ProActive Investors UK
Oil stocks still remain a focus for small cap investors who are looking for a speculative distraction from macroeconomic woes.
The FTSE AIM 100 lost nearly 1% in the past week to stand at 3,184. But while many stocks remain locked in range bound trading, as risk capital comes on and off the table, the oil sector remains a favoured venue for AIM’s speculators.
“Demand for small caps is still strong,” said Mike Van Dulken, head of research at Accendo Markets.
He says the current backdrop of high oil prices and the potential for high rewards keeps the junior oil sector well supported.
“(High oil prices) keep ventures viable. Even though there are concerns of macroeconomics and a global slowdown, the demand for these (small cap) oil stocks is still there.
“Plus the potential scale of returns (from explorers) can be so big that even at the height of the European crisis, we still had big demand as investors looked for that one big winner, to offset potentially several losers.”
Providence Resources (LON:PVRp), which has tripled in value since March, is a clear example of the rewards an oil and gas breakthrough can deliver for small cap investors.
The latest in a series of announcements marked another watershed in the company’s development as it revealed that 280 million barrels of oil could be recovered from the Barryroe field off Ireland’s south coast.
Providence is now deciding how it will develop the project, which will be Ireland’s first commercial oilfield.
“We expected success at Barryroe because it was a high confidence well, but all the results have come back just that little bit better, which has made it easier for us and hopefully this will be the catalyst that gets more [oil] companies interested in Ireland.”
Morocco and Ireland focussed Fastnet Oil & Gas (LON:FAST) was another strong mover gaining 30% this week thanks to positive signals from its peers.
It was boosted in part by growing interest in its prospects in the Celtic Sea, near Barryroe, and also its exploration project off Morocco’s coast which neighbours Chariot Oil & Gas’ newly acquired projects.
The acquisitive company, which joined AIM earlier this year, is also understood to be moving closer to striking a deal for a third asset which is thought to be in Africa.
Another AIM quoted explorer on the rise, albeit from a low recent base, isSound Oil (LON:SOU). It has been one of AIM’s top performers in recent weeks, gaining 36% since the start of October, as momentum grows behind its exploration and development efforts.
This week it revealed a change in senior management as non-exec director Andrew Hockey and CFO James Parsons stepped up to take the chairman and CEO roles following the retirement of Gerry Orbell – who previously held both positions.
In the mining sector, West African Minerals’ (LON:WAFM) impressive share price rise, which saw the stock rise to a peak of 92.5p from around 12p, was recognised at last night’s AIM Awards.
The company is chaired by former Lonmin CEO Brad Mills and it is focused on commercialising significant iron ore deposits. It won the award for ‘best performing share’.
More signs of tangible progress helped Anglo Asian Mining (LON:AAZ) mark an 85% rise since August months.
This comes as production continues to ramp up at the Gedabek mine in Azerbaijan, where it is now expected to produce around 50,000 ounces of gold this year.
Coloured gemstone specialist Gemfields (LON:GEM) marked up a 30% gain since September as it revealed it more than doubled underlying profits last year as sales of emeralds at its quarterly auctions hit record levels.
Profits before exceptional items rose 140% to US$47.8 mln in the year to June on revenues 108% higher at US$83.7mln.
Elsewhere the market sat up and took notice as Tantalus Rare Earths, a Frankfurt listed stock familiar to London investors, reportedly hired renowned City deal maker Ian Hannam – the ‘King of mining mergers’ and who worked at JP Morgan Cazenove up until this year.
Among the biotech’s it was another good week for Summit (LON:SUMM) as it soared 72% after the drug developer unveiled positive phase I trial results for its potentially breakthrough treatment for the fatal muscle wasting disease Duchenne Muscular Dystrophy (DMD).
The study, which recruited 48 volunteers, revealed SMT C1100 was safe and well tolerated at all doses. And importantly the levels of absorption were above those predicted to achieve clinical efficacy.
Chief executive Glyn Edwards said Summit has cleared a “massive hurdle that has removed a lot of uncertainty”.
Virtual queuing technology firm Lo-Q (LON:LOQ)advanced 16% this week as it announced a number of new business deals. Yesterday it revealed a deal to install its time-saving technology for at least two theme parks run by a major US operator.
Earlier in the week it unveiled its first deal for a new cloud-based smart phone app, which co-ordinates bookings and virtual queuing.
The markets biggest losers this week were Digital Learning Market Place (LON:DLM), which unveiled a restructuring to take the operating company private while leaving behind a new investment company.
Copper Development Corp (LON:CDC) shed 36% this week, so did Ceres Power (LON:CWR). Safeland (LON:SAF), a property trading company, fell 30%.
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