Oil explorers - Dream Portfolio list
Northern Petroleum 70p current price At the current market cap of £60m, Northern Petroleum trades at a premium of just £35m to its last reported cash reserves. Northern’s geographical activities concentrate principally in the Netherlands where they are actually producing oil & receiving revenues. The company’s licences include the potential for exploring the Shale basins in the North & West of the Netherlands and where an independent study has estimated gross reserves of between 20-30bn barrels of oil. The company does however have activities in Guyane (at time of writing, there is a legal spat with the Government of Guyane over the exploration license validity, although the importance of this to NOP is very minimal given their tiny interest in the Guyance license at stake), Italy (the 2 areas with good exploration prospects and hence NAV upside) & the UK which includes both gas and oil opportunities. Consensus broker price targets exceed 100p per share, and at the current share price there is very little value ascribed to the company assets with the stock trading on an ex cash PE of under 5 times.
The chart below is quite interesting to us too in that there is the tantalising prospect of a ‘double bottom’ formation now the stock has returned to the 60p level. From an RSI perspective the shares are oversold (being around the 30 level) and the weekly stochastics seem to be giving a lead indicator of an upturn. Married with the cheap valuation for an established and politically low risk operator, we believe the shares offer good value here. Please note that this is quite an illiquid stock and depending upon your spreadbet firm, the margin requirement may be high. Stops should be used cautiously given the illiquidity - best to take a modest position size than run too rigid a stop.
July 2012 | www.financial-spread-betting.com | 57