Xcite has a mini flash crash as CPR announcement moved back

Wow what a day for Xcite Energy!! All seemed to be stable this morning with the share price barely budging at around 392p to buy. Then the company presentation started at the Oilbarrel forum at 12.30pm and things starting moving down. First a few pence and then before I knew it I was choking on my sandwich as the share price briefly hit 350p, down 40p or so at just after 1pm. Suddenly

the margin on my spread bet account was looking rather perilous with an email from IGindex arriving in my inbox before long asking for a deposit (note to myself to review my emergency deposit requirements).

Xcite had in effect suffered its own “flash crash”, similar in nature, but not as severe as the Rockhopper (RKH) one back in June 2nd 2010. The price quickly bounced back as I desperately tried to buy more shares below 355p to no avail and actually went back into the mid 380p range around 1.30pm before settling at its current 376p, down 4.4% on the day.

What was the reason for the precipitous fall? Well the severe drop seemed to coincide with news being received from the oilbarrel conference that the CPR (Competent Persons Report) would be available in February or even March rather than the January timescale originally anticipated (thanks to Hedge Fox on iii.co.uk for his live posts from the conference).

Initial sales byprivate investors on this news seems to have led to a massive loss of
liquidity (as it did with Rockhopper’s “flash crash”) probably due to a sudden but severe lack of
buyers and overwhelming sells, large numbers of stop losses being triggered and a likely degree of Market Maker manipulation who swung the price down heavily to mop up sales. Like the Rockhopper situation, I am sure many holders were left out of pocket as the price bounced back.

Do not use stop losses on AIM stocks this is the golden rule in Contrarian Investors’s humble
opinion, the extreme volatility on some of these stocks can be very expensive if they are used. Fine on FTSE stocks, but on stocks controlled by Market Makers investors need to be disciplined and watchful and avoid them.

Looking at the presentation from the oilbarrel conference (http://www.xcite energy.com/docs/XEL%20General%20Jan11%20Oilbarrel%20v3%20FINAL.pdf
) the only disappointment is the delay in the CPR release, otherwise things
look increasingly positive with probability of success now 90%+ (I think this is on the low side given the strong flow test results)

Key points from the presentation include:
9/3b-6, 6z appraisal well:

• Potential resource of 950 million barrels (at least 750 million barrels)
• 120-250 million barrels of recoverable oil (an increase from 160mm barrels)
• Successful commercial flow test in Dec 2010
• Shows mobility and reservoir properties are at or above the high end of expectation for this part of the reservoir
• The techniques to drill 500m+ horizontal well and achieve stabilised flow rates worked according to plan
• Pilot well confirmed upside reservoir on Eastern flank
• Horizontal well of over 500m; flowed for over 36 hours; stabilised at multiple flow rates
• Multi-staged flow test reached 2900 bopd (pre-well max expectation of 2800bopd); test was surface equipment limited 
• 6z well had a flow capability of 3000 to 3500+ bopd with a reasonable and sustainable drawdown
• Test results should enable the movement of ‘Contingent Resources’ to ‘Reserves’ for First Stage Production plan.

Next steps
Short-term:

• Assimilate and update current reservoir model with new well information to:
• Produce an interim PIIP update (pre full-scale structural model)
• Produce an interim Reserves assessment to progress the FSP plan
• Complete jack up rig contract for the Rowan Norway unit (drilling &amp production)
• Complete design and order process equipment for FSP (full scale production)

Medium-term:

• Upgrade full reservoir model with new well information to:
• Produce a new PIIP using the new structural model
• Produce an updated recoverable Reserves assessment based upon new full scale model
• Submit Field Development Plan to the Government for approval for FSP and beyond
• Identify projects to expand Block Reserves, eg EOR (full field and new satellites)
• Deliver ‘first oil’ from FSP

Late 2011/early 2012 target date for FSP start up. In addition Charles Lucas-Clements (Director of Strategy and Business Development for XER) stated that he believed the CPR update should show "Most likely recovery estimate" at 200million barrels of oil with this figure being described as "conservative". He said that could increase by 50-100% (300m-400m) - "We think there is room for the share price to double or treble and this should be achieved in the next 12-18 months as a farily safe bet"  and "We know there's much more oil, but we can't say how much more at this stage". It will be established as part of the ongoing development.(ref. whowantstomeamill iii who was present at the event) .This would be incredible and a cause for much confidence. So much for the 10% share price drop during lunch!!

What a day for Xcite Energy! I was in need of a bit of portfolio stimulation this morning after the
lack of share price movement, but this was a little too much. It didn’t help that there was a cock up in the RNS being released this morning about the presentation being available on the Xcite web site and it was nowhere to be seen for at least an hour. The directors have been great at managing news flow so far, but I ask them to take note today since I think a great many investors lost money
unnecessarily. It also shows how illiquid Xcite energy is and how much volatility there is due to its large private investor base which means huge swings in the share price can occur on news of any sort. The sooner we get off AIM and onto the main FTSE market the better with some more institutions on board to give greater stability to the share price action (BOD, if  there's any possibility at all you're reading this blog perhaps you can make an announcement about intention to leave AIM soon??)

I love the excitement of AIM shares, but on days like this it can be a little too Xciting!! So we await the rig announcement (due any day), CPR with potentially significant resource upgrade in February (or March worst case), plus announcements relating to preparation for start of production by end of year (rig should arrive in October). Sounds good to me and glad I managed to pick up a few extra at 370p by selling some Angel Mining.

Xcite RNS re. Oilbarrel conference - intriguing!

Xcite Energy (XEL) have just released an RNS saying the 12.30 Oilbarrel presentation is available shortly on their web site. The only reason I can see for this RNS is that the presentation itself has some "interesting" info. Mmmm. We didn't see an RNS for the last Oilbarrel forum in November but usually price sensitive information cannot be put into a presentation without a specific RNS - unless an RNS will come out at the time the meeting starts? Can't see the document yet anyhow, I guess due to a technical glitch. If only there were some £ left, but fully committed already.

The tension is killing me on Xcite Energy

Sorry not much to blog about this morning.  So here's a ramble.

Still no RNS from Xcite Energy (XEL). Shares flat as a pancake this morning. A few hours and they'll be presenting at oilbarrel. com conference in London but of course they can't reveal any market sensitive information. So will there a RNS later this morning? If not we will have to have one tomorrow on the rig at the very least and hopefully a lot more. Perhaps the resources upgrade is so massive that the board couldn't get out of bed with their hang overs from the celebration party??!!

Put a few more in my ISA yesterday on the minor price drop. Now a case of watching and waiting.

p.s. Frustrated I can't be at Oilbarrel because of a meeting. Groan!

Angel Mining CFO awarded 10 million shares at 5.8p

Angel Mining (ANGM) have announced late in the day today that their CFO Kevin McNair has been 10 million shares in the company's incentive share plan at 5.89p. Hell of an incentive to move the share price above 6p! A lot of buys late in day so hopefully back to a blue day tomorrow after the slippages this week back from the 7p level. Disappointing that the BBC Greenland documentary had no positive impact, despite show casing the company's Black Angel mine.

With Angel Mining gold production underway at Nanulaq this remains a very strong buy in my opinion.You get a gold mine producing $32 million in sales this year plus a potential $1.5 billion zinc/lead mine at Black Angel thrown in for free.

Xcite confirmed at Oilbarrel forum tomorrow

40th Oilbarrel Forum Thursday 13th January 2011

2:16 PM (28 minutes ago)

Amy Clayton

Good Afternoon,

40^th Oilbarrel Forum 13^th January 2011 – tomorrow from 9am at our NEW VENUE

As you’ve registered to attend tomorrow’s Oilbarrel Forum, here is a quick e-mail to confirm your booking and remind you that the first event of 2011 will take place at our new venue, for which the address is:

Merchant Taylors' Hall
30 Threadneedle Street
London

EC2R 8JB

The nearest tube station is Bank. For a map, please click here.

As usual, registration is at 9am with the first presentation starting at 9.30am, and the event will be followed by a complimentary buffet lunch – a great chance to chat to the speakers as well as other investors and industry professionals attending the show.

The presenting companies at tomorrow’s event include (in presenting order):

Neon Energy

NoHotAir.co.uk

Coastal Energy

Gulf Keystone Petroleum

Symphony Environmental

Xcite Energy

If you have any queries you can reach me on 020 7562 3398.

Kind regards,

Amy

Amy Clayton

Website & Communicationsend_of_the_skype_highlighting

Minesite.com

Oilbarrel.com

Level 3, 3 London Wall Buildings, London Wall, London, EC2M 5SY

Some investment ideas once Xcite meets target price

I'm been starting some research into some portfolio additions once Xcite hits my target price of £5.50 or so and I can more sensibly diversify the portfolio. Struggling to find decent AIM opportunities outside mining and oil. But the search continues. Ideas welcome.

On my list so far are:

1. Sirius exploration (SXX) - but share price rise has been pretty aggressive over last few days
2. Rockhopper (RKH) - will be watching carefully once new well has spudded
3. Range resources (RRL) - some geopolitical risk to be concerned about e.g. Georgia
4. Coastal Energy (CEO) - hitting 52 weeks high which Contrarian Investor dislikes as entry point

Dull day so far for portfolio

After getting up with anticipation every morning this week for an RNS from Xcite Energy, nothing so far. The shares dropped 4.5p initially but now are stable down 1.5p at 385-395p but the spread is swinging around considerably. I was a little surprised that the drop wasn't much greater but I suppose everyone's playing the waiting game and not daring to trade in and out with news due any time soon on the Bentley resources. I still believe an RNS will be issued before the oilbarrel.com conference tomorrow but the board of directors are pretty astute in releasing information only when the i's have been dotted and t's crossed. The rig news must come before the 15th to avoid a $4 million penalty.

Angel mining and Bowleven are both pretty flat today. I guess its going to be a low adrenaline day! Come on Xcite board give the Contrarian a lovely RNS this morning!

Xcite and Bowleven Market Maker games

After a 4% decline in Bowleven (BLVN) yesterday, despite the seemingly positive news, shock horror it is now up 16p or 4%. Looks like another classic case of AIM stock manipulation with the Market Makers tempting nervous private investors to dump their shares yesterday and "sell on the news" and of course there was the usual nonsense on the bulletin boards that Bowleven was going down, down, down. The Market Makers love it because as investor nerves grow, trading increases, volume of sales grows which is great because they make money through the spread (the difference between the buying and selling price). Plus they can gather together some stock because they are likely to have some big institutional orders to fill or will have shortly.

Now on Xcite (XEL) it looks like a similar story. News is expected anytime on the rig (deadline is the 15th of Jan) and hopefully the CPR (the Competent Persons Report) for the Bentley North Sea field upgrade. The last 2 days the shares have failed to break the £4 barrier on relatively low volumes so instead the market makers thought they could generate some business through more trades by walking the price down. Xcite is currently down 9.5p or 2.2% as those nervous private investors give away their valuable shares to the Market Makers who will stash them with thanks for the time when the RNS's will come (and they will.....hours....days who knows) and then they can sell them back at a much higher price and fill their big orders. 

Please don't be duped. Xcite is not going down to 300p. They don't have a duster, the flow test wasn't a

dud, the CPR won't come in March etc. etc. I'm waiting to hear the rumour on iii.co.uk that the rig has caught fire or some other nonsense. Keep your nerve. Contrarian Investor is!!

Xcite maintains positive momentum

The third straight day of gains looks to be on the cards, with Xcite Energy currently up 8p at 397p to buy. A few more pence and it will be the 52 week high (though it hit 425p intra day on the flow test results).

Looking at the timing of RNS releases, the company does not necessarily release them at 7am so news could be anytime and lets not forget the deadline for the signing of the rig contract is the 15th.

Position in significant profit but not even thinking of selling one.

Bowleven looks to be selling on news but opportunity beckons

After this morning's RNS which to me looks positive, although not "transformational", the Bowleven share price initially spiked up to 415p but profit taking has swiftly taken it down to its current  381p, down nearly 4% on the day. A case of "sell on the news". But I am taking this opportunity to top up my position since I believe there may be further good news to come with the sidetrack well. Current market cap is around £820 million, $1.2 billion, which implies that each barrel is valued at around $5 with potential upside. With crude selling for over $90 a barrel, looks a good share to tuck away for a few months.

Further good news from Bowleven

A drilling update from Bowleven (BLVN) this morning has confirmed further drilling success at its Cameroon Sapele 1 well. They have now drilled to a current target depth of 4,539 metres and has drilled through the Cross-cut event and into the Cretaceous.Estimates of oil in place have increased from 40 -290 million barrels to 65 to 430 million barrels in the Deep Omicron, mean 217 million barrels.

Also further upside possible by the look of it, "it is believed that the well has encountered additional sands at the current TD. Further Cretaceous targets have also been identified and consequently, drilling is planned to continue upon completion of current logging activities."

Looks like the last minute spread bet punt will start to pay off this morning. Should ease the tension/anticipation of waiting for news from Xcite Energy, which has no RNS out today as yet.

Angel Mining Black Angel Mine just featured on BBC2 "Arctic with Bruce Parry"

Just been watching BBC 2's "Artic with Bruce Parry". Brucy spent some time in the summer of 2010 with Tim Daffern (resigned to be CEO of gold miner Hambledon Mining (HMB) in September 2010) at the Black Angel mine owned by Angel Mining (ANGM) in the Disko bay area of Greenland. Tim confirms that there are reserves of $1 billion of  lead and zinc with1000 pillars of $1.5 million dollar zinc seams. The programme shows the building of the cable car entrance to the mine. Interesting stuff!

I hate it when the markets are closed

I'm waiting for the markets to reopen tomorrow with great anticipation with the news due from Xcite Energy and Bowleven. Even if RNS's aren't forthcoming on Monday, then its only a matter of time.

Things are nicely primed for positive share price action. I took the decision to close some of my CFD (contracts for difference) positions on Friday and open spread bets on IG INDEX instead since this strategy means any large move up in Xcite will mean no capital gains tax liability. CGT is now 28% for higher rate tax payers and I don't fancy handing over a third of my Xcite gains to the Inland Revenue. On September 2011 spread bet positions the premium was pretty reasonable late on in the week for Xcite. Annoying though that the deposit requirements on both Xcite and Bowleven are high given their AIM status.

A lesson I've learnt with both CFD and spread bet trading is to leave plenty of deposit in your account to avoid any problems if things go wrong and they start closing positions for you because of margin calls. Before the 2008 stock market falls, they used to call you to tell you to deposit more funds. Now they just close them without informing you. I can imagine there were a lot Rockhopper investors caught out when the "flash crash" happened last year and there margin was exhausted when the price collapsed only to be in utter dismay when the share price recovered. This is why I do not use stop losses on AIM stocks, the volatility can be so enormous that you can be caught out whilst you're in a meeting or getting a coffee! Juggling things to maximise your position but leaving yourself some security in case things go wrong can be a tricky balance.

U.S. earnings season kicks off on Monday

Aluminium producer Alcoa (aa.) kicks off the Q4 U.S. earning season next week and expectations are high with most analysts pencilling in average S&P 500 earnings growth of 30% plus.  So the markets should be particularly dynamic next week on both sides of the Atlantic. It seems unlikely that companies will miss their earnings from 2010 and therefore expect some positive momentum in the DOW and S&P 500 which will spill over to Europe.

There is so much to worry about though, the rise in commodity prices will inevitably feed back into higher inflation so interest rates will have to start rising eventually. The combination of rising interest rates and stagnating growth isn't a particularly enticing concept to look forward to. I reiterate my point again that 2011 is about stock picking and trading not buying and holding.

Portfolio review of the week - 8th January 2011

My first week after returning to writing the Contrarian Investor UK blog has been a good one. It was a difficult decision to restart posting given the constraints on my time but I have been encouraged firstly by the portfolio performance, by the significant traffic coming to the site and some of the positive comments left by readers. As with any blog, you sometimes hit the wall of despair, but for now I will persevere with posts and see how the thing goes.

I have thrown my usual rules of portfolio diversification out of the window at the moment with my substantial holding in North Sea oil company Xcite Energy (XEL). Whilst being reckless in some respects, I have not found such a compelling risk/reward ratio on an AIM stock for a very long time and in particular  the share price weakness following the excellent flow test results for the Bentley field was one of those rare"once in a lifetime" investing opportunities.  Despite being massively de-risked at the point that Xcite announced a flow test of 2900 barrels per day i.e. of field commerciality,  I could pick up shares for around 350p, only 20-30 p more than when the shares had a huge risk of failure still hanging over them as investors waited to see if the company could actually extract the 160 million barrels of oil plus from the field. The market makers had a field day, as private investors piled out of Xcite in the New Year in to other stocks. I had not imagined that I would be able to buy Xcite for less than 400p following flow test results this good, but sometimes the markets aren't logical and that's when easy money can be made.

So next week will be an exciting week for Xcite. The oilbarrel.com conference next Thusday the 13th and the deadline for the signing of the rig on the 15th make me believe that it is very likely that we will see at least 2 RNS's - 1) an updated CPR (competent persons report) to upgrade the Bentley field oil reserves 2) signing of the rig contract with a timeline for the start of field commercialisation. The board of directors have been expert in managing the flow of information to investors and I'm sure they won't less us down now. The share price rebound yesterday and Thursday seems to illustrate that I am not alone in expecting some good news update early next week.

Of course we're already seeing rumours swirling of Statoil bids etc. I'm sceptical about these so early in the game but I guess you never know. Perhaps someone is thinking in an M&A department somewhere that they can pick up Bentley on the cheap.

Greenland gold miner, Angel Mining (ANGM) also had a strong week. With the share price close to breaking 7p, up from 5.5p, for most of it. I am awaiting the BBC documentary about Greenland on Sunday night with interest which features their Black Angel zinc mine. Though my holding is far less large than Xcite, I am confident that as the year progresses the share price will continue to move up albeit  with some volatility. This is the way with these sub 10p AIM stocks.

Finally, as I posted yesterday, I have made a speculative investment in Cameroon oil explorer Bowleven (BLVN) as further results from its Sapele 1 well are imminent. Though there is a risk in this investment if the company update is disappointing the downside risk is somewhat minimised by the RNS's already released in November about the size of the existing discovery. The potential upside could be massive, so a cheeky spread bet was placed and though I have less confidence than Xcite the risk/reward ratio looks good.

Once Xcite reaches my target price I will look to move funds into other stocks on my watch list assuming the market corrects enough for me to take advantage of any compelling valuations. However, for now I wait for the arrival of next week with great anticipation with all the potential news flow from all the companies in the Contrarian Investor UK portfolio. Keeping my fingers crossed for a champagne week to ease the winter blues!