Following on from our very popular blog of May 24th 2012 in which we opined upon the price appreciation potential of a basket of Oil Exploration stocks, it is encouraging to see that our stock picks are beginning to show signs of life.
That the spread of stocks was (and make no mistake, still is) materially undervalued on any measure of discount to risked NAV’s; EV:2P and potential drilling successes is unarguable. We wholeheartedly believe that the 18 months timescale we set to sit with these positions will result in a long smile at the end.
Below are charts of Heritage Oil & Bowleven relative to the FTSE over the last month, you can see clearly the underperformance being reversed in recent days and heavy volume in both stocks – these are classic smoke signals of a potential bottoming formation. I personally find it hard to envision just what could take the entire portfolio (Northern Pet, Bowleven, Xcite Energy, Falklands Oil & Gas, Heritage & Gulfsands Petroleum) lower by another 15-20% whilst the upside runs into 100%’s of percent and not just in our opinion but also the consensus analyst community (aswell as fellow corporates given the increasing number of takeover approaches this year).
Heritage Oil chart
Aside from the reversal of underperformance relative the wider market, we can also see 3 toes in the mid teens levels and a break to the upside (4th test) above 132p – this looks to target 150p to us in the near term.
As with Hoil, there is the tantalising prospect of a so called ‘rectangle’ break now being in place in this chart too and which would give a short term target of the mid 70’s, also within a few weeks timescale.
In our forthcoming July issue of Spreadbet Magazine (out this weekend) we have an expanded piece on the Oil Explorers Dream Portfolio aswell as indepth analysis of Ithaca Energy & Ophir Energy too. To ensure you receive your free copy of our magazine (the biggest issue yet!) entirely for free, simply register your email address in our subscribe box to the right.