
Maximising growth through innovation
Case Study: Xcite Energy - Pre-production planning and development of an offshore heavy oil field
Understanding the unique nature of the venture
Assessing the technologies involved:
Horizontal well technology
Separation technology
Charles Lucas-Clements, Director of Strategy and Business Development, Xcite Energy ResourcesUnited Kingdom
Understanding the unique nature of the venture
Assessing the technologies involved:
Horizontal well technology
Separation technology
Charles Lucas-Clements, Director of Strategy and Business Development, Xcite Energy ResourcesUnited Kingdom
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