Portfolio review of the week - 26th February 2011

On Friday the FTSE 100 finished up 81 points at 6,001, down 1.3% on the week. The Dow Jones Jones Industrials finished up 62 points, or 0.5%, at 12,130, a 2.1% fall for the week and the worst since mid August 2010. Shares rebounded on Friday as the oil price stabilised and the markets began to be reassured that the Libya's 2.5% contribution to global oil supplies could be covered by other oil producers and that Colonel Gaddafi's position was becoming increasingly precarious. The U.K. market declined less than across the Atlantic because of the greater number of oil and defensive stocks in the FTSE 100.


The U.K. market was thrown into turmoil yesterday as the London Stock exchange computer system crashed for 4 hours, meaning trading was suspended for most of the morning.To coincide with the LSE problems, the revised Q4 2010 GDP figures were released by the Office of National Statistics showing a revised 0.6% decline in the U.K. economy (versus previous estimates of 0.5%).


Despite the market panic in the middle of the week, the Contrarian Investor UK portfolio had mixed fortunes but I took some opportunities during price dips to top up on Xcite Energy (XEL) and Weatherly International. I also bought into another North Sea oil company, Encore Oil for the first time (EO.). 


Xcite Energy (XEL) - Xcite had a good rise on Friday and finished the week at 346p, a 1.8% decline. There have been some reassuring noises that a farm in or placing may not be needed to bring the Bentley heavy oil field into production. The interview published by Rupert Cole (CFO) indicates that any fund raising will be on Xcite's terms not on the institutions and that they have several options open to them (http://contrarianinvestoruk.blogspot.com/2011/02/xcites-cfo-cole-confirms-partner-may.html). 


An update from British American offshore (Rowan Companies) who are currently constructing Xcite's rig, the Rowan Norway also confirms delivery of the rig is due June 2011, with operations starting in the North Sea in November 2011 (with the transit time from the Duabi construction site). Looking at the SEDA (standby equity drawdown agreement), there is insufficient funds remaining to complete the final $30 million instalment due on delivery in June. Therefore it would be anticipated that the company would need alternative funds by this date. With the CPR (competent persons report) due early in March, it is inevitable that Xcite will leverage this report to find the funds its needs and this is not necessarily a discounted placing. As I have stated before, using a bank loan or bond offer seems possible. Either way, went it went back below £3.40 this week, it was a great buying opportunity.


http://www.rowancompanies.com/_filelib/FileCabinet/PDFs/Offshore-CM.pdf?FileName=Offshore-CM.pdf
Rig is under construction with delivery expected in June 2011. Contract executed for combined drilling and production operations with an initial term of 240 days followed by a one year priced option in the low $250s. Production fee of $1 per barrel of oil produced is also payable during the initial term. Customer is required to provide security for the initial term totaling $60 million by the date of shipyard delivery of the rig. The first installment of $15 million was received on February 17, 2011. The second $15 million installment is due February 25, 2011, with the final installment of $30 million due upon delivery of the rig from the shipyard. Rig is expected to commence operations in November 2011.
Rockhopper (RKH) - Another bad week the falklands oil explorer, with the shares dropping 12% to 233p. I have covered the fact earlier in the week that the current market capitalisation (£600 million) is daft with what the RKH have already discovered at Sea Lion (http://contrarianinvestoruk.blogspot.com/2011/02/taking-advantage-of-silly-valuations-on.html). But this frontier explorer is out of favour, and the private investor stampede has moved onto pasteur's new for now! With drilling results from the 14/10-4 well due around mid-March, it is inevitable that this share should starting perking up in a couple of weeks time. Hopefully 230p is the new base, but you never know with a Falklands oil stock!


Encore oil (EO.) - I took the opportunity to buy into North Sea oil explorer, Encore Oil this week, given the company prospects and news flow over the next few weeks. There was talk of a takeover this week by Premier Oil, but this seems a bit far fetched.

Encore own a 16.6% interest in the Cladhan North Sea licence with Sterling Resources (73.4%) and Dyas (10%). Drilling is expected to commence within the next few days at Cladhan (Blocks 210/29a & 210/30a) with the flotilla of vessels apparently on its way. The Burgman prospect is expected to spud any day soon using Encore's contracted rig the Galaxy II.

Sirius Minerals - Another terrible week for potash company Sirius, with a 15% to 13p. No bad news, such sentiment. Topped up a little at 12.5p and now we wait!

Bowleven (BLVN) - Bowleven had a good week with the share reiterated as being on Goldman Sachs conviction buy list, despite rumours of issues in Cameroon which now seem to have been largely diffused. Goldman has said that recent share underperformance has created an attractive entry point into the stock - "We view the upcoming drilling campaign offshore Cameroon positively, with recent success at the Sapele prospect helping to de-risk the surrounding acreage,". The target price was cut to 578p from 623p, with drilling at the Cameroon Sapele-1 prematurely halted because of high pressure gas which the drilling equipment was not specified to handle.The shares rose 5% on the week to 335p.

Weatherly International (WTI) - The interim results this week had plenty of encouraging news from this Namibian copper company (http://contrarianinvestoruk.blogspot.com/2011/02/weatherly-international-interim-results.html). Topped up on WTI. I have great confidence that we will see Weatherly shares significantly higher within weeks.

Market moves up after London Stock Exchange closes for 4 hours

With oil prices stabilising as the end game in Libya seems close as regards Gaddafi, markets responded nicely with the FTSE 100 up 90 points to 6,006 and the Dow Industrials is up 65 to 12,130.  Lots of gains across the board. Some degree of risk appetite has undoubtedly returned with a lot of the AIM stocks that have bombed in the last week bouncing., for example, Kurdistan oil explorer, Gulf Keystone was up over 10%.

The London stock exchange was down all morning after a new software system which was installed 2 weeks ago, sprang a glitch. Hopefully when the LSE merge with the Canadian TSX, they can use their software!

Most of the stocks in the Contrarian Investor UK portfolio are having a good day, Bowleven, Sirius, Weatherly, Encore are all up, the only exception is Rockhopper which is down a couple of pence. Nice to see Xcite Energy up 2.5% today after yesterday's top up. Now I need to see some RKH action, up, not down!

Lloyds makes first profit since U.K. tax payer bail out

Lloyds Banking Group (LLOY) has just announced its first annual profit, since the government rescue. In 2008 at the height of the financial crisis, the Labour government brokered a deal whereby the U.K. tax payer injected capital in return for a 41% stake in an enlarged group which included HBOS (Halifax Bank of Scotland).

For 2010 it made pre-tax profits of £2.2bn, compared with a £6.3bn loss in 2009 and higher than consensus estimates of £2 billion. Bad debt was down to £13bn, from £23bn the previous year.

Things seem to be improving faster at Lloyds than RBS and with its signficant share of the U.K. mortage market as a result of the HBOS integration the future is probably bright unless the housing market is dented by interest rate increases later in the year. It is worth remembering that Lloyds and HBOS would never have been able to combine because of competition issues in normal circumstances.

Xcite's CFO Cole confirms partner may not be needed to develop Bentley field

Various sources have now published details of an interview with Rupert Cole (CFO of Xcite Energy) conducted on Wednesday. He makes the statements that "...believes Xcite can undertake the development without bringing in a partner and possibly without raising fresh equity.", ""I wouldn't rule it out, I wouldn't rule it in either," he said when asked if the company was planning a fundraising, adding that he was encouraged by approaches from institutions willing to lend to the company."

So it looks like an equity placing is not a done deal and if it is done it will be Xcite's terms not the institutional investors, i.e. not at a big discount to the current price. It is not unfeasible that Xcite may choose to borrow the money required to develop the field or use its Bentley Alliance partnership. I am sure that the management team is as keen as anyone not to dilute their substantial share holding giving shares away at a discount. Its worth reminding that at 340p or so, Xcite is only at a small premium to the share price pre-flow test back in December. 

With production starting early next year at a hefty 15,000 barrels per day (an upside target of 60,000 has been stated by Xcite management before), $ will be flowing into the Xcite coffers very quickly, particularly with Brent Crude oil over $100 a barrel. With this cash flow due in early 2012, Xcite could securitise this cash flow against a bond at a fixed coupon (interest rate). The fact that the Bentley field is in the North Sea should make it easier to bring a bank onboard to provide the necessary investment.

Hopefully this will be the bottom and we can look forward to a ramp up in the share price as the CPR document publication moves ever closer. I couldn't resist topping up at 338p yesterday.

INTERVIEW-Xcite confident on Bentley oil field development
Wed 23/02/2011 17:44
http://www.selftrade.co.uk/news-information/news.php?fullview=1&idNews=9569037&submit=

* CFO says development could require fresh equity

* Targeting first oil in Q1 2012

By Sarah Young

LONDON, Feb 23 (Reuters) - Xcite Energy XELL.L is confident it can undertake a major oil field development off the east coast of Scotland without bringing in a partner, it said on Wednesday, as it looks to become one of the biggest independent oil companies in the North Sea.

"We're not of a mind to farm-down ... There's no reason that we can't deliver this and bring the field into production," Chief Financial Officer Rupert Cole said in an interview.

Xcite's management estimates its Bentley field in the northern North Sea could hold up to 200 million barrels of recoverable oil, a reserve base which would propel it into the top ranks of London-listed independent oil companies alongside Premier Oil PMO.L and Enquest ENQ.L .

Independent oil companies, increasingly dominant in the North Sea as oil majors such as BP BP.L put fields up for sale, are helping to revive the oil province. ID:nLDE71L18J

British oil production is forecast to decline more slowly over the next five years with investment in the North Sea rising in 2011 compared with the previous two years. ID:nLDE71L181

Bringing a substantial oil field like Bentley into production is a costly process for a company with no cash flow, but Cole believes Xcite can undertake the development without bringing in a partner and possibly without raising fresh equity.

"I wouldn't rule it out, I wouldn't rule it in either," he said when asked if the company was planning a fundraising, adding that he was encouraged by approaches from institutions willing to lend to the company.

FIRST OIL

The company, whose shares have soared over 700 percent in the last 12 months since a well returned better than expected results in late 2010, is targeting first oil from an initial production plan in the first quarter of next year.

"The strategy for Xcite has always been to eat this elephant a bite at a time," Cole said.

The first stage will be followed by further development plans once the company starts to generate cash flow, estimated by Cole at an initial $300 million to $400 million over the first two to three years from production at a forecast rate of 15,000 barrels of oil per day.

(Editing by Greg Mahlich)

((sarah.young@thomsonreuters.com; +44 207 542 7717; Reuters Messaging: sarah.young.thomsonreuters@reuters.net))

Keywords: XCITE/

Gaddafi loses control outside Tripoli and oil price turns down

Gaddafi's hold on power in Libya is slipping with reports that his authority is now confined to parts of Tripoli.Towns to the west of the capital have fallen and all of the east is firmly in opposition hands.

Gaddafi blamed the revolt on al-Qaida leader Osama bin Laden, and said the protesters were fuelled by hallucinogenic drugs.

Saudi Arabia is in discussions to increase its oil output to offset any loss of production in Libya. Recently U.S. WTI crude is down 0.5% to $97 a barrel (Brent crude is now flat on the day at $111, after spiking earlier to $120 a barrel). Traders were spooked when talk of a Face Book campaign to hold a day of action in Saudi Arabia took hold, but so far only a few hundred people have registered.

Algeria has officially lifted its 19-year-old state of emergency, according to the national Algerian Press Service. The action lifts restrictions on freedom of speech and assembly imposed to combat an Islamist insurgency. Worries that Algeria and Tunisia could join the turmoil was of particular concern given the gas pipelines which serve Europe cross these countries.

Gulf Keystone dropping like a rock

Gulf Keystone (GKP), the Kurdistan focused oil explorer has been tumbling in recent days. It is currently down 10% at 132p. As I wrote in my review of GKP earlier in February (http://contrarianinvestoruk.blogspot.com/2011/02/gulf-keystone-petroleum-interesting.html) , I was concerned about the political and legal risks and at 180p, it had gotten ahead of itself.

Despite a rising oil price, GKP is dropping as fears continue to grow that factions in Kurdistan may try and break away from Iraq. Also that the contracts that the semi-autonomous government has signed may be torn up leaving foreign oil companies with nothing more than pieces of paper.

There's plenty of good shares in the nice and secure North Sea before you start putting your money into Iraq (Encore, Nautical, Xcite etc.) . The risk/reward is in favour of the sellers at the moment. Institutions are selling and it would not be surprising to see this below 120p. If you compare two Frontier explorers, GKP with RKH, the latter is far less risky as its assets are more secure and there is no litigation hanging over it. Even if RKH is in the South Atlantic, its still UK sovereign territory!

Big day of earnings U.K. Market

2010 Losses at RBS were double that expected at £1.1 billion, though the operating profit before write downs was £1.9 billion, compared with a £6.1 billion loss in 2009. Bad debt losses were £9.3 billion versus nearly £14 billion in 2009. The shares are down 3% to 46p.

British American Tobacco (BATS) reported pre-tax profits up 5% to £4.3 billion. Volumes were down 2% overall to 708 billion with a 1% decline in the Americas, and 8% lower in Western Europe, but these were offset by higher prices. The operating margin grew 2% and earnings per share grew by 6% to 145p. The total dividend increased 15% to 114p and a £750 million share buy back was started. The shares are down 2.5% to £23.54, with disapointment about the size of the share buy back (presumably smaller fund acquisitions).

Centrica (CNA) waz flat at 334p, after announcing pre-tax profits of £2.8 billion, up from £1 billion a year ago. Revenue was broadly flat at £22 billion. British gas added 267,000 customers in 2010, despite a  7% price increase. They said  wholesale gas prices rose substantially in the final quarter of 2010, meaning a lower margin.

Brent crude oil hits $119

Brent crude oil for April delivery went up as high as 6% this morning, $17 in the last week. Worries about Libya and possible contagion to other oil producing states were behind the rise. No one wants to be left short if things kick off in the Middle East, triggering panic buying. Its incredible to think that oil dropped to close to $20 during 2009.

FT.com February 23rd - Bowleven and Encore Oil

London small caps: Broker upgrade boosts Bowleven
By Bryce Elder
Published: February 23 2011 19:39 | Last updated: February 23 2011 19:39


Bowleven rose 3.2 per cent to 323p after Goldman Sachs added the oil explorer to its “conviction buy” list on valuation grounds. Investors were putting no value to Bowleven’s drilling campaign due to start at the Etinde field offshore Cameroon, even though success had the potential to lift the stock above £10, the broker said.

Encore Oil was up by 3.7 per cent to 120½p following press speculation that Premier Oil would agree a bid of around 220p per share for its North Sea peer before May.

“First up, it would be bizarre, in our view, if two companies had agreed a price for a deal and then waited for up to two months to announce it,” said RBS analyst Phil Corbett, who also doubted whether Encore’s exploration portfolio would be of interest to Premier. “Given the market tends to place much greater value on exploration than the industry, and Premier’s only major foray into corporate acquisitions in recent years was through the distressed sale of Oilexco, we would discount these reports for now,” he said.


Source: http://www.ft.com/cms/s/0/eb2119da-3f7e-11e0-a1ba-00144feabdc0.html#axzz1ErFqLn2A

Guardian - Oil price could hit $220 a barrel

Oil price 'could hit $220 a barrel'

Experts at Japanese bank Nomura raise spectre of doubling in oil price if unrest in Libya continues

• • Share78
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• Simon Goodley and Terry Macalister
• guardian.co.uk, Wednesday 23 February 2011 18.57 GMT
• Article history

Traders work the crude oil options pit at the New York Mercantile Exchange on 23 February. Oil prices soared as unrest in Libya continued. Photograph: Mary Altaffer/AP

The continuing violence in Libya and fears that the unrest will spread to other parts of north Africa and the Middle East could create the biggestoil shock since the first Gulf war, analysts have warned.

Up to half of Libya's oil production is now estimated to have been shut down as a result of the crisis engulfing the country – creating supply concerns that pushed the price of Brent crude above $110 a barrel, now experiencing its biggest three-day gain in a year.

Commodity analysts at Japanese bank Nomura raised the possibility that prices could perhaps hit $220 a barrel. In a note to clients the bank warned: "The closest comparison to the current unrest in the Middle East and north Africa is the 1990-1991 Gulf war. If Libya and Algeria were to halt oil production together, prices could peak above $220 a barrel and Opec spare capacity will be reduced to levels seen during the Gulf war and when prices hit $147 in 2008."

The alarmist view was partly backed up by Marco Dunand, chairman and co-founder of Swiss energy trading group Mercuria Energy. Dunand predicts that oil could rise above $150 a barrel, if the unrest continues to spread.

"I don't want to over-hype things, but there are scenarios under which oil could go above $150 without a doubt and those scenarios are to do with stability in the Middle East if things start spreading," he said. Dunand reckoned $150 was a "20% possibility".

Surging oil hit world stock markets, with the FTSE 100 closing down 73.23 points at 5924 and the Dow Jones trading down around 93 points at 12,119 as London traders went home.

Economists typically reckon that a $10 a barrel increase in the price of oil knocks about half a percentage point from global GDP growth. However, in a more measured note, Julian Jessop of Capital Economics said: "We continue to expect oil prices to drop back sharply later this year. In part this is because we think that Libya will be both the first and the last of the major oil producers to see significant disruption (and indeed that the Gaddafi regime itself will fall soon), allowing the risk premium to fade away."

The situation in north Africa and the Middle East, and the knock-on effect on the price of oil, is causing others to reconsider the issue of energy security.

Andrew Horstead, risk specialist at energy and carbon management company Utilyx, warned of the dangers of being too energy dependent on the Middle East. "The unrest we're seeing in Libya is already having an impact on oil supply but the real issue will come if the trouble spills over into Saudi Arabia," he said. "The rise in oil has also hit European gas markets, with UK gas prices for winter delivery rising 9% in a little over two weeks, while there are reports that Libyan gas supplies to Europe have also been stopped.

"The closure has sent jitters through a market already nervous about the potential disruption to Europe-bound liquefied natural gas (LNG) through the Suez Canal. The developments in north Africa and the Middle East highlight just how interconnected the energy market is and how the UK's energy supply is at the mercy of events happening in other countries. It's essential that more emphasis is placed on producing energy within the UK if we are to secure our energy supply."

Last Caterpillar earnings call points to solid 2011 global economic recovery

It was interesting to read the last Caterpillar (CAT) conference call, made in late January to accompany the Q4 2010 results. I have highlighted some of the key bits below from the transcript of the earnings call. Given Caterpillar manufactures machines and other equipment for the construction and mining sector it is considered to be a litmus test for the state of the global economy, Caterpillar is a key company to follow. During 2009 its share price collapsed to around $20, it is now $100 - incredible for a 5 bagger with such a mega cap company! 

What Doug Oberhelman and Ed Rapp say about 2011 is a good test of the likely strength of the global economy, and on the whole they are positive about growth particularly in the U.S.. Despite all the turmoil in the Middle East and Africa, lets not forget that corporate profits are strong this year and the U.S. Federal Reserve is pumping in hundreds of billions of dollars into the economy through the QE2 (quantitative easing) programme where they buy treasury bonds to aid liquidity and hence stimulate economic growth and reduce interest costs.

Chairman and CEO, Doug Oberhelman

Group President and CFO, Ed Rapp

2010 sales and revenues were $42.6 billion. That's a $10 billion or a 31% increase from 2009. Profit per share was $4.15, a significant increase from $1.43 in 2009, as we reported it, and $2.18 a share in 2009, excluding redundancy costs. 

With that in mind, our outlook for 2010 sales and revenues is to exceed $50 billion and profit to be near $6 a share. Key points related to the outlook for the top line include our expectation of continued positive economic growth in the developing world overall. While we don't expect those economies to grow quite as rapidly as they did in 2010, they should still grow fast enough to support an increase in machine sales. We expect world growth and relatively tight commodity supply to continue to provide a very positive environment for our Mining customers. Demand for Mining remains strong and we would expect Mining sales to increase in 2010.

Over the past quarter, we've become somewhat more positive about economic growth in the developed economies of North America, Europe and Japan. And we're now expecting the U.S. economy to grow about 3.5% in 2011. We're expecting continued growth in our Machine sales in developed economies despite our expectation of a relatively weak recovery in construction spending. That's because we believe that customer fleets have deteriorated over the past few years. End-users in the U.S., Europe and Japan cut their machine purchases more than construction activity declined, particularly in 2008 and 2009.

While machine sales in the developed world improved in 2010, it was from a very low base, and we don't believe the increase was enough to stop the deterioration of fleets. Cat dealer rental fleets are a good example. In 2010, dealers purchased significantly more new machines for rental fleets than they did in 2009, but despite that, fleet size declined in 2010 and the average age of machines in their fleets went up. In short, for Machines, we expect continued growth in sales in 2011, continuing growth in the developing world, some economic improvement, coupled with an increasing need to refresh customer and rental fleets in the developed world and positive conditions for mining.

The outlook for Engines isn't quite as positive. We expect 2011 Engine sales to improve, but most of our top line improvement will be Machinery. We expect sales of reciprocating engines for oil and gas, electric power and industrial applications will continue to improve, but later cycle areas like turbines and engines for large marine applications are expected to decline.

We expect profit again to be near $6 a share, an increase from $4.15 in 2010 and above the 2008 record of $5.66 a share. And recall, the $5.66 from 2008 included large favorable tax items that resulted in a tax rate that year near 19%. So on a before-tax basis, we expect to do even better than the headline number would indicate relative to the prior 2008 peak.

The most significant reason for the expected profit improvement from 2009 is higher sales volume. We do, however, expect continued negative sales mix in 2011, with Machines growing faster than Engines. While we expect the mix to be negative, the year-over-year impact should be less than 2010.

We expect a small improvement in price realization, coupled with material costs that we expect to remain relatively flat in 2011.

We also expect variable labor and burden efficiency to continue to improve. We're expecting an increase in period manufacturing costs, and that's a result of higher volume and implementation of a number of initiatives to increase capacity. The capacity initiatives are programs that we announced in 2010 such as mining capacity in the U.S. and India; excavator capacity in the U.S. and China, a new engine facility in China for 3500 Series engines; and a new backhoe and loader facility in Brazil. In addition to capital, these capital investments will drive expense in 2011. We have to push them forward. We need more production capacity to be ready for 2012 and beyond.

Now in addition, R&D expense is expected to rise about 20% in 2011. And again, primarily related to the continuing implementation of emissions requirements, SG&A expense should rise modestly in 2011, and mostly activities to support higher sales, SG&A as a percent of sales should continue to decline. We expect a slightly higher tax rate, mostly from an unfavorable geographic mix of profits from a tax perspective, and we're using a 28% rate.

Finally, the outlook includes bridge financing costs of about $50 million related to Bucyrus and some additional costs related to the integration planning that I mentioned earlier. From an incremental margin standpoint, we're expecting about 25% of incremental operating profit on incremental sales and revenues in 2011. Now that 25% number excludes acquisitions, and in that context, it excludes EMD because it wasn't in our numbers in 2010 for the full year.

Okay, to summarize, 2010 was the first year of sustained recovery from a tough year in 2009. 2011 looks better and we're expecting record profits. We're investing in capacity increases around the world to be prepared for 2012 and beyond, including substantial investment in the U.S. Of the $3 billion of capital expenditures in our forecast for 2011, more than half are being invested in the United States. 2010 cash flow was also good news as well. Our Machinery and Engines operating cash flow was an all-time record at $5.6 billion. Our debt-to-capital ratio dropped from over 47% at year-end 2009 to 34.8% at year-end 2010. And we raised our dividend again in 2010. In fact, for 17 consecutive years, Caterpillar has paid higher dividends to stockholders. Machine sales to end-users improved throughout 2010 and ended the year strong. And finally, excluding acquisitions, we increased our total workforce by about 19,000 people in 2010, with about 7,500 in the U.S. In a tough employment environment, we added about 15% to our total U.S. workforce, and that includes full-time employees and our flexible workforce.

Still hanging on there in Sirius Minerals but surely time for turn

It feels like Sirius Minerals has been falling for ever, with the share price hitting just over 13p today. In mid-January all seemed to well with the price moving over 21p, following news of the York Potash acquisition. Every was celebrating what a great company Sirius was and how the potash price was going into orbit , now  "doom and gloom" pervades the bulletin boards. Investors are fearing a return to the days of 2p, which wasn't that far away in 2010. The board seem to be desperately trying to hold up the share price with the odd RNS, but short term holders aren't convinced and the price drifts ever lower. The market makers are happy to move the price down to try and attract some buyers, but if nothing else they attract some sellers as stop losses are breached, confidence collapses, fear grips the heart of private investors etc. etc.

I am well down on Sirius on my remaining positions after making some money back in January. I am a believer that the Sirius story is genuine and not some sort of smokescreen to "screw" the stupid private investor. The company has built a good collection of potash assets around the world and Dakota and NE England give plenty of hope for the future. Yes it is disappointing that a deal with the Chinese may not materialise in Australia but that is not a reason for Sirius to move back to 2p. I am holding despite the ugly red mark on my account and trust the board to deliver on the "potash dream" over the next 18 months. SXX is not a 1 month story, it will play out over the next 12 months. Investors must have patience and forget the doom mongers on the bulletin boards. Of course I may be wrong, and we  will again head sub 10p, but my bet is once the African/Middle East crisis is over, we are more likely to see 20p than 2p!

Hurray, a positive day at last for the portfolio, despite FTSE falls!

Despite a nasty day for the FTSE 100 (down 73 to 5,924) and Dow Jones Industrials (currently down 100 to 12,114) it was a positive day for most of the Contrarian Investor stocks. News that The Bank of England’s Monetary Policy Committee (MPC) had moved a little closer to lifting interest rates when it met earlier this was announced today as Spencer Dale, the Bank's chief economist, joined Andrew Sentance and Martin Weale, who voted for higher rates the previous month, in calling for a rate hike. So the vote to retain U.K. base rates at 0.5% was 6-3. No doubt the MPC will be worried about the rising oil price with its impact on inflation and negative influence on economic growth.

Bowleven (BLVN) had its second day of gains, finishing up 10p at 323p with it being reiterated as a Goldman Sach's conviction buy. Goldman has said that recent share underperformance has created an attractive entry point into the stock - "We view the upcoming drilling campaign offshore Cameroon positively, with recent success at the Sapele prospect helping to de-risk the surrounding acreage,". The target price was cut to 578p from 623p, with drilling at the Cameroon Sapele-1 prematurely halted because of high pressure gas which the drilling equipment was not specified to handle. Things appear to be calming down a little in Cameroon, with President Paul Biya reportedly not running for re-election later this year after 28 years in power.

Xcite (XEL) finished up 6.5p at 344p and even Rockhopper (RKH) was in the blue, up 3p at 235p. Could this be the end of the Rockhopper slide at last? Disappointing to see Weatherly international move up only 2% after the positive comments on the interim results report.  The one glitch was the continued slide in Sirius Minerals (SXX) to 13.38p, down 5%.

I took the plunge and bought North Sea oil play, Encore Oil (EO) as it has been on my watch list for a while and around 120p it should be a strong entry point. Didn't want to buy yet another oil company but its North Sea so less risky, oil is going through the roof and frankly I've been struggling to find many decent bets outside of commodity stocks so far.

Oil price continues to rise on fears of Africa and middle east contagion

The FTSE 100 is currently down 58 points to 5,929 and the Dow Jones Industrials is down 42 to 12,175 as investors finally start worrying about rising oil prices and its potential impact on economic growth. Brent crude oil is up $3.8 to $109 a barrel.

The closure of oil production and refining in Libya has sent oil prices up to levels not seen for 2.5 years. As Civil war seems a distinct possibility in Libya, with Gaddafi's refusal to step down from power, the reassuring words from OPEC that they can increase supply has done little to reassure oil traders. Talk that Gaddafi may deliberately sabotage Libya's oil field's before he is forced from power as a final act of the "mad dog" hasn't helped sentiment. Troops disloyal to Gaddafi have taken second city Benghazi.

Safe haven's continue to be the flavour of the week with U.S. treasury bonds and gold rising (gold hit $1409 an ounce today) as fear begins to infect investors after weeks of euphoria. Riskier assets like AIM stocks are continuing to be sold off.

Finally, an opportunity to buy stocks for better value after weeks of rises meant there were little cheap targets to be had. This volatility will continue for the foreseeable future until the situation in Africa and the Middle East becomes clearer."Be greedy when others are fearful"!

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