Friday, December 16, 2005
Another week of waiting on Dana
Well, Tuesday came and went without significant news from Dana Petroleum. The company released this drilling update:
An intermediate logging programme was completed over the Upper Cretaceous interval, above 11,601 feet... Initial interpretation of the data collected indicates the presence of two hydrocarbon bearing sandstones, which are some 500 feet apart. The lower sandstone has a gross thickness of approximately 131 feet of which the upper 33 feet contains a hydrocarbon which, based on the data available so far, appears to be a light oil or a liquids rich gas-condensate. The upper sandstone is 13 feet thick and is currently interpreted to be gas bearing... The intermediate interval logged and described above has examined the Cretaceous above a depth of 11,601 feet. There is potential for other sands to be present in the remaining 2,299 feet (701m) or so of section still to be examined as drilling continues down to the planned total depth of 13,900 feet.
So, on the way down to target depth, Dana has encountered significant oil shows and more could follow soon. It remains to be seen if the discovery made so far will be commercialised but given the well location and the thickness of the hydrocarbon regions encountered my guess would be not. But drilling hasn't reached target depth yet. Next Tuesday's announcement will probably be the most significant Dana has made since I invested over two years ago.
Elsewhere, my large short position, Countrywide, made me suffer a sudoriferous morning yesterday. Since placing my bet in August that Countrywide shares would fall, the share price has moved against me substantially. After first shorting at 328p, the shares rose to almost 400p before falling back to 360p. On a further spike upwards, I doubled my bet at 380p. In the last two weeks the shares have approached 400p again. On Wednesday at 7 a.m, Countrywide issued a trading statement claiming that despite 2005 being the worst year in thirty for housing transactions, Countrywide was on track to meet market expectations for the full year. This came as a complete shock. The average broker earnings per share forecast on Countrywide for 2005 is 12.6p. I expected the share price to rapidly move against me at market opening and leave me with a very tough decision on whether I should cut my losses or stump up more cash to keep my bet open. Fortunately, the market was disappointed by the announcement and the shares fell 1.5% in the first hour of trading. The shares fell further on Friday to 385p to buy. I will move into profit if Countrywide falls below 350p.
In the first half of the year, Countrywide made 1.8p EPS. This isn't a markedly seasonal industry. Countrywide's earnings should be pretty evenly distributed from one half to the next. So how is the estate agent going to make five times as much money in the second half of the year as they did in the first? I'm confident they can't and with the company's largest shareholder currently selling down their holding I expect more of my losses to be recouped before 2005 is out.
The Artful Dodger
An intermediate logging programme was completed over the Upper Cretaceous interval, above 11,601 feet... Initial interpretation of the data collected indicates the presence of two hydrocarbon bearing sandstones, which are some 500 feet apart. The lower sandstone has a gross thickness of approximately 131 feet of which the upper 33 feet contains a hydrocarbon which, based on the data available so far, appears to be a light oil or a liquids rich gas-condensate. The upper sandstone is 13 feet thick and is currently interpreted to be gas bearing... The intermediate interval logged and described above has examined the Cretaceous above a depth of 11,601 feet. There is potential for other sands to be present in the remaining 2,299 feet (701m) or so of section still to be examined as drilling continues down to the planned total depth of 13,900 feet.
So, on the way down to target depth, Dana has encountered significant oil shows and more could follow soon. It remains to be seen if the discovery made so far will be commercialised but given the well location and the thickness of the hydrocarbon regions encountered my guess would be not. But drilling hasn't reached target depth yet. Next Tuesday's announcement will probably be the most significant Dana has made since I invested over two years ago.
Elsewhere, my large short position, Countrywide, made me suffer a sudoriferous morning yesterday. Since placing my bet in August that Countrywide shares would fall, the share price has moved against me substantially. After first shorting at 328p, the shares rose to almost 400p before falling back to 360p. On a further spike upwards, I doubled my bet at 380p. In the last two weeks the shares have approached 400p again. On Wednesday at 7 a.m, Countrywide issued a trading statement claiming that despite 2005 being the worst year in thirty for housing transactions, Countrywide was on track to meet market expectations for the full year. This came as a complete shock. The average broker earnings per share forecast on Countrywide for 2005 is 12.6p. I expected the share price to rapidly move against me at market opening and leave me with a very tough decision on whether I should cut my losses or stump up more cash to keep my bet open. Fortunately, the market was disappointed by the announcement and the shares fell 1.5% in the first hour of trading. The shares fell further on Friday to 385p to buy. I will move into profit if Countrywide falls below 350p.
In the first half of the year, Countrywide made 1.8p EPS. This isn't a markedly seasonal industry. Countrywide's earnings should be pretty evenly distributed from one half to the next. So how is the estate agent going to make five times as much money in the second half of the year as they did in the first? I'm confident they can't and with the company's largest shareholder currently selling down their holding I expect more of my losses to be recouped before 2005 is out.
The Artful Dodger
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