Tuesday, November 30, 2004
No news is bad news
All my portfolio holdings would be considered 'smaller companies', organisations with a market value dwarved by the Goliaths that make up the FTSE-100 or Dow Jones Industrial Average.
Small companies are less researched, promoted or analysed. This can provide real opportunities for small potatoes investors like myself - shares can languish unloved, unrecognised and significantly undervalued.
Sniffing out these truffles is the first challenge. The required search and appraisal is a laborious process - just ask any oil explorer or over-exposed pop mogul. Patience and confidence in one's judgement is also vital while waiting for value to be reached. Finally, luck would come in handy and might manifest itself in a takeover bid or large institutional stake building.
Staying patient and remaining confident is easier if your investment is producing a stream of newsflow. This needn't be financial results themselves any information can be just what the market needs to provoke a reaction and re-assessment.
Dana Petroleum and Chaucer Holdings, my second and third largest stakes respectively, demonstrated this need for news recently, precipitating some very welcome price-perkiness.
Last Tuesday, Dana announced an impressive deal that would see a significant increase in North Sea production in exchange for a stake in a gas field still very much in the development phase:
Dana's North Sea gas production is expected to rise by approximately 17 million standard cubic feet per day, equivalent to around 2,800 barrels of oil per day. At the effective date of 1st July 2004, Dana estimates the acquisition will add 37 billion cubic feet of gas reserves to the Company, equivalent to 6.2 million barrels of oil. This is offset by the divestment of reserves in Block 23/16c equivalent to 1.4 million barrels of oil.
It was announced Dana would also hand Caledonia EU Limited (its partner in the trade) a cash makeweight. Any fears as to where this cash would come from were soon assuaged as Friday saw another announcement of divestment in development from Dana:
Dana will sell its minority 10% shareholding, with attaching rights and obligations, in the Russian company OAO Evikhon for a consideration of US$28 million.
The market was encouraged by this news. For those not following the company, the North Sea deal confirmed Dana's main source of earnings, production, is set to increase substantially from the numbers given at the last results announcement. This news should come as no surprise to keen followers of the share or this blog, I reported in October that Dana intended to hike up production to reach 27,000 boepd (barrels of oil-equivalent per day) by the end of 2005. The market response was encouragingly positive and the shares were quickly marked up.
The disposal of Dana's Evikhon stake demonstrates that the claims the company has been making since the AGM are being accomplished as Dana moves to focus on North Sea production and West African exploration, eschewing the peripheral distraction of Russian development work.
The declarations from Dana reinforce my confidence in this investment. Production is set to rise on the year and management is concentrating on extracting shareholder value from areas where the exertions can be more profitably applied.
Not one to miss out (for a change), Chaucer wowed market combatants with the announcement that a significant dividend hike was on the way for the next three years:
the Board has decided to adopt a distribution policy which aims to increase dividends by approximately 10% per annum from 2005 to 2008
Chaucer topped this off with more positive talk on trading and the assurance that hurricane losses on the year were expected to remain in the range previously stated and trading was progressing well:
Following the end of the hurricane season, the 2004 underwriting year remains on course to produce a third consecutive year of healthy underwriting profits
The news pushed Chaucer shares up to today's 48p to sell, Dana closed today at 410p to sell following disappointing drilling results other oil explorers prospecting elsewhere offshore Mauritania.
My remaining holdings, Ben Bailey and Mayborn, look set to give the market a significant signal in December. In that month last year, both companies announced forecast busting trading, sending shares rising sharply. A repeat performance this year would be just the early Christmas present my portfolio needs.
The Artful Dodger
Small companies are less researched, promoted or analysed. This can provide real opportunities for small potatoes investors like myself - shares can languish unloved, unrecognised and significantly undervalued.
Sniffing out these truffles is the first challenge. The required search and appraisal is a laborious process - just ask any oil explorer or over-exposed pop mogul. Patience and confidence in one's judgement is also vital while waiting for value to be reached. Finally, luck would come in handy and might manifest itself in a takeover bid or large institutional stake building.
Staying patient and remaining confident is easier if your investment is producing a stream of newsflow. This needn't be financial results themselves any information can be just what the market needs to provoke a reaction and re-assessment.
Dana Petroleum and Chaucer Holdings, my second and third largest stakes respectively, demonstrated this need for news recently, precipitating some very welcome price-perkiness.
Last Tuesday, Dana announced an impressive deal that would see a significant increase in North Sea production in exchange for a stake in a gas field still very much in the development phase:
Dana's North Sea gas production is expected to rise by approximately 17 million standard cubic feet per day, equivalent to around 2,800 barrels of oil per day. At the effective date of 1st July 2004, Dana estimates the acquisition will add 37 billion cubic feet of gas reserves to the Company, equivalent to 6.2 million barrels of oil. This is offset by the divestment of reserves in Block 23/16c equivalent to 1.4 million barrels of oil.
It was announced Dana would also hand Caledonia EU Limited (its partner in the trade) a cash makeweight. Any fears as to where this cash would come from were soon assuaged as Friday saw another announcement of divestment in development from Dana:
Dana will sell its minority 10% shareholding, with attaching rights and obligations, in the Russian company OAO Evikhon for a consideration of US$28 million.
The market was encouraged by this news. For those not following the company, the North Sea deal confirmed Dana's main source of earnings, production, is set to increase substantially from the numbers given at the last results announcement. This news should come as no surprise to keen followers of the share or this blog, I reported in October that Dana intended to hike up production to reach 27,000 boepd (barrels of oil-equivalent per day) by the end of 2005. The market response was encouragingly positive and the shares were quickly marked up.
The disposal of Dana's Evikhon stake demonstrates that the claims the company has been making since the AGM are being accomplished as Dana moves to focus on North Sea production and West African exploration, eschewing the peripheral distraction of Russian development work.
The declarations from Dana reinforce my confidence in this investment. Production is set to rise on the year and management is concentrating on extracting shareholder value from areas where the exertions can be more profitably applied.
Not one to miss out (for a change), Chaucer wowed market combatants with the announcement that a significant dividend hike was on the way for the next three years:
the Board has decided to adopt a distribution policy which aims to increase dividends by approximately 10% per annum from 2005 to 2008
Chaucer topped this off with more positive talk on trading and the assurance that hurricane losses on the year were expected to remain in the range previously stated and trading was progressing well:
Following the end of the hurricane season, the 2004 underwriting year remains on course to produce a third consecutive year of healthy underwriting profits
The news pushed Chaucer shares up to today's 48p to sell, Dana closed today at 410p to sell following disappointing drilling results other oil explorers prospecting elsewhere offshore Mauritania.
My remaining holdings, Ben Bailey and Mayborn, look set to give the market a significant signal in December. In that month last year, both companies announced forecast busting trading, sending shares rising sharply. A repeat performance this year would be just the early Christmas present my portfolio needs.
The Artful Dodger
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