He could've used some cheap gasolineRight, here's one I've been looking at for a while, but which recently hit my "limit buy" order - Indago Petroleum (IPL.LSE), a junior oil and gas explorer listed on AIM. They currently have an interest in three exploration wells in Oman - see their website for details.
What's interesting about IPL? Well, for a start, you must have noticed how the oil price has been absolutely slaughtered by the post-Lehman crash, taking the energy juniors with it. It seems likely to me that this correction went too far, and (like any hard asset) oil should at least recover against increasingly debased currencies such as sterling or the US dollar. There's also the whole Peak Oil argument, which I find quite convincing, but this is very much strategic background.
To be more specific, IPL is an oil explorer which hasn't found any oil (yet). In fact, looking at their last interim report, what they have encountered is a series of problems, including a blow-out at their Al Jariya well in February 2008.
So, what's worth buying about this company? I refer you to their announcement of 23rd February 2009, which indicates that a settlement has been reached with their insurers regarding compensation for the above blow-out, viz.:
Once the Company has received its share of the Settlement, it is projected to have cash balances in the region of $38 million. It is anticipated that all the Settlement monies will have been received by the end of March 2009.
Source: Investegate.co.uk
Now, this is where it gets interesting. If you deduct all of their liabilities from the above cash figure (about $10M, in the last interim report), that leaves net cash of $28M, or around£19.23M in sterling. Divided by the 53.36M shares in issue, and you have a net cash per share figure of around 36p.
Those of you familiar with Benjamin Graham's classic The Intelligent Investor will see where I am coming from. Graham's definition of a "bargain issue" was a company trading at a significant discount to its net current asset figure. I managed to pick up some IPL the other day at 25p; they're 28p now as I type, which is still a 22% discount to cash.
Is IPL a sure thing? Of course not - all that cash could easily be frittered away on further failed exploration effort. But, oil and gas exploration is essentially a throw of the dice; just because IPL have been unlucky up until now, does not mean their next effort will also draw a blank. And, generally rising oil and gas prices would also help the share price.
When all is said and done, though, this is just a small speculation, not something to bet the farm on.
Posts
2 comments:
At least they won't be tapping for more funding. Directors hold v few shares. Taken a small punt and will add. Looks like a few punters got wind of the announcement on insurance money.
Centamin plodding along nicely. Paulson keeps buying more.
Yes, a low-level of director holding would normally be a bad sign. But, like I said, it's one for a small punt rather than a significant holding. I don't think you're likely to be too badly hurt buying under net cash, though.
As long as gold holds up, and mine progress continues, Centamin is as near a sure-thing as small cap mining shares get. The biggest risk is probably political (if the Egyptian government decides on expropriation), but that's a risk with any company anywhere these days (Lloyds-TSB, say).
Post a Comment