Fiddling with Rockhopper spread bets

Took some profit on my March spread bets on Rockhopper (RKH) and bought some September positions instead following today's 3% rise. Though things look interesting for the current well 14/10-3, the next appraisal well looks to have a significantly higher probability of success so better to have a longer term outlook to make money. Lots and lots of rumours.....some respected posters on the bulletin boards sound convinced its a strike, but you never know in with this exploration game. But with say a 20% downside on a duster, and a 100% upside on a moderate find, its a risk worth taking. That's where the Desire Petroleum gamblers went wrong, it was always a binary bet on success or failure. With Rockhopper, Sea Lion and £200 million cash in the bank following the fund raising changes the game to make it a moderate risk rather than throwing a "dart at a board" and hoping. I hope Sam Moody puts us out our misery, just think of the impact on U.K.'s GDP with all those investors glued to their screens from 8am to 4.30pm!!

Xcite Energy - the madness of markets

I have realised how fickle the markets are today! So with an upward revision of Bentley oil reserves and signing of a production rig due any day, I am seeing that Xcite shares are currently down over 4% at 362p. I presume some investors are piling out to buy into other stocks that have been tipped in the press over the weekend and no doubt the market makers are playing their usual games to fill their boots with cheap stock before the RNS's. I reiterate from today's RNS, "....with the intention to update the information in the February 2009 Competent Persons Report potentially enabling a reserves report to be issued in DUE COURSE" i.e. we will have an update in days not weeks! I guess patience is a virtue and some investors don't have it!

Comparing the Market caps of some oil stocks underscores my point:

Xcite Energy (160 mm barrels+) £579m

Desire Petroleum (0 barrels) £128m

Rockhopper (170 mm barrels) £965m

Keep the faith XEL investors and buy on weakness!

Portfolio review of the week June 5th 2010

After a week of significant volatility, markets fell heavily yesterday, with the Dow Jones Industrial Average falling on disappointing jobs news from the U.S. and fears of a spread in the European debt crisis due to Hungary. The Dow fell 323 points, or 3.2%, to 9,931 and finished the week below the key 10,000 mark and 2% lower for the week. The Nasdaq Composite dropped 84 points or 3.6% on Friday to finish at 2,219 and down 1.7% for the week. The S&P 500 dropped 3.44% or 38 points to 1,065 with a fall of 2.3% for the week. The FTSE 100 fell 85 points or 1.6% to 5,126 on Friday and finished down 1.2% for the week. However, FTSE futures are pointing to another 50 point drop on Monday since the worst of the Wall Street falls were not seen until after the close of the European markets.

Industrial and infrastructure stocks (e.g. Caterpillar CAT down 5.5% at $57.7) were hit particularly hard as a weakening euro means that revenues will be hit as the sales are translated back to dollars on currency conversion, plus any weakening of the European economies will hold back sales volumes. In addition, a weakening of commodity prices such as oil (which dropped over 4% to $71) and banking fears hit financials, energy and commodity stocks - Conoco Philipps (COP) was down 3.7% to $50, Barclays (BARC) was down 4.7% to £2.88, BHP Billioton (BHP) dropped 3.7% to £17.71.

The key reason for the decline was that U.S. non farm payrolls rose by only 431,000 last month, short of expectations for a rise of 515,000 jobs. Most of the rise was due to temporary census staff hiring (which created 411,000 jobs) and only 41,000 private sector jobs were created (against 218,000 in April). There were also downward revisions to payrolls in March and April, both 22,000 lower at 208,000 and 290,000 respectively. The unemployment rate dropped to 9.7% in May from 9.9% the previous month, in line with expectations.

On top of this the euro got a battering with a fall below the $1.20 level against the dollar being the lowest point for four years as fears that Hungary may suffer a Greek style debt crisis emerged. Hungary is in the European union but not part of the euro. However, after the concerns about Spain last week, worries about Hungary have given investors plenty of reasons to be pessimistic about the state of European finances and the health of its banks. A spokesman for Viktor Orban, the Hungarian Prime Minister, suggested that his country had only a slim chance of avoiding a Greek-style debt crisis. Peter Szijjarto, the Prime Minister’s spokesman, said that his Government was “ready to avoid the path that Greece took ... After realising what reality is, we will not hesitate to act.” The potential exposure to any Hungarian default by European markets is a stark reminder that the write-down's of the banks may not be over.

The Contrarian Investor UK portfolio has had limited trading over the last 2 weeks due to holiday. But positions were initiated in Coal of Africa (CZA) at 104p and BP at £4.19. The Coal of Africa position is retained but BP was sold on Thursday at £4.50. Short term trades were all put in play on Barclays (BARC), Man Group (MAN) and Prudential (PRU) which were all closed within a day or two as the market rebounded from the market falls late in May. The falls of last week have put some interesting opportunities on the table and I will take these on any further weakness during the early part of next week especially if the FTSE moves below 5000 again. Any fall in the U.S. S&P 500 below the key technical 1,050 level will be watched with interest.

It was disappointing not to be involved in the huge spike in the Falkland Islands oil shares yesterday after Rockhopper (RKH) issued a very positive technical update on its Sealion oil find in the North Falklands basin. RKH finished up 33% at £3.19, Desire Petroleum (DES) was up 22% at £1.00 and Falklands Oil and Gas (FOGL) was 10.5% at £2.06. Rockhopper upgraded the size of the find to 242 million barrels recoverable with further increases likely. After seeing the price drop to below a £1.00 on Wednesday on false rumours of a poor quality oil discovery (and possibly some sort of manipulation), buyers at this point have seen a 300% plus increase. After having my finger on the trigger to buy at these levels I am frustrated that I didn't proceed. Nice profit missed. It is incredible to think that Rockhopper was trading in the 35p range as little as a few weeks ago before the results of the Sealion appraisal well. So continued holders are nearly at the "ten bagger"stage. You don't see too many of these trading opportunities and I am sure that many have profited nicely. I am also sure that many lost a lot of money during the "flash crash" of Wednesday. It has been positive to see some good profits in these Falkland Islands shares, but what could have been if I'd had the nerve!?

Falklands Islands oil shares profits taken

This week speculative investors have moved money from Desire Petroleum (DES) to fellow North Falklands basin driller Rockhopper Exploration (RKH) following news from Desire's Liz well that it was non-commercial and was being plugged. After a sharp rise in RKH from the lows 40's to close to 60p on Tuesday, today it is down around 4% on the evitable profit taking.

After making some large profits on RKH and Falkland Oil and Gas (FOGL) this week I no longer hold any of the Falkland's Islands drillers. Why have taken my money off the table? 1) The results from Rockhopper Sea Lion drill site will not be available for around a month 2) The spudding of Rockhopper well is unlikely to drive a significant new inflow of investment into the stock given news flow will take some time and speculators have been badly burnt on Desire (Desire has now fallen from a peak of around 130p to today's 45p). 3) most of the rotation within the sector from DES to RKH has probably taken place on Monday/Tuesday this week. For now Contrarian Investor UK stays on the sidelines but will keep an eye on things for any potentially fruitful entry points

Rockhopper gains as much as 20%

Rockhopper Exploration (RKH) gained as much as 20% (and has now settled 16% up) this afternoon as Desire Petroleum (DES) issued another news release about the Liz well saying that the well was being plugged and abandoned as a gas discovery. DES said that 17 metres of net  "hydrocarbon pay' were encountered between 2961 and 3031 metres but the reservoir quality was poor. The Ocean Guardian rig is now moving to the Rockhopper's Sea Lion site and spudding is expected towards the end of the week. After rising as much as 20% on the news,  2/3 of the Rockhopper position and the Falklands Oil and Gas (FOGL) position were closed for solid profits as results from the Rockhopper well will not be available for around a month following the spud.

Portfolio review of the week 3rd April 2010

Falkland Island Oil Explorers  -Another bullish week on the markets was tempered by the collapse in the Falkland Island oil drillers on Monday as Desire Petroleum (DES) was forced to issue a premature news release on the progress of the Liz well following a report in the Sunday Times that reservoir quality was poor. Another update from Desire on Thursday afternoon indicated that drilling was continuing to greater depths after hydrocarbon shows with  final report due late next week. It seems that there is a significant amount of gas (yet to be confirmed) but oil seems to be elusive to date and given the geographical location and the current world gas price this is clearly not an advantageous position. Desire's share collapsed 50% on Monday to around 50p and have held steady for the rest of the week. Fortunately a holding in Desire was sold the previous week. Position's in Falklands Oil and Gas (FOGL) and Rockhopper (RKH) fell through stop losses on Monday as sentiment turned against the explorers. However, having stabilised later in the day I bought back both as the geological structures are unrelated to Desire's prospect and Rockhopper' s well is due to be drilled next by the Ocean Guardian rig with spudding in early April.

GW Pharma (GWP) - GW Pharma continues to drift downwards following the positive news on Sativex a couple of weeks ago. Things are expected to be quiet until May onwards when an update on national approval from the UK and Spanish regulatory authorities would be expected. The interims are also in May and news on other regional licensing deals outside North America and Europe would be expected as well as the U.S. FDA cancer pain application wit Otsuka Corp.. I sold around 2/3 of my holding on the news and bought back some at 115p. I am monitoring this share closely for a further buying opportunities on a slide back below 110p because May and June news should drive this to well over 130p.

Norseman Gold (NGL) - A position was started in this Australian gold company on Monday. See the previous article, http://contrarianinvestoruk.blogspot.com/2010/03/norseman-gold-looks-solid-australian.html.

Coal of Africa (CZA) - The Coal of Africa position was increased this week as Morgan Stanley increased their share target to 200p  (current 145p) and a full UK market listing is due.

BHP Billiton (BLT) - A contrarian short on BHP Billiton was placed on Thursday morning following a week of strong rises as the rise in commodity stocks seems overcooked.

Genzyme (GENZ) - The position was closed on the rebound to $53.

Micron (MU) - Short term trades at just over $10.2 were made and closed before the quarterly earnings at $10.8

Falkland Island Oil explorers blast down through guaranteed stops

The Falkland Island drillers (Desire Petroleum, Falkland Island and Gas, Rockhopper and Borders and Southern) are sharply down this morning on Desire's Liz news. The shares were in auction (a period of time when there is no automatic execution on an order book and where Orders that are allowed during auctions may be entered during this period) but are now in full trading. Desire is down 63% at 36p, Rochopper is down 40% at 31p, Falklands Oil and Gas is down 15% at 115p. Fortunately the decision to move into CFDs with guaranteed stops ws sensible with all stops being triggered at the open. Today just shows the potential volatility of oil explorers on a "no show". Feeling a little bruised this morning. Ouch!! 

Desire Petroleum Liz field update broadly confirms Times story

Following the Times article yesterday which stated that the Liz field drilling had not encountered commercial quantities of oil, Desire Petroleum have today released an RNS (see below). The key part of the RNS "oil may be present in thin intervals but that reservoir quality is poor" indicates that the Times story was broadly correct although further testing is clearly in progress. Things aren't going to go well for the share price this morning when the market opens at 8am.

Due to recent press speculation, Desire Petroleum wishes to announce that the Liz 14/19-1 well, in the North Falkland Basin, has reached a depth of 3570 metres and logging is underway.

The primary Liz target was encountered at around 2550 metres with indications of hydrocarbons while drilling. Subsequent logging operations have shown that oil may be present in thin intervals but that reservoir quality is poor. Wireline sampling is still to be carried out. Deeper gas shows have also been encountered while drilling, particularly below 3400 metres and these have still to be evaluated by wireline logging and sampling.

Until the logging is complete and the results analysed it will not be possible to determine the significance of the hydrocarbons encountered and whether the well will need to be drilled deeper, suspended for testing or plugged and abandoned.

Operations are expected to be completed later this week when a full announcement will be made.

Desire PR company refutes today's Times story

Posters on bulletin board iii.co.uk are posting that, Buchanan, Desire Petroleum's PR company have stated that an RNS will be issued tomorrow morning at 7am before the market opens to clarify the situation following the Times story today which said that oil had been found but not in commercial quantities. Buchanan have reportedly said that testing is ongoing and there has been no final data to confirm the commerciality of the Falklands Liz drilling prospect. Lots of rumours which hopefully will be put to bed by an official statement tomorrow.

As  a follow up, Reuters have just confirmed the iii reports that an RNS will issued at 7am tomorrow - "A spokesman for Desire said on Sunday that tests were ongoing, and the company would issue a statement on Monday morning clarifying the situation to shareholders." (http://uk.reuters.com/article/idUKTRE62R0WD20100328)

Times publishes story that Desire Petroleum's well is non-commercial

According to today's Times , The first well drilled off the Falkland Islands in 12 years has struck oil — but not enough to be commercially viable. Furthermore, "Desire is expected to say that the well drilled at its Liz prospect was “technically successful”, meaning it found oil, but that it is “non-commercial”, meaning that there was not enough oil to justify developing the field. The company declined to comment. Sources close to the situation said it had not finished drilling, but the signs were not encouraging. A source said: “It’s not a duster [a dry well], but it’s not commercially successful.” Desire has been working on the well for the past month.

Given this news is based on unofficial sources and the company has not commented it would be surprising if an RNS is not released tomorrow morning to clarify the situation as Desire Petroleum's share price (and the other Falkland drillers) will fall substantially on these rumours given they are published in a relatively reputable source of the Times newspaper. If true, very bad news for my Falkland's oil portfolio - I guess you win some, lose some!!

Source: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7078788.ece)

Reconfiguration of Falkland Islands oil holdings

With the rise back above £1 for Desire Petroleum (DES) I took the opportunity to de-risk the Falklands Islands portfolio. Unfortunately IG are not accepting controlled risk Contracts for Difference (CFD) trades on Desire which makes a "duster" on the Liz prospect risky for the portfolio. However, there are still accepting controlled risk trades on the other Falklands Oil drillers and therefore I have closed the Desire position and opened a new long positions in Falkland Oil and gas (FOGL) and Rockhopper (RKH) since the downside is protected to a 12.5% loss whilst allowing me unlimited upside "hanging on the coat tails" of a Desire positive update, should it occur. The gains in the other Falkland Islands drillers may be less marked than Desire but an unprotected trade feels foolhardy given the risks.

The RNS from Desire on the results of the Liz field drilling should be due very soon since we are nearly 30 days into drilling.

Desire Petroleum finally moves up

After several days of small, but steady falls, Desire Petroleum (DES) finally looks to be moving in the right direction with the shares currently up around 5.5%. Bulletin boards like iii.co.uk have been buzzing with around 1000 posts a day and the rumour mill surrounding the potential testing of core samples have been doing the rounds.  The results from Desire's Liz field are due any day which is increasing the volatility of this stock. Desire is not a stock "for widows or orphans" but the fact that it is so speculative makes the potential rewards so exciting. I have continued to hold as the share price has slipped over the last week and given the seismic data from the Desire field I am more than hopeful that the company's management will have chosen the Liz prospect for good reason i.e. that oil/gas shows are present.  The Falkland Islands drillers are at the high stress end of the spectrum and this week the adrenaline will be at maximum power as it could be the make or break for the stocks even though there are other drilling prospects for Ocean Guardian to drill.

Portfolio review of the week March 20th 2010

After 8 days of gains in the U.S. and a strong move upwards in the U.K., it was not surprising that the S&P 500 finally moved down. I remain cautious on the market at this level and am using the strength as an opportunity to sell down some positions. My ISA is now 60% in cash, after unit trust purchases bought in November has shown near 20% gains.

GW pharma (GWP) - An exceptional week for GWP as the company announced that all aspects of safety, quality and efficacy had been resolved for the UK/Spanish licence applications for multiple sclerosis drug, Sativex. The stock moved up from around 100p to finish the week at 121p. Though tempting to take profits, there is significant news flow yet to come from the company. A milestone payment from Bayer Schering of £10 million will be triggered on the UK licence approval in May. A further milestone payment of £2.5 million will be due from Almirall (GW's European partner) on Spanish approval, due Q3 (£8 million was paid in 2009). Results from the clinical study in cancer pain have been confirmed for Spring 2010. It is likely that global distribution deals for Asia and Latam will be announced at the interims in May.

The regulatory announcement this week is a ground breaking event for GW pharma. Sativex approval in Europe is  now assured. Given the company was founded in 1998 to develop Sativex, the end of a 12 year road is now in sight. Although reimbursement issues are yet to be resolved, the strength of the commercialisation partners (Bayer Schering and Almirall), will no doubt ensure that any issues are resolved.

Falkland Island Oil drillers (Desire Petroleum DES, Falkland Oil and Gas FOGL, Borders and Southern BOR) - After double digit increases in the Falkland Island oil explorers on Monday, the shares fell away during the rest of the week. News from Desire Petroleum's Liz field where the Ocean Guardian rig is drilling is expected any day. Most of my positions are held in controlled risk CFDs (contracts for difference) which limits downside on any bad news. Positive news from Liz, will drive these shares, particularly Desire petroleum, up at least 30% and possibly a lot more. Though risky, the risk/reward is enticing with the downside protected.

ITV (ITV) - ITV continued to tread water and finished the week at 54p. The only news was the size of Adam Crozier's pay and performance package which is geared to a recovery in the share price.

ARM Holdings (ARM) - A short was initiated this week and this finished on a small profit for the week. It was encouraging that despite large gains in the semiconductor stocks during the week, ARM did not participate in this rally. The rationale for the short in ARM and SSL were explained on a post during the week.

SSL International (SSL) -  A short initiated at 780p was down a couple of percent, with the stock closing at 792p yesterday.

Ithaca Energy (IAE) -  The North sea focused oil explorer moved up from 108p on Monday to finish the week at 134.5p, a gain of 24%. A position initiated on Tuesday was unfortunately closed too early at 124p and illustrates the caution needed when selling stocks into a positive momentum move especially when the stock is dual listed. Moves on the Canadian TSX, where commodity stocks powered up this week, drove the share price appreciation on this side of the Atlantic.

Micron Technology (MU) - Position closed at $10.14. The stock finished at $9.90 last night. Micron has rebounded strongly from around $8 in the last month and therefore an opportunity was taken to sell off on the rise.

Intel (INTC) -  An overnight position was taken on Intel which generated a 3% gain. No longer holding.

Falkland Oil drillers in demand today on rumour mill

Desire Petroleum (DES) up 11.5% , Rockhopper (RKH) up 10.7% this morning with consistent buying and in the case of DES 4 million traded already. Could be rumours from Ocean Guardian rig or just the usual volatility of these shares. We will find out in the next week or so!

The Independent Small Talk has a small mention today:

Desire primed for Falklands oil announcement

It could all kick off in the Falkland Islands at the end of this week.

No, we're not talking about another military scrap over the islands' sovereignty, as in 1982, but according to sources, Thursday or Friday is the first time that the Aim-listed Desire Petroleum could announce that it has found oil in the territorial seas to the north of the Falklands.

The group's exploratory drilling has caused one huge diplomatic spat between Argentina, which claims ownership of the islands, and the UK. Desire has been unusually quiet about the drilling programme, largely because it wants to keep its head below the parapet. However, if the drilling has gone as well as the company dared to believe, we should all learn about it soon. Analysts expect that, realistically, it could take another couple of weeks for the group to tell the market how it has got on.

Desire is drilling in an area that other giants such as Shell tried to find oil in more than a decade ago and left empty-handed, and analysts put the group's chances of success at no more than about 20 per cent.

Earlier this month, the US Secretary of State, Hillary Clinton, called on the UK to open discussions with Argentina on the possibility of any future drilling.

Source: http://www.independent.co.uk/news/business/sharewatch/small-talk-lse-looks-to-tackle-problem-of-aim-investor-relations-1921542.html

Portfolio review of the week March 13th 2010

GW Pharma (GWP) - Very quiet week for GW Pharma on very low trading volumes and share price holding at around £1.00. Continuing to hold sizeable position.


Falkland Islands Oil drillers (Desire Petroleum DES, Falkland Oil and Gas FOGL, Borders and Southern BOR) - The prices of the Falkland Oil explorers continued to drop this week on lack of news causing investor apathy, speculators moving their money elsewhere or  shorters in action. The investment thesis for these shares has not changed since the spudding of the first well in February. Actual results from Desire's drilling prospect on the Liz field in the North Falklands basin is keenly awaited. It is expected that Desire's Ocean Guardian Rig should have an indication of oil/gas finds in the next 1-2 weeks. These shares are a binary bet on what happens on Liz. Either Desire will go to less than 50p or we will see a move several pounds higher its that simple. CFD's with guaranteed stops have been placed on BOR and FOGL to limit any downside.


ITV (ITV) - Again little movement in ITV this week, closing at 52p on lack of any news.


Prudential (PRU) - Short term long position taken in PRU earlier in the week which was closed yesterday as the price moved over £5.50. Contrarian Investor UK likes the PRU Asian story but the surge in the markets on both sides of the Atlantic over the last couple of weeks makes me nervous and I have reluctantly decided to take profits given the move from £5.00 to £5.53 in little less than a week, after the falls from over £6 precipitated by the huge rights issue to fund the AIA acquisition (AIG's Asian unit).


Micron Technology (MU) - After a move up from around $8 to over $10 over the last 2 weeks or so on continued positive sentiment on memory chip prices and consumption levels, I have taken profits in half my position at $10.17. Micron closed last night at $9.97 and I continue to hold 1000 shares.

Portfolio review of the week March 9th 2010

The portfolio review is a little late due to a holiday. As I noted on my previous post, Contrarian Investor UK is searching for suitable short term trading opportunities and there appear to be few obvious long only options. The volatility of the market makes me reluctant to commit to large shorts so the portfolio is on a holding pattern waiting for results from the Falkland Islands and news from GW pharma. New ideas are being assessed.

GW Pharma (GWP) - The portfolio's largest holding had a good week, with a solid move from around the 90p mark to £1.00. However, a minimum 35% upside is expected if the European approval for cannabis spray, Sativex, is announced this month. In addition to this, clinical trial results from the 336 patient phase II/III study funded by partner Otsuka are due early this year. The patients in the study have advanced cancer for which there is no curative therapy and are experiencing little relief from pain using conventional opiods. The primary goal of the study is response rate after 5 weeks. Further studies are planned to start in mid-2010 to enable the U.S. FDA registration of Sativex in 2011 and an additional European indication for cancer pain, also in 2011.

Falkland Oil drillers (Desire Petroleum DES, Falkland Oil and Gas FOGL, Borders and Southern BOR) - The potential intervention of U.S. Secretary of State, Hillary Clinton, helped to dampen sentiment in the Falkland Island Oil drillers. Following a meeting with the Argentinian President, Cristina Fernandez de Kirchner, Clinton said she encouraged the U.K. and Argentine governments to negotiate a settlement in relation to the sovereignty of the Falkland Islands. DES, FOGL and BOR are all down 20%-30% from the point when Desire's Ocean Guardian Rig began drilling in the North Falklands basin. However, news from the Ocean Guardian should be forthcoming in the next 1-2 weeks.

ITV (ITV) - ITV's 2009 results were initially positively received by the markets with a rise on the announcement to 57p. However, the shares have now drifted back to 52p with the markets expecting the return to health of the company to take some time under Norman/Crozier's leadership. ITV seem to be stuck in a trading range in the 50's and further positive news is needed to propel them through the 60p mark.

Amgen (AMGN) - The final tranche of Amgen stock was sold today at $57.6, giving a 5% gain despite the propects for Osteoporosis drug, Prolia. I am hoping for a buyback situation around $55 given the trading range of $55-58.

Micron Technology (MU) - Micron is stubbornly stuck below the $10 mark and currently trades at $9.5 despite the positive outllook for memory chips.

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. 

Political heat rises as Falkland Oil drilling finally starts

Desire Petroleum’s Ocean Guardian Rig finally started drilling in the North Falklands basin last Monday and it only served to bolster Argentinian efforts further to use political pressure to try and disrupt the drilling campaign, but these efforts are considered by many commentators as being unlikely to succeed.

After the disastrous war with the U.K. over the sovereignty of the Falkland Island (Malvinas) in 1982 started by Argentinian president, General Galtieri, things have been relatively quiet in the South Atlantic for the last 28 years. The islands were discovered by the British in 1592, permanently occupied in 1833 and for the last 100 years Argentina has contested ownership of the Islands with the British.

Argentina’s President Cristina Fernández de Kirchner’s has undertaken an anti-corporate campaign of significant proportions, with her latest move being to try to collect more than $6.5 billion in currency reserves to pay down debt and breath live into the flagging economy, after a move to privatise private pensions in 2008. An unpopular fight with farmers over export taxes has made her and her party postions weak in elections due in 2011. Desire Petroleum’s move to drill in the Falklands has been met with much vitriole. The first step was discourage ships sailing to the Falklands by requiring them to get permits if they pass through Argentinean waters - the Falkland Oil drillers have said this will have little impact on the drilling campaign. The Argentine foreign minister, Jorge Taiana, met with Ban Ki-moon, the U.N. secretary general, last week to pressurise the U.N. to agree with the assertion that Britain should be forced to acknowledge sovereignty claims. Taiana also argued that the U.K. does not have the right to exploit resources in the Falklands without first obtaining approval from Argentina.

At the Rio, Latin America summit this week, Hugo Chávez pledged his country's military support for a Falklands war. However, a military move against the U.K. would be suicidal from a political and economic perspective and it would be surprising if the Argentine government is even close to considering this despite the rhetoric in Rio.

If Desire do strike any significant oil during March, then the heat coming from Argentina can only get worse, even if military action is highly unlikely after the disastrous 1982 attack on the Islands. For De Kirchner’s government, added pressure on the U.N. and other organisations about sovereignity is highly popular in her country and it would be a tough sell indeed to her electorate if Desire or any other of the Falklands drillers (Rockhopper Exploration, Falklands Oil and Gas, or Borders and Southern ) “strike it rich” and Argentina was seen to be doing nothing as the U.K. collected the wealth from this "Argentine asset of right". Next year's Presidential election makes the Falklands an easy diversion to the country's own economic problems, just as Galtieri used the Islands back in the 1980's to cover similar but much more serious issues.

For shareholders such as myself, the politics have made it a nervous week on the markets for the Falklands Oil drillers. Despite the Ocean Guardian Rig spud on Monday, share prices have moved down as political risk has clouded the opportunity and talk of a military strike on the rig by Argentinian jet fighters has made investors question the risk/reward of the Falklands drillers. I for one took the opportunity to increase my holding in Desire Petroleum as the rumours rose later in the week. There is significant risk of course, but it is more of a no oil show than a pre-emptive attack by the Argentinian Navy.

No stopping stampede for Falkland Island Oil shares

The Falkland Oil drillers continued to power ahead this morning as the Ocean Guardian Rig starts drilling on the Liz field: Desire Petroleum (DES) 129p +10%, Rockhopper (RKH) 76.75p +10%, Falkland Oil and Gas (FOGL)159p +5.3%, Borders and Southern (BOR) 69p +2.2%. The North Falklands basin drillers, Desire and Rockhopper are getting the majority of the action given the relative rates of news flow from the Northern and Southern basins.

News flow from Desire Petroleum and Nighthawk Energy

Desire Petroleum (DES) began drilling on its prospect in the Falkland Islands this morning. It would be surprising not to get an RNS updating shareholders during this week. Falkland Oil and Gas (FOGL) and BHP's announcement on hiring of a deep water rig for their South Falklands prospects should also be due any week now.

The key seismic and production information from the Jolly Ranch and Revere projects is expected from Nighthawk Energy (HAWK) this week. Should either be a highly exciting or demoralising news release for HAWK shareholders!