We wrote about Providence Resources just a few weeks ago HERE in which we set out the investment case pretty succinctly. It is what we call an “asymmetric risk/reward profile” and is akin to Gulfsands Petroleum that we also wrote about HERE.
Followers of our funds and style will have come to realise that we are what we term “asset dislocation” specialists. That is we search for what we believe are extremes of value and then take positions and wait patiently for a catalyst to occur.
Looking at Providence Resources chart below, it seems that we are not alone in recent days in anticipating some news flow from the Irish E&P play that has been beaten down this last year to a level that has had many analysts not only scratching their heads, but other parts of their anatomy no doubt too at “Mr Markets” valuation… The stock price rose by just over 20% in the closing part of last week and sprung to life against a weak market backdrop – generally a smoke signal we have found.
They say volume is frequently a precursor to price and in this case PVR seems to be adhering to the script. Nearly 4% of the company changed hands between Thursday and Friday and thus it looks like the seller that has been overhanging the stock for months may finally have been cleared. Question is what is behind this volume?
We understand that the company has been making presentations to existing holders this last week and no doubt re-iterating that farm in negotiations remain ongoing. Word from the analysts is that there are at least two serious players remaining in the mix. We expect that existing holders have taken advantage of the depressed share price to top up. We certainly have.
CEO Tony O Reilly “Junior”
The recent news flow has been positive and “carry on as usual” is very much the order of the day for CEO Tony O Reilly. With all the woes in the Middle East that show, sadly, precious little sign of abating, decent oil prospects in “safe” jurisdictions with easy access to end markets can, in our opinion, only grow in terms of feasability and attractiveness to the majors.
IF farm out news is finally released, the price spike last week is likely to be a mere blip on the chart. We would not be surprised to see a stock price anywhere between £2-4 depending on the level of participation dilution and of course the fine detail in the terms.
CLEAR DISCLOSURE – EXPOSURE TO PROVIDENCE RESOURCES IS HELD WITHIN TITAN’S FUNDS AND PERSONALLY BY RICHARD JENNINGS.
This piece should not be taken as an advocation to buy (or sell) these instruments and you should always take independent financial advice in relation to your own circumstances.