Sunday, 26 January 2014

2014 Stock Picks: Group 3: Small Cap Resources

Right, time to cover the list of 13 mid tier stocks that twitter followers picked out for success in 2014. If you missed the origins of this list, I asked followers for tips for 2014. They gave me 41. You can read the full list here I then split them into groups to make them more manageable. This is group 3 out of 5 groups in total and this group is focussed entirely on resources. Their market caps are between £12 and £30m.

As usual, the following is a basic overview only. So for the sake of clarity, I do this as a hobby, not to pretend I know about the next big success. I’m sharing my and others’ thoughts on shares as I hope that gives you ideas for further research. But please do your own due diligence. Thank-you. Right, here they are........

Small Cap (£12m - 30m) Resource stocks

Chosen By
Starting Market Cap
Starting Share Price
Magnolia Pet
Tri-Star Resources
W Resources
Baron Oil
Beacon Hill Resources
Tertiary Minerals
Edge resources

Tomco Energy Pls (TOM)
TomCo is focused on oil shale in Utah, USA. It owns 100% of 2 leases covering 5 blocks with an independent JORC compliant resource declared in the measured category of 126million barrels for the main tract of the Holliday block. There is an estimated 21 gallons of 31-34 deg API oil per tonne of shale, with a mine life of 21 years.

Literally next door to TomCo is a company called Red Leaf, who operate their Seep Ridge site 15 miles south west of TomCo’s Holliday block. They are planning a 9,800 bopd commercial operation using their “EcoShale™ In-Capsule Process” - a more environmentally friendly way to extract oil from the ground. The oil major Total has invested in Red Leaf’s technology which gives some confidence in their project.

TomCo's strategy is, therefore, to develop the Holliday Block as a similar follow-on to Seep Ridge using the same EcoShale™ In-Capsule Process, with the same targeted production rate of 9,800 bopd. Red Leaf’s first oil is due in 2014. TomCo’s would be sometime following this but I have to say I couldn’t see any indication of when exactly they are planning to commercialise the project, as Final Investment Decisions on the Total / Red Leaf venture has not been taken, and then their project needs to be up and running before TomCo’s could proceed with theirs.

However, you could see this as a positive, as it should mean that their approach is less risky, as they are using technology which will have been refined and proven next door at someone else’s cost. But you should remember that they could still be many months away from production.

Compared to their peer group TomCo seem to be relatively attractive. According to Beaufort Securities TomCo’s North American unconventional oil peer group is valued at $1.57/barrel of oil equivalent. Next door, Red Leaf is valued at an implied $5.38/boe. And TomCo are valued at just $0.25/boe. So there is plenty of potential if they get the project through to production. Cash flow break even is apparently c.$50/bbl and over the next 2 years they expect to derisk the project as Red Leaf makes progress on its own project. TomCo also have some assets which they could monetise for around $5m.

The project looks less risky than other pure exploration plays, and the resources are there, but you would need to be happy to lock your investment away for a while. The valuation is low, but I guess that’s a reflection on the timescales involved. An interesting prospect if you are in for the long term.

Empyrean Energy Plc (EME)
Empyrean is a profitable O&G company focussed primarily onshore in Texas and California. They have a mix of assets at various stages. Its flagship project is the Sugarloaf AMI in the prolific Eagle Ford Shale, Texas. It has a 3% working interest (operator is Marathon Oil) in 116 producing wells (across 24,000 acres) and at full development this is expected to reach over 280 wells, and there could be further upside from additional formations and closer well spacing. They plan to drill 110-120 wells in 2014 compared to 48 in 2013. The Company has a term debt facility in place of up to US$50 million with Macquarie Bank to develop their acreage. They also own:
  • A 57.2% interest in the Eagle Oil Pool Development Project in California, a proven O&G province 
  • A 7.5% interest in the Sugarloaf Block A operated by ConocoPhillips
  • A 10% interest in the Riverbend Project in Texas currently producing from the Wilcox formation.
The 6 months to the end of September saw some good numbers:
  • Net Profit +3512% to £2.38m (prior year 2012: £66,000)
  • Net Profit for 6 months already +18% on net profit for the full year ended 31 March 2013
  • Revenue +136% to £3.83m (prior year 2012: £1,62m)
  • Gross Profit +354% to £3.15m (prior year 2012: £694,000)
Marathon has forecast a reduction in drilling costs and time for 2014. Additional processing facilities and pipeline capacity is planned for 2014. In addition to the Eagle ford Shale, there could be further potential from the Austin Chalk, which covers much of the Sugarloaf AMI area. Austin Chalk drilling is planned for 2014.

Empyrean CEO Tom Kelly said, "Empyrean is delighted with the increase in Net Profit for the half year which already demonstrate significant uplift in comparison to the full year results for the period ended 31 March 2013...” “....the coming six months look very exciting for the company and we look forward to announcing specific 2014 plans for our Eagle Ford Shale acreage, once received from Marathon. Based on results from pilots and activity to date, we are confident that these will substantially enhance production, reserves and revenues and we look forward to reporting on these developments, alongside the various initiatives on-going across other parts of our US onshore portfolio, on a regular basis."

I quite like the look of Empyrean and will look some more.

Magnolia Petroleum Plc (MAGP)
Magnolia is focussed in the US, in particular North Dakota and Oklahoma. It has interests in 140 producing and non-producing assets. Over time Magnolia has been increasing its interest in wells which have traditionally been low percent working interests but are now becoming more material. Several new wells are due to come into production in Q1 with higher interests than previously. At the same time they are actively acquiring new leases and managing activity to grow and diversify their portfolio.

Current 2P reserves stand at 1.43m barrels of oil and condensate, with 5.1mcf of gas. The overall value of this has been determined as US$47m. However this was as of last August and only 9 out of 45 of the wells drilled between January and August were included in that figure. Reserves estimates also include only 5,500 out of the total 13,500 acres in proven formations. Since August additional drilling activity has taken place and an updated CPR is due to be commissioned in Q1 which is expected to increase reserves across 1P, 2P and 3P categories.

Full year revenues for 2013 should be well ahead of 2012 following a strong H1 and good performance and higher interest of some new wells in H2. The six month results to the end of June 2013 carried the following numbers:
  • Revenues +223% to US$910k (H1 2012: US$282k). Already +27% on the full year (FY 2012: US$709k)
  • EBITDA US$237,552 (H1 2012: loss of US$485,464)
  • Daily production +75% to 214 boepd as at 1 August 2013
  • 2P reserves increased to 1.437m barrels oil and condensate and 5,124 MMcf natural gas (68,700 barrels and 249.8 MMcf on admission to AIM November 2011)
  • 2P reserves valued at US$47million (21 fold increase since Admission to AIM)

Obtala Resources Ltd (OBT)
Obtala is not an operation with which I am familiar! It invests in and develops natural resources in Africa. It says it “is working towards developing a vertically integrated trading platform with the emphasis on agriculture, food production and processing with projects currently in Tanzania, Mozambique and Lesotho.” Obtala also has substantial natural forest timber concessions in Mozambique. Their interests are split across 3 main areas:
  1. Agriculture: (Tanzania, Mozambique) - Horticulture, Sundried Tomatoes, Dried Fruits, Developing Agri-Hub.
  2. Timber (Mozambique)- Natural Forests, 10 traded species, multiple products
  3. Processing (Lesotho) - Fruit and Veg cannery, Home Farms, Local market, Branded goods. 
They say they are determined to grow and develop the business – for example, they recently signed a heads of agreement to assume control over the cannery in Lesotho at no cost with no debt incurred allowing them to enter the branded goods market. They are targeting a self sustainable, profitable agribusiness and timber trading company and are also looking for further growth opportunities elsewhere in Africa. Their recent ops update highlighted the following:
  • Tomato harvest yielded 90 tonnes of fresh produce per hectare from Phase 1 (anticipated to generate revenue in excess of $0.5m per month)
  • Predicted monthly production of dried product is c.150 tonnes across Phase 1 of Morogoro Tomato Farm (50% higher than originally anticipated)
  • First export shipment of 20 tonnes of dried product before end of 2013
  • Fully funded and cash generative to complete Phase 2 by Q2 2014 and Phase 3 by Q3 2014 (taking gross revenue to in excess of $1m per month)
Very different from the usual oil and gas stock!

Tangiers Petroleum Ltd. (TPET)
Tangiers is a junior O&G exploration company with their key project offshore Morocco. Tangiers successfully farmed out 50% of their interest in this Tarfaya block to Galp Energia (operator) who is paying $40.5m plus $7.5m back costs. Tangiers retain a 25% interest and are now carried for the first well planned to be drilled in the first half of 2014.

More recently Tangiers announced an off-market takeover for all of the shares in Jacka Resources Ltd (ASX: JKA). Jacka have prospects across Africa, including Tunisia, Nigeria, Tanzania and Somaliland. This follows Tangiers announcement that their strategy was to exit their Australian interests and instead focus on building an African focussed O&G exploration, development and production Company.

The combined entity of Jacka and Tangiers will provide some highly prospective assets in Africa, including two high impact wells planned for 2014: the first fully carried AO-1 exploration well in the Tarfaya block, Morocco and the second being the drilling and testing of the Hammamet West-3 sidetrack 2 in Tunisia. They also have exposure to a promising near-term offshore Nigerian development project in Aje (OML 113) where the joint venture plans to complete the field development plan by early 2014. Aje is adjacent to the recent Ogo discovery, where the operator, Afren, recently announced upgraded recoverable resources of 774 million barrels of oil equivalent and identified a new deeper hydrocarbon-bearing zone. The acreage in Somaliland and Tanzania is still at an early stage but both areas have attracted strong interest from industry participants.

Twelve months ago Tangiers shares were around 25p. With their Australian interests now cleared out, and the proposed takeover of Jacka on the table, the way is clear for Tangiers to focus exclusively on Africa and roll the dice on their first 2 drills this coming half year.

Tri-Star Resources (TSTR)
Tri-Star’s objective is “to become the leading integrated antimony metal and products manufacturer to western economy consumers utilising an environmentally advanced 20,000 tonnes per annum name plate capacity antimony metal and tri-oxide production facility in the Gulf”. Try saying that with your mouth full. So what’s antimony I hear you say? It is an important minor metal with a wide range of uses most notably as an additive in flame retardant compounds eg for printed circuit boards, computers and other electronics. China has supplied 90% of the world’s supplies for the last decade.

The plan is to design and build an “antimony roaster” and a value added downstream antimony trioxide manufacturing facility in the UAE. This would produce finished material. The raw material would be supplied from Tri-Star’s own exploration and development projects in Turkey and Canada, as well as from third party producers. They are aiming to be the Western world’s leading integrated miner, producer and marketer of antimony metal and antimony tri-oxide products.

The company was formed in 2008 by Mr Emin Eyi, a metal proprietary trader with over 40 years experience in Antimony metals and products. The UAE roaster project has seen a MOU signed establishing the joint venture parties with detailed planning underway and development of the Turkey and Canada projects is ongoing.

W Resources (WRES)
W Resources struck me as an interesting and promising project which looks like it has come a long way. It is a tungsten and gold exploration and development company with assets in Spain and Portugal. Its flagship project is its La Parrilla Tailings Project in Spain. The project comprises a tungsten mine and a tungsten tailings project situated in the southwest of Spain, close to roads and with power and water already in place. The 2008 estimated resource is 36million tonnes at 0.09% WO3, making it one of the largest tungsten deposits in the western world.

W Resources has recently successfully test commissioned its pre-concentration plant which is now complete. First tungsten production is anticipated in Q1 2014; in fact according to last week’s RNS it is “next month”. Annual production is anticipated to be 28,000 MTU Tungsten (W) and 26 tonnes Tin (Sn), which will deliver over €7m revenue per annum at current prices. The price of tungsten has more than doubled in the last 3 years and La Parrilla offers a low cost, high margin resource development opportunity.

Recent news saw final concentrate grades exceed expectations by a significant amount and discussions have begun with potential customers for sales of product. In the short term it is expected that the product will be sold to 1 or 2 customers to provide a strong base from which to build. The Chairman Michael Masterman said “As we near production at La Parrilla Tailings next month we are delighted that the final analysis has delivered tungsten grades of over 60% and tin at over 7%, significantly exceeding our expectations. This is further endorsed by the positive response from potential customers, which we look forward to securing off take agreements with in the coming months."

The long journey mining companies from prospecting, exploration, discoveries, financing, planning, approvals, investment, development and then finally production can take many years. W Resources looks like it has been on that journey and I’m wondering if it might be the time to join the journey for the best bit? DYOR.

Mariana Resources Ltd (MARL)
Mariana is a gold, silver and copper exploration and development company with projects in South America. Their prospects are located in Peru and Argentina.
  • Peru - option to earn 51% interest in highly prospective copper-gold and copper silver porphyry targets in the Cordillera del Condor. This is a highly prospective licence and has significant upside potential. Initial positive drilling results were released in December. Mariana also has an option to earn a 70% interest in the Soledad copper-gold and silver project in Central Peru. This is close to Barrick Gold’s Pierina gold/silver mine. Drilling here is planned for H1 2014. 
  • Southern Argentina - core gold-silver projects at Las Calandrias (100%), Sierra Blanca (100%), Los Cisnes (100%), Bozal (100%) and Los Amigos JV (30%). These projects span over 200k hectares in the Deseado Massif epithermal gold-silver district in mining-friendly Santa Cruz Province. The Argentian Las Calandrias flagship asset has an initial gold resource estimate in excess of 500,000 equivalent ounces. Low cost exploration continues to advance these assets as part of a longer term strategy for Mariana. 
Mariana is clearly moving its projects forwards. I’m not that keen on early stage mining operations as the journey can be a long one and I would prefer to join at a later stage (see W Resources above) but it looks like Mariana has attractive prospects and is making good progress if this is your area of interest – one to look at if that’s the case.

Baron Oil Plc (BOIL)
Baron Oil is another O&G E&P company, this one focused in Columbia and Peru. Baron has been through a complete reorganisation and was previously known as Gold Oil Plc. Trading was suspended in 2012 and finally lifted in January 2013 following an almost complete change to the board, a placing, and a change in strategy. Baron Oil is reportedly now in a steady state after a period of significant turmoil. That said, the board say they need to look for opportunities to enhance shareholder value in the short to medium term. Their web site didn’t inspire me massively as it talked about the challenges and risks of operating in Latin America and how Columbia is now hard to get good deals sorted. They do report though that several potential opportunities are being analyzed and will be announced if successful conclusions are forthcoming, but the company has released no news at all since 17th September last year.

Baron’s interim results for the six months to end of June 2013 showed a small profit of £303k versus a loss of £1.5m the year before. They have successfully farmed out portions of their blocks, and also formed a partnership with S&J Full Services for their Colombian producing field where discussions are ongoing with Ecopetrol regarding a licence extension, and until this is granted the company state they will not invest more funds here. In Peru there are plans to drill a well(s) in 2014 in Block Z-38 which adjoins block Z-34. Positive results would underwrite the potential of Block Z-34.

Baron didn't fill me with confidence, due to the past history of the company, the licence negotiations, and the risk of operating in Latin America, but if it overcomes these challenges maybe it could be a phoenix out of the ashes of Gold Oil?

Caza Oil and Gas (CAZA)
Caza is involved in the USA in Texas, Southeast New Mexico, and the Louisiana Gulf Coast. In Texas and New Mexico Caza have operations in the Permian basin which are relatively low risk prospects from the Wolfberry, Bone Spring and Delaware Mountain plays. This is a mature basin with well established infrastructure. Modern technology is being used to unlock the substantial resources that remain in place in this region. The Gulf Coast operations cover a large area and the majority of production comes from natural gas reservoirs in conventional sandstones, many of which are stacked and provide multiple pay zones. Where condensates exist, this can add significant economic upside.

Caza’s 3rd quarter results to end of September included the following highlights:
  • Aggregate production for Q3 + 66% to 36,491boe versus same period 2012.
  • Q3 revenue +186% to $2.6m ($902,622 2012). The increase was primarily due to additional Bone Spring wells brought online.
  • The ratio of oil and non gas liquid (NGL) increased to 63% of the company's combined oil and natural gas production, mitigating the low US gas price.
  • Cash balance of $13.4m compared to $19.1m end of June. The decrease due primarily to drilling activities in the Bone Spring play in New Mexico.
The ratio of oil and NGL is increasing and this is expected to continue. Production and revenue is ahead of last year and Q2 figures. There is plenty more drilling planned in 2014 and more wells to come online. To accelerate development and production Caza has drawn $35m from a $50m facility which it is using to drill several wells currently underway. If these are successful production should be possible immediately as facilities are already in place.

Beacon Hill Resources (BHR)
I like Beacon Hill. That’s odd really as they have been a complete nightmare recently but I still like them. They have a certain determination that suggests that they are going to get there....eventually. It’s just that the journey recently has been over the edge of the cliff and they haven’t come back up yet. But Beacon Hill remains one of my top speculative stocks for 2014 and I am invested with an expectation of a share price at least four times higher than currently. But that depends on full commercial production as a Tier 1 status producer and it’s not certain so please don’t take my word for it – I just like the possibility and am prepared to take the risk.
Beacon Hill is focussed on building and developing a portfolio of near term production projects in commodities relating to the steel industry. They have three main projects:
  • Their flagship Minas Moatize Coal project in Mozambique
  • Their Changara Coal project also in Mozambique
  • Their Arthur River Magnesite Project in Australia. 
What I like about Beacon Hill is that they are making progress, seemingly with gritted teeth in the face of strong headwinds. They have secured an allocation for 0.5m tonnes p.a. on the Sena Railway line, itself no mean feat. They have installed and commissioned the wash plant. They have updated their JORC reserves statement which shows a commercially viable operation for 15 years even at current depressed coal prices. They have 5 diesel locomotives and 90 rail wagons on the way from South Africa, and have also entered into an agreement to acquire up to 70% interest in an exploration licence to provide pig iron mineralisation and magnetite, part of their plan to integrate across the steel industry.

The recent share price has been killed by “Darwin funded” convertible loan notes. These have taken the gloss off the progress towards production. Together with the global price of coking coal, there are many reasons why investors might choose to steer away from BHR. But they are making progress, and are planning on leasing out the locomotives whilst upgrading their production facilities until they achieve Tier 1 status. This should provide better financing as well as allow the global prices of commodities to recover. Combined this all pushes back production to late 2014, even into 2015, but at £15m BHR is priced cheaply. For info, in 2011 there was reportedly an interested party offering £120m for BHR which was turned down. Those days seem a distant memory now, but I believe that BHR could just make it to 2015 and be priced around the same level if all goes to plan. That would be 8 times the current SP.

Tertiary Minerals (TYM)
Tertiary Minerals is a mineral exploration and development company building a strategic position in the fluorspar sector. Their strategy is to develop large fluorspar deposits in stable, democratic, mining friendly areas. Tertiary controls two significant projects in Sweden and Norway, as well as a large deposit of strategic significance in Nevada USA.

Fluorspar is an essential material in the chemical, steel and aluminium industries. The EU named fluorspar as one of 14 critical raw materials for which a predicted supply shortage would represent a substantial economic threat. Meanwhile, China is changing from a large net exporter to a potential net importer.

Tertiary’s Swedish project shows solid economics with a resource of 3Mt of fluorspar. An exploitation permit is expected to be submitted in 2014. Their Norwegian project adds another 1Mt resource. Nevada drilling resulted in an estimate of at least 8Mt with recent positive drill results showing upside potential.

On the positive side Beaufort Securities agree with the supply & demand issues for fluorspar. Medium term pricing should be trending upwards. Tertiary has 3 attractive prospects in stable areas of the world, and could farm out some of their licences to add cash to their coffers. Broker targets suggest 16p-21p could be achieved.

Less positive is the potential for other fluorspar discoveries in the western world (as it is an abundant resource), or the risk that some form of synthetic alternative could be developed. Production remains several years away meaning funding could be a challenge. But overall Beaufort say Tertiary remain undervalued on both a theoretical and resource based assessment.

Edge Resources (EDG)
Edge Resources is an oil and gas company focused on Canada with a number of 100% owned interests. In the past they have struggled with debt and in September they had to refinance. Shares were 22p not long ago but are currently just under 7p which gives a market cap of only £11m. They have just successfully drilled and cased 4 wells in their Eye Hill license with all 4 wells expected to produce at commercial rates. Preliminary results show a production rate of 175 bopd from 3 of the 4 wells (slightly lower than PI expectations) but this is expected to increase as the wells clean up. The wells should also lead to an increase in reserves and a new reserves report is due in the spring.

Half year results showed improvements across most areas. Production was up to 283bopd. Revenue was up over 20%, general and admin costs were down. Operating costs were down substantially (due partly to the increase in oil prices). Net Cash generated was $850,000 compared to a loss of $447,000 same period 2012.

I quite liked the look of Edge Resources. They are a very small outfit, but already making a small profit, and with what looks like a new found focus on their future following a challenging 2013. They reminded me of the turnaround that Nighthawk has managed to pull off. 2014 could see them make continued progress and at under £12m market cap there should be plenty of headroom if they manage to keep the progress going. DYOR though please.

Sunday, 19 January 2014

2014 Stock Picks : Group 2 The Mid Tier

Group 2 : Mid Tier Mixed Stocks

Blimey, this was meant to be a quick and easy review of some twitter tips for 2014 but the list of 41 is proving time consuming! Not helped by a very busy time at work this week so needed to focus elsewhere.... but..... here are more details about the mid tier picks from twitter followers who reckon these are going to be the top choices for 2014. As always, the following is only intended to signpost companies to do your own research on. Information is in the form of basic overview only from public web sites, so please DYOR if interested in any of the below picks. Out of all of the following my interest was drawn to Kromek, Thalassa and Coms, none of which would be my usual cup of tea but all of which seem to be making solid progress and are already operating profitably at least at an operational level with bullish management statements recently.

Mid Tier (£30m - £100m market caps)

Chosen By
Starting Market Cap
Starting Share Price
Solomon Gold
Range Resources
Baobab Resources
Westminster Group
Sirius Petroleum

For the full list of all 41 stock picks please read the following link ...

Kromek (KMK)
Kromek arrived on AIM in October 2013 and describe themselves as a pioneer in digital colour imaging for x-rays, materials technology and advanced 3D imaging. In their words they are “changing the way we see the world”. Their focus is on highly specialised semiconductor materials which are used in detectors of x-rays, gamma rays, medical imaging, security screening (including civilian and military markets), industrial inspection and space exploration.

Kromek also supply x-ray imaging equipment which provides real 3D x-rays for the first time without specialist viewing equipment. They are targeting application in nuclear (cell) detection, including forms of cancer screening, as well as for a growing trend for networked sensors which will create significant additional opportunities. In summary, they are working across three key sectors - medical imaging, security screening and nuclear detection.

Their recent half year report to end of October (released 8th January) shows sales growing quickly up to nearly £2.4m versus £0.7m same period year prior. That turned a gross loss to a gross profit albeit administrative expenses still left them with an operating loss following their IPO in October. They did repay all £3m of their debt at this time however so are debt free. They have secured a $5.3m development deal as a partner to four top OEM’s in the market and another contract just short of $1m. Their security screening business saw multiple contracts awarded for their airport bottle scanners and finally their Nuclear Detection business won contracts worth up to $3.7m. They own 70 granted patents with 110 pending. Arnab Basu, CEO, commented “Kromek is currently growing strongly as we enter the rapid commercialisation of our business, utilising our powerful IP and technology platforms”

Looks like a nice little company with fast growth and one which seems to be moving to greater commercialisation throughout 2014.

Thalassa (THAL)
Thalassa Holdings Ltd is focussed on marine seismic operations. Their corporate strategy is "Exploration and Beyond". The "Exploration" part focuses on frontier activity and/or challenging locations, whilst the "Beyond" part focuses on production activity and securing opportunities in permanent reservoir monitoring. So a mix of higher risk challenging projects and lower risk mature production projects. Sounds interesting so far.

Alongside their technical expertise and consultancy in marine seismic operations they also operate, via a subsidiary, three portable modular source systems (PMSS™). These PMSS™ generate seismic source for use in seismic acquisition in oil and gas exploration. The equipment is temporarily installed on the back of a platform supply vessel.

Recent performance looks promising and the share price has risen strongly. On 8th January the board announced that they expect to significantly exceed market expectations for the full year 2013. Turnover is expected to be broadly in line but “operating profit and earnings per share to beat expectations by more than 10% and 20% respectively”. Results will be out week commencing 17th March but capital expenditure is forecast to increase as a result of increased business interest recently. They plan to refurbish two compressors recently acquired and build a mini PMSSTM for use in the high resolution 3D sector.

Interestingly over 3m shares have just been bought by the company (from the Chairman and from treasury) to hold in trust on behalf of all employees to reward performance and potentially share future profits more equitably amongst employees. I like this too. In my opinion it shows a progressive mind set amongst the board and should enhance employee engagement and therefore performance (I would say that working for one of the UK’s largest employee owned companies!) One to watch and to do more research on to check the current SP versus financial performance as it has risen strongly. There are only 24m shares in issue so not a big float at all.  

Plethora (PLE)
Plethora is focussed on a sector that being honest I’m not interested in - the health industry. From an investing perspective it generally scares me due to the volatility of share prices (that’s rich I hear you cry when I bang on about oil and gas explorers) Presumably either a product works or it does not and for this reason I’m not sure how you pick your investments? That said I will keep PLE in the list as it’s not my selection.

Plethora has a product that they hope to launch, PSD502, which is a spray for the treatment of premature ejaculation. They anticipate a launch in 2014. Premature ejaculation is possibly the most common form of sexual dysfunction in men and there is currently no globally approved and effective pharmaceutical treatment for this condition. (Note the word “pharmaceutical” which I presume means they therefore exclude alcohol J  ) So the market potentially offers significant potential for development and growth

Plethora is engaged in discussions with potential partners to agree the manufacture, licensing, product size and format, launch plans, marketing etc. A lead manufacturer has already been identified. Dependant on the moving parts all coming together the launch of the product is planned for mid to end 2014. In addition to European approval already received, a submission to the US Food and Drug Administration is being prepared which would open up a significant market “at least as big as Europe”

The Chairman commented “The board is committed to the delivery of commercial value at the earliest opportunity in 2014… and ....the company intends to see the launch of PSD502 at the earliest opportunity”. Not one for me, but if you are interested it seems that much of the R&D is complete and that they are moving towards launch this year.

SolGold (SOLG)
SolGold is based in Queensland, Australia and its strategy is “to be an integrated gold and copper discoverer, developer and miner”. SolGold's projects are located in northern Ecuador, Australia, and the Solomon Islands and consist of the following:
·         Ecuador - a joint venture on the Cascabel copper-gold project. The company have just announced the results of a drill which indicate the discovery of a large high grade copper gold porphyry system. They are apparently the best results of all of the stage one drilling that they have done recently.  
·         Australia - 100% interest in the Rannes, Mt Perry, Cracow West and Normanby Projects, all in southeast Queensland. The Rannes project has indicated and inferred resources of 18.7 million tonnes at 0.9 g/t gold equivalent (296,657 ounces of gold and 10,137,736 ounces of silver).  
·         Solomon Islands - the Fauro Project on Fauro island, and the Lower Koloula, Malukuna and Kuma licenses on Guadalcanal. A JV partner is being sought for the Fauro project to pursue drilling of gold-copper targets defined in the 2011 exploration program. 

Board and Management hold approximately 15.1% of the issued share capital which should indicate an aligned interest between board and investors. They have completed a number of placing over the past year which puts me off but to be fair the share price has risen from 2p to 8p over the past 12 months. The directors have also participated in the placings so you can make your own mind up on this choice.

Range Resources (RRL):
Range probably doesn’t need much introduction as most PI’s seem to have been long or short on Range at some point over the years. However, since 2011 being short would have been the only way to make any money, much to the despair of many a small PI. Range has interests and licences spread across the world from Guatemala, Georgia, Colombia, Somalia, North America, and Trinidad as follows:
·         Georgia – 45% interest in licence with 3P of 203Bcf of gas
·         Puntland – 20% interest in 2 licences with estimated undiscovered oil in place of 3.2bn barrels.
·         Colombia – 65% interest in licence with c.5.5m barrels undiscovered OIP
·         Guatemala - 29% strategic stake in Citation Resources with 2P of 0.74m and 6.4m contingent resources
·         Trinidad – 20.2m barrels of 2P reserves owning 100% of 3 blocks.
·         Texas, USA- producing gas assets which they have been in the process of selling for $30m for around 18 months. Must be the longest sale process ever but apparently they are close to completing.

Range is producing somewhere in the region of 800 bopd (although they haven’t released an update on this for a long while), mostly from their Trinidad assets. They aim to increase this to 4000bopd by the end of this year (but don’t hold your breath). I gave up on the Range dream a couple of years ago so am biased. I accept they have some good prospects but the key for them in 2014 will be can they deliver on their promises? The SP is back at all time lows so if they can then there is every chance of a good outcome in 2014. But they also now have over 3 billion shares in issue, so any value added has a lot of shares to be divided across. Please DYOR. If you are interested I made a comparison of Range with a different Trinidad focused oil company, Trinity here

Fastnet Oil and Gas (FAST)
Fastnet is an E&P O&G company focused on near-term exploration. They have two areas of interest - Morocco and the Celtic Sea. Both of these areas are hotting up. The Celtic Sea is attracting interest following the successful Barryroe appraisal and Statoil’s Bay du Nord Discovery in a similar geological basin offshore Canada. And Morocco has attracted big players in the last year including BP, Chevron, Cairn Energy, Genel and Total.

·         Morocco. Fastnet have an exclusive option to farm into eight onshore exploration permits (the Tendrara Lakbir Petroleum Agreement). An independent assessment of these areas shows gross contingent recoverable resources between c.311 BCF (Best) and 892 BCF (High) for the TE-5 structure. A farm out agreement has also been signed with SK Innovation for the Foum Assaka Contract Area where SK Innovation will contribute to past costs and up to a two well carry on the Eagle Prospect (first exploration and appraisal well or 2 exploration wells). Well planning is underway for the first FA-1 well, estimated to contain 360 mmboe of Pmean resources.
·         The Celtic Sea. Fastnet have completed the largest ever 3D seismic in the Celtic Sea over the Mizzen, East Mizzen and Deep Kinsale areas. A farm-out process in relation to all or part of the Celtic Sea areas is ongoing with a view to concluding this process to allow a potential 2015 drilling program. This remains key to unlocking an affordable way forwards in this area. 

Fastnet had US$10.9 million cash at the end of September 2013 having completed a £10m fundraising before costs. They made a net loss of US$856,000 for the period ending September but are fully funded for their 2014 on and offshore Moroccan drilling programme

Baobab Resources Plc (BAO)
Baobab is focused on Mozambique where it is currently completing a Bankable Feasibility Study ('BFS') at its pig iron and ferro-vanadium project in the Tete province. This is one of Africa's fastest growing mining and industrial centres. Their most recent operational update highlights were as follows:
·         Boabab’s 2013 drilling campaign was successfully completed with the ambition being to convert the upper portions of the Tenge resource block, representing a minimum 10 years of operation, to a JORC compliant measured category. Preliminary results are expected this month (January) with a revised resource statement expected by the end of Q1.
·         Test work carried out in 2013 confirmed that a low impurity pig iron product could be produced using Baobab's iron ore and local Mozambique thermal coal see RNS here dated 4 March 2013.
·         Further tests are on-going and will provide the first data on the composition of the vanadium and titanium slag by-products. Results are expected in early 2014.
·         Discussions regarding port and rail allocation are making solid progress and are expected to be formalised shortly by way of a Memorandum of Understanding.
·         Mining title and industrial licence applications are being prepared for submission in January 2014. The environmental impact assessment ('EIA') and associated resettlement plan and community and enterprise development programme are making good progress.

Westminster Group Plc (WSG)
Westminster Group is involved in the supply of system solutions and products to the security, defence and safety markets worldwide. Their principal activity being the design, supply and ongoing support of advanced technology security solutions. This includes surveillance, detection, tracking and interception technologies as well as long term managed services contracts such as the management and running of complete security services and solutions in airports, ports and other similar areas. It also includes manned services, consultancy and training services. The majority of its business comes from governments, agencies, NGO's, and blue chip organisations. The Group is represented in 48 countries with a strong focus on Africa, the Middle East and Asia and has two internationally focussed divisions - Managed Services and Technology.

Last year saw Westminster restructure its business, dispose of a couple of misaligned subsidiaries, win numerous contracts, and raise just over half a million pounds drawing down on its equity financing facility (EFF) with Darwin. This appears to have been done at a premium to the share price on each occasion. Impressive! At the same time they have reduced their debt considerably following the earlier restructuring and division of the company into the two trading divisions. On the back of this the share price has risen from around 35p to stand at just over 80p today.

At the last interim results to the end of June and since this date they have announced the following:

·         Revenue from ongoing operations £4.7m (2012: £4.8m). Aviation Division revenues +214% to £1.44m
·         Gross Margin +40%. Operating EBITDA +350% to £0.18m (2012: £0.04m)
·         Significant progress in signing further long term Managed Services contracts and numerous other discussions underway.
·         Debt reduced from £3.29m on 19th June to £830,000 as of 29th October
·         Appointed as a strategic partner for security with International Air Transport
·         Significant progress on delivery of a $3m East African screening project which is awaiting certain final procedural formalities.
·         Acquired business of Aviation Security and Training business GXS Aviation

So they have had a good 2013 and look well set to continue to grow in 2014. The share price has already risen strongly, but there is good reason as to why. One to research further me thinks.....

Coms is an end-to-end provider of telecommunications and IT services to business and industry. They offer a full range of services across VoIP, smart buildings, broadband and infrastructure. They pride themselves on service, innovation, passion and dedication, and own and operate their own UK based Carrier Class telephony platform.

Recent trading looks promising. Their most recent update had the following highlights:
·         Trading in the 9 months to October 2013 was strong, with revenue and EBITDA in line with management expectations. The company enjoyed record order levels and healthy cash generation
·         Promising order book for the remainder of the year. Confident of prospects for full year.
·         All acquisitions made during 2013 expected to be fully integrated by the year-end.
·         Confidence in ability to achieve organic growth demonstrated by 2013 contract wins with Taunton & Somerset NHS Trust, London Borough of Barnet, University of Kent, North Wales Hospital, Surrey and Sussex Healthcare, Harrogate District Foundation Trust, West Midlands NHS Trust and Gateshead NHS Foundation Trust.
·         A new headquarters and “centre of excellence” in Buckinghamshire opened and is operational with the capacity for increased headcount and activity in the future.

At the time, Dave Breith, CEO, stated: "This has been a transformational period for our business and I am looking forward to updating our shareholders on our last quarter's trading performance and publishing our full year Group accounts following our year end on 31 January 2014"

Sirius Petroleum (SRSP)
Sirius Petroleum has been focused on oil and gas development and production opportunities in Nigeria for the past 3 years. They’ve entered into an agreement to fund the development of the already discovered Ororo marginal oil field, located in shallow waters offshore Ondo State, Nigeria. The field is adjacent to a number of other producing fields, all of which are operated by Chevron. Chevron discovered the Ororo field in 1986 with the Ororo-1 well, which found hydrocarbons over 12 reservoirs. The well flowed at a combined rate of c.2,800 bopd from two oil producing sands. In December 2013 Sirius announced that Schlumberger had completed an independent field evaluation study on the Ororo Field which confirmed significant recoverable resources higher than the Company's original estimates (P50 - P10 recoverable oil from the Ororo-1 well estimated at 10.0MMstb - 12.8MMstb).

Sirius also announced that it is to embark on the preliminary process for a re-entry on the Ororo-1 well. Seven oil bearing sands were identified and no oil water contact was located in any of the reservoirs. The combined results suggest the exploitation potential of the field is good. Schlumberger have been involved from the very beginning and Sirius are in discussions with them to provide project management and drilling services to accelerate the development plans and get to first oil. Sirius also have an off-take agreement already in place with Glencore Energy UK Limited which includes the potential to provide a conditional pre-financing facility of up to $65 million, the repayment of which will be made against initial sales of oil.

The downside is that Sirius has no producing assets yet and therefore no meaningful cash flow. They seem to be managing costs carefully but nevertheless operating losses in the half year to end of June 2013 were $1.24m. Finance costs of $2.088 million reflected the interest and charges on short term working capital funding. Total comprehensive loss was $3.26m. They since announced that they have additional options with which to fund the development of their first farm-in and to acquire additional assets and are at an advanced stage in this process. During the last year however they issued a total of 857k shares in settlement of fees at 3.5p and arranged a placing for 123m shares raising £1.8 million. These funds were to provide additional working capital whilst Sirius finalises the terms of the financing required to develop the portfolio of oil and gas assets

Their Chairman stated “Sirius has attracted a range of options with which to fund the development of our first farm-in and to acquire additional assets.  The recent new funds raised by the Company provide us with working capital ahead of securing our main funding facility which is now at an advanced stage.  The Board is confident that the Company is on course to successfully deliver the strategy to build a substantial portfolio of oil and gas assets”

The potential of the discovered oil field, higher than anticipated recoverable oil evaluation report, off take agreement, relationship with Schlumberger, and decent flow test on the well all seem positive. The funding would remain an issue for me as I’m not so keen on companies that have a long way to go before turning resources into producing assets and there is no indication of how long this wait will be, but among the multitude of O&G exploration companies Sirius seems to me to be better set than the average. DYOR.

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Thanks and happy researching!