Britain will take up to half the revenues if drilling programme is successful
By Brian Brady, Sunday, 28 February 2010, Independent
Britain and the Falkland Islands have made a deal to split any proceeds from the controversial oil drilling programme in the South Atlantic.
UK ministers have revealed that the Executive Council in Port Stanley had "offered to share some of any future hydrocarbons-related revenues", which could be worth billions of pounds. If a 30-day drilling programme begun by a British firm last week strikes oil, the yield from corporation taxes and royalties in the fields north of the islands alone could be more than £100bn.
A Foreign Office source said the Government had already begun negotiations over the eventual share-out, and had reached an "understanding" that could see the Treasury taking up to half the profits. Officials have pointed to Britain's multimillion-pound programme of support to the islands over almost three decades since the war following Argentina's invasion in 1982.
Argentina, which disputes the British claim to the Falklands, last week asked the United Nations Secretary General, Ban Ki-moon, to bring the UK into talks over the islands' sovereignty. The Foreign Secretary, David Miliband, said British oil exploration in the area was "completely in accordance with international law".
Ministers have been cautious about who would benefit from the bonanza since the potential reserves were first highlighted almost 20 years ago. The Falklands Executive Council offered in 1994 to share any proceeds as a contribution towards the defence of the islands. The islands' ruling executive council later warned that the spectacle of the Treasury taking oil revenue would be "a propaganda gift to the Argentines, who would say it proved that Britain had an exploitative, colonial attitude to the Falklands".
The Liberal Democrat MP Bob Russell said: "They have been sustained since before the Falklands war to the tune of hundreds of millions of pounds from the taxpayer. It is only right that, if they are going to become instant millionaires, they should share that with the UK and with neighbouring British territories such as St Helena and Ascension Island."
Sunday, February 28, 2010
Portfolio Update - February 28th 2010
A relatively benign week on the markets but a good month for equities in general. The FTSE 100 rose 76 points to 5,354 on Friday, whilst U.S. stocks finished modestly higher (DOW JONES Industrials 10,325 +4 points) to have their best month since November (DOW +2.6%, NASDAQ +4.2%, S&P 500 +1.5%, FTSE 100 +2.6% for the month)
On Friday, the U.S. Commerce Department reported that GDP grew at a 5.9% the fourth quarter of 2009, the fastest rate since the third quarter of 2003 confirming the the American economy is solidly moving out of recession. This compared with the U.K.’s revised GDP of 0.3%.
The portfolio was hit hard this week by the disappointing news from Nighthawk Energy (HAWK), highlighting the risks and rewards of investing in small cap stocks. Contrarian Investor UK is currently assessing some new ideas for the portfolio with a view to rebalancing to a more diversified portfolio.
Nighthawk Energy (HAWK) – On Tuesday, Nighthawk finally issued a more comprehensive report on the Jolly Ranch shale oil and gas play in the U.S.. The results were poor, with the field still producing little more than 150 barrels per day (BPD) despite promises as the Annual General Meeting (AGM) that production would be closer to 800-1000 by quarter one 2010. The horizontal drilling technique used on some of the wells to extract oil seems to have been relatively unsuccessful meaning that HAWK is looking at the economics of the field based on standard vertical drilling. The company had $18 million of cash and liquid assets left after the fund raising in 2009. Contrarian Investor UK sold his position on the news at 27p, with the stock finishing the week at 25p. A 30% loss was painful given the commitment in time to this company but I am concerned that the “proving up” of the Jolly shale oil field will take the company into late 2010 where cash resources will become stretched and a further fund raising will be necessary. It is also somewhat concerning that private partner Running Foxes, who currently fund 50% of the drilling work, may not have an appetite for continued high investment in Jolly. Although HAWK may decide to sell its Revere or Cisco Springs fields, this stock is now looking very high risk and I disappointed in the results from Jolly Ranch after the strong convictions expressed at the AGM by MD David Bramhill and Steve Tedesco (from partner Running Foxes). At 25p, HAWK may still produce a return for buyers at this level but although it may go to 40p, sub 20p may also be just round the corner for this company which seems to thrive on shareholder disappointment.
Falkland Oil drillers (Desire Petroleum, Falkland Oil and Gas, Borders and Southern) – The Falkland Oil explorers all slipped this week, as the Argentinean government continued to apply political pressure through the Rio Summit and U.N. for the British government to stop further drilling around the Islands. This political pressure has been to date unsuccessful but added to the relative risks of these shares. I continue to hold DES, FOGL and BOR on expectation of results from the Ocean Guardian rig in March despite all the volatility in these companies.
ITV (ITV) – ITV continues it’s move back up and finished at 54p, following a positive outlook from Scottish Television company STV (which was formerly known as SMG). STV chief executive, Rob Woodward, forecast that the national TV ad market was likely to be up between 4 and 8% year on year in April.
GW Pharma (GWP) – Approval for cannabis spray, Sativex, is still expected in Q1 and this remains Contrarian Investor U.K’s largest holding.
Amgen (AMGN) - A quiet week for Amgen with the stock finishing at $56. Further news on osteoporosis drug, Prolia, still awaited in quarter one 2010.
Micron Technology (MU) – The stock moved back over the $9 mark as the outlook for DRAM memory chips continue to improve in the the second half of 2010.
On Friday, the U.S. Commerce Department reported that GDP grew at a 5.9% the fourth quarter of 2009, the fastest rate since the third quarter of 2003 confirming the the American economy is solidly moving out of recession. This compared with the U.K.’s revised GDP of 0.3%.
The portfolio was hit hard this week by the disappointing news from Nighthawk Energy (HAWK), highlighting the risks and rewards of investing in small cap stocks. Contrarian Investor UK is currently assessing some new ideas for the portfolio with a view to rebalancing to a more diversified portfolio.
Nighthawk Energy (HAWK) – On Tuesday, Nighthawk finally issued a more comprehensive report on the Jolly Ranch shale oil and gas play in the U.S.. The results were poor, with the field still producing little more than 150 barrels per day (BPD) despite promises as the Annual General Meeting (AGM) that production would be closer to 800-1000 by quarter one 2010. The horizontal drilling technique used on some of the wells to extract oil seems to have been relatively unsuccessful meaning that HAWK is looking at the economics of the field based on standard vertical drilling. The company had $18 million of cash and liquid assets left after the fund raising in 2009. Contrarian Investor UK sold his position on the news at 27p, with the stock finishing the week at 25p. A 30% loss was painful given the commitment in time to this company but I am concerned that the “proving up” of the Jolly shale oil field will take the company into late 2010 where cash resources will become stretched and a further fund raising will be necessary. It is also somewhat concerning that private partner Running Foxes, who currently fund 50% of the drilling work, may not have an appetite for continued high investment in Jolly. Although HAWK may decide to sell its Revere or Cisco Springs fields, this stock is now looking very high risk and I disappointed in the results from Jolly Ranch after the strong convictions expressed at the AGM by MD David Bramhill and Steve Tedesco (from partner Running Foxes). At 25p, HAWK may still produce a return for buyers at this level but although it may go to 40p, sub 20p may also be just round the corner for this company which seems to thrive on shareholder disappointment.
Falkland Oil drillers (Desire Petroleum, Falkland Oil and Gas, Borders and Southern) – The Falkland Oil explorers all slipped this week, as the Argentinean government continued to apply political pressure through the Rio Summit and U.N. for the British government to stop further drilling around the Islands. This political pressure has been to date unsuccessful but added to the relative risks of these shares. I continue to hold DES, FOGL and BOR on expectation of results from the Ocean Guardian rig in March despite all the volatility in these companies.
ITV (ITV) – ITV continues it’s move back up and finished at 54p, following a positive outlook from Scottish Television company STV (which was formerly known as SMG). STV chief executive, Rob Woodward, forecast that the national TV ad market was likely to be up between 4 and 8% year on year in April.
GW Pharma (GWP) – Approval for cannabis spray, Sativex, is still expected in Q1 and this remains Contrarian Investor U.K’s largest holding.
Amgen (AMGN) - A quiet week for Amgen with the stock finishing at $56. Further news on osteoporosis drug, Prolia, still awaited in quarter one 2010.
Micron Technology (MU) – The stock moved back over the $9 mark as the outlook for DRAM memory chips continue to improve in the the second half of 2010.
Subscribe to:
Posts (Atom)