Home » News and Views
Category Archives: News and Views
Future of Oil and Gas
In an era of rising demand and hype for electric vehicles (EV) and battery technology, commodities and ETFs linked to oil and gas have managed to hold their prices. EV stocks like Tesla and Nio have increased by 71% and 100% respectively in the past year. The price of WTI Crude Oil has also increased by 76%, while prices of micro-cap oil stocks like #ECHO Echo Energy and #MSMN Mosman Oil and Gas have increased by 58% and 13% respectively.
This clearly signifies that even after the rise in demand of EVs, commodities like oil and gas are here to stay in the short and long term.
Consumers are under the impression that they could be in an oil-free world by 2030 and most consumers perceive batteries and electricity as the primary source of energy. However, this is highly unlikely and nothing but a series of myths planted in our brains due to effective marketing.
The International Energy Agency (IEA) that analyses trends in energy industry, released its annual World Energy Outlook in November 2019. It looks at potential energy demand and supply under different scenarios to explore different possible futures. The IEA scenario stated a global increase in energy demand by 24% by 2040 of which, oil and natural gas will supply 64% of the world’s energy needs. In accordance with the Paris Climate Agreement, if based on the Sustainable Development Scenario, the oil and natural gas will still supply 47% of the world’s energy by 2040.
More than 15% of oil demand goes into non-combusted use including petrochemicals which is expected to grow to 20% by 2040. Even if the demand for gasoline and other fuels may hypothetically be on the decline, the petrochemical sector, in contrast, still has room to grow. Some major companies have even pledged some $100bn into the petrochemical industry over the next decade.
Developing countries like India have one of the most aggressive renewable power capacity roll-out programmes worldwide. However, its access to affordable fossil fuels remains a priority for its government because its needs for cheap oil, gas and coal continue to rise to meet energy demand that is forecast to more than double by 2040. India’s petroleum minister Dharmendra Pradhan believes the world’s third-largest oil consumer could be the “golden goose” for crude suppliers as it buys more than 80% of its oil needs from foreign crude purchases.
The graph below demonstrates that the forecasted oil demand for 2040 is higher than present day with non-combusted being the driver to increase the demand. While in the primary energy consumption chart, oil is forecasted to maintain its consumption as a primary source by 2040. Whereas the primary consumption of gas is forecasted to rise.
Texas Oil Wells
In 2018, companies in the Permian Basin – “an ancient, oil-rich seabed that spans West Texas and South Eastern New Mexico — were producing twice as much oil as they had four years earlier” whilst forecasters expected the production to double again by 2023.
The International Energy Agency (IEA) had also predicted that American oil mostly from the Permian will account for 80% of growth in global supply over the next seven years.
Some small companies already had presence in the Permian Basin before these predictions and report in 2018. In 2017, Mosman Oil & Gas (MSMN) acquired several oil and gas leases comprising the Welch Permian Basin Project for a consideration of $310,000. Although the Welch project contributed to a gross profit of $167,000 in the year ended 30 June 2020, recently Mosman sold this Welch Project for $420,000 receiving a premium of 40% from the sale of the project alone.
Mosman is steadily growing its working interests across a number of projects in Texas, including Stanley, Falcon-1, Winters and Galaxie. These have produced a gross profit of over $500,000 in the 2020 year. Stanley also has a 100% success rate with oil production from four wells drilled to date.
Texas wells are providing high returns to oil companies, and with a growing number of projects and acreage, Mosman is well placed for future growth.
South Argentina Oil Wells
Many companies own wells in Argentina and Latin America as it is considered a region rich in resources with 4% of natural gas reserves and 20% of world oil reserves. They are also often undergoing positive development in macro conditions. A strong demand outlook for energy consumption and economic growth coupled with underdeveloped – but lower cost – onshore plays, makes Latin America a favourable region for companies like Echo Energy (ECHO) to deploy its expertise in support of an exploration-led growth strategy.
For the financial year ended 31 December 2020, Santa Cruz Sur at the south-eastern tip of Argentina helped Echo Energy to increase its revenue fourfold to US $11.1mn. This was also due to Echo securing new gas sales contracts at premium rates to the prevailing spot markets in early Q1 2021.
The increase in revenue drove an significant increase in the Echo Energy (ECHO) stock price by 51% from 55p to 83p between December 2020 and January 2021.
Major and Small Suppliers of Oil and Gas
The difference between the barrels of oil supplied can be huge when major suppliers are compared to the small suppliers. But all that glitters is not gold. High supply and production would require a higher demand to be profitable, if the demand of oil stagnates in the future it will affect the major suppliers before the small suppliers.
The big 10 companies accounted for 28% of global oil production in 2020 as shown below.
When this is compared to small oil producers like Echo Energy and Mosman Oil and Gas, Echo Energy produced a cumulative of 94,000 barrels of oil in Santa Cruz Sur in South Argentina. While Mosman Oil and Gas produced a gross of 90,000 barrels of oil in the year ended June 2020. Based on available data, the production of Echo and Mosman combined is 0.2% of the global oil demand.
This is effective during times of recession or when the global demand is low as during unprecedented times a major oil supplier to generate profits and work at full capacity would need to sell between 5-12% of oil demand while small suppliers of oil would need to fulfil a negligible percentage of global demand of oil to turn profitable. This is due to high storing and inventory costs for major oil suppliers as well as higher fixed costs due to bigger operations.
Therefore, even though the oil demand is perceived to be lower in the future due to alternative resources, the demand doesn’t seem to be in decline due to oil having uses other than fuel and gas for cars and transportation like non-combusted petrochemicals. Even if the demand for oil is on the decline it would not affect small oil suppliers; as working at full capacity they fulfil just a small percentage of global oil demand and still manage to make hefty profits.
These among many, are the reasons keeping the oil prices buoyant and in the mix, not only for the present day but also for the future.
VSA Capital Group (VSA) joined Aquis on 9 September and at the same time raised £253,000 at 21p a share. The share price has risen to 23.5p (23p/24p), which values the company at £4.57m. There have been five trades. VSA Capital is a broker and financial adviser. It also has stakes in cryptocurrency and blockchain businesses. It is an Aquis corporate adviser, and this will be a major focus of the business.
Ecotricity says that it has received acceptances equivalent to 1.9% of Good Energy (GOOD) to add to its existing holding of 25.1%.
Arbuthnot Banking (ARBB) has sold 200,000 shares in Secure Trust, raising £2.5m, and reduced its stake to 3.32%.
EPE Special Opportunities (ESO) increased its NAV by 24% to 542.3p a share in the six months to July 2021. Luceco (LUCE) is one of the main factors in that growth of NAV and 4.5 million shares were sold to raise £15m. Another investee company, Pharmacy2U, is moving into profit. At the end of the period, a majority stake in homewares company Rayware was acquired.
Igraine (KING), where Oscillate (MUSH) has a 24.6% stake, says that its investee company Excalibur Medicines has completed the ARCADIA phase 2 trial for AZD1656, a treatment for diabetic patients with Covid-19 (see Cizzle below). The trial covered 153 patients. The treatment has reduced mortality rates and it is safe.
Walls and Futures REIT (WAFR) lost £214,000 in the year to March 2021, while NAV fell 5% to 102p a share. The value of investment properties fell by 1%. Walls has secured lease terms and memorandums of understanding with new partners for provision of housing for autistic people. The new homes are being designed in pods and constructed off site. There is cash available for investment, but the company requires additional funds to complete all the potential new projects. The problem is that the share price is well below NAV.
SulNOx Group (SNOX) says that its direct sales operation has made sales of its diesel additive to 200 clients in just over one month. The products will be sold on the Amazon platform.
Non-fungible tokens (NFTs) investor NFT Investments (NFT) has made an initial investment of $700,000 in Blimp Technologies Inc. In this case it is in the company rather than NFTs. Blimp has developed a platform that rewards home buyers and sellers, as well as advisers, for contributing value to a token network started by the Home Network Foundation. The theory is that this should reduce delays and disappointments and make the process more transparent.
CBD products supplier Voyager Life (VOY) has secured two new stores in Dundee and Edinburgh following the opening of the St Andrews store. Rebranding is complete and new products are being launched. The company’s products are stocked in more than 70 other stores.
Vulcan Industries (VULC) says chief executive John Maxwell is stepping down due to ill health, although he remains on the board. Ian Tordoff becomes executive chairman. Kieran Vaughan has left the board.
Altona Rare Earths (ALR) has raised £1.25m at 14p a share, which was a premium to the market price.
Building products supplier Alumasc (ALU) increased full year revenues by 19% to £90.5m, while underlying pre-tax profit nearly trebled to £10.5m, helped by cost cuts and improving margins. Net debt was £900,000, while the pension deficit has reduced to £4.5m. The final dividend is 6.25p a share and the total dividend is 9.5p a share. Demand is strong but Alumasc is uncertain when the customer will take the products. That is because shortages of other building products, such as bricks, have held up developments.
Michelmersh Brick (MBH) continues to benefit from strong demand for bricks and reducing stocks and orders stretch into the fourth quarter. Interim revenues were 10% ahead at £29.9m and pre-tax profit jumped from £2m to £5m. Full year figures will be slightly better than previously expected. The interim dividend is being reintroduced.
Concrete levelling equipment supplier Somero Enterprises Inc (SOM) benefited from buoyant North American demand in the first half. Non-residential construction is buoyant in North America and orders are at a high level. In the six months to June 2021, revenues increased from $35.3m to $64.4m, which was much higher than the first half of 2019 prior to Covid-19. Pre-tax profit more than trebled from $7.5m to $23.5m. There was $16m of cash generated from operations. The interim dividend is 9 cents a share. Guidance has been upgraded.
Minds + Machines (MMX) has announced a tender offer of up to £58m at 9.6p a share – equivalent to estimated NAV following the disposal of the operating activities. That would mean that up to 604.1 million shares could be redeemed.
There was 11.6% growth in the Vector Capital (VCAP) loan book to £40.6m. The interim dividend is 0.95p. The main customers are residential property developers that need short-to-medium-term finance. There are additional funds available to further grow the loan book to £46m.
Dekel Agri-Vision (DKL) increased the fresh fruit bunches by one-fifth to 8,469Mt, compared to August the previous year. Crude palm oil production was 6% higher at 1,678Mt, but the amount sold was one-quarter ahead at 1,852Mt. The average crude palm oil price achieved was 76% higher at €947/tonne. Palm kernel production was also much higher.
Parsley Box (MEAL) is investing the proceeds of its recent flotation in developing products, including a range of chilled meals, and increasing marketing. This means that the loss is increasing, but the benefits will show through in the years to come. Interim revenues were £14m, up from £11.1m, and £11m of the latest revenues were from repeat customers. The loss increased from £1m to £5.42m. There is still £6.52m in the bank.
Embedded computer boards developer and manufacturer Concurrent Technologies (CNC) reported flat interim revenues of £9.3m. Lower overheads helped pre-tax profit improve from £1.22m to £1.59m.
LED lighting and wiring accessories supplier Luceco (LUCE) has reiterated its full year guidance following its interims. Group revenues were 51% ahead at £108.2m, while pre-tax profit improved from £8.3m to £18.5m. The comparatives did reflect the initial period of Covid-19 but there is still strong underlying growth. There have been cost pressures, but investment has improved efficiency which has offset this. Overheads grew more slowly than revenues and interim operating margins are double the level in the first half of 2019.
Cizzle Biotechnology (CIZ) expects to sign a deal with charity St George Capital, where it would receive royalty payments of up to £5m for AZD1656, a treatment for diabetic patients with Covid-19, plus payments for a companion diagnostic. St George has undertaken a successful phase II trial for AZD1656 and is seeking a license and funding for further trials.
A Musk tweet on the 16th of May 2021 led to a 20% downfall of Bitcoin. The tweet implied that Tesla has sold all of its Bitcoins. The downfall of Bitcoin was halted the next day, soon after Elon Musk tweeted again stating that Tesla had not sold any Bitcoin. A couple of weeks later, Musk tweeted a heart break emoji captioning it “#Bitcoin”; the saga of the downfall of bitcoin had begun again! It didn’t end till Musk made a U-turn on his statements tweeting that Tesla would in fact accept Bitcoin.
But one has to ask, does Elon Musk really control the cryptocurrency market? The answer is both yes and no.
The market price of cryptocurrencies are derived by the basic fundamentals of economics, which is demand and supply. Demand being proportional and supply being inversely proportional to the price of these intangible assets. While some cryptos like Bitcoin have a limited supply, for example 21 million bitcoins, others like Ethereum don’t have an explicit cap on their supply.
Whilst most cryptocurrencies can be manipulated in the short term, bitcoin having a limited supply makes it easier for Elon Musk to control Bitcoin prices in the long term when compared to Ethereum. Most investors believe that most financial markets are semi-strong efficient and that some individuals have more knowledge than that of the general public. Therefore, retail investors lie their trust in Elon Musk because of his billionaire status as well as being the CEO of Tesla, believing that due to those factors he possesses more market information than the market and can control the market sentiments.
On the other hand, many would argue that Elon Musk has no role in the constant change of the price of Bitcoin, and the tweets were posted after institutional or big investors had already started trading bitcoin. This can be proven by looking at the Bitcoin technical chart which was following the Wyckoff Accumulation pattern.
The Wyckoff accumulation pattern has 5 phases where the price fluctuates in a range. The higher bounds of the range are known as resistance while the lower bounds of the range are known as support. In phase A there is intense selling pressure which results to the price going below the support, after which it rebounds to the resistance before testing the support again. Phase B leads to the price falling further than the lows of phase A, before shortly rebounding. Phase C is a crucial phase where for one final time, it tests the support also known as the spring and that is where the rally begins. Phase D and E occur when prices move in a bullish pattern, finally breaking the resistance to move further up.
The Wyckoff accumulation stage looks something like this –
The negative tweets by Elon Musk for Bitcoin came during phase A and B while the positive ones came during phase C and D which many people believe is purely co-incidental.
The bitcoin pattern showed below between May 2021 to June 2021 followed the Wyckoff Accumulation stage. Between May 2021 and June 2021 Elon Musk tweeted about cryptocurrency 12 times.
There are many people who have termed Elon Musk as a “Doge God” and believe he played an instrumental role in the high volatile prices of Bitcoin while individual and institutional technical analysts believed Musk’s tweets just came at the right time and the changes in prices were due to the Wyckoff accumulation stage. Does Musk control the cryptocurrency market? Will Bitcoin, Ethereum or Doge Coin continue its bullish run? The future will surely tell.
Jake Hopkins, a university student in the U.K., decided earlier this year to do something most people in the world have been trying to avoid: he volunteered to get Covid-19. Jake signed up for a human challenge trial that intentionally infects participants with the virus. He shares recordings from his experience in the controversial study, and WSJ’s Jenny Strasburg explains the researchers’ goals.
AQUIS STOCK EXCHANGE
Rutherford Healthcare (RUTH) says a UK investor has agreed to acquire 19 million shares at 65p each. That will raise £12.35m. Rutherford is also issuing 64 million shares to acquire UAE-based Proton Partners International Health Care Investments, which owns the Gulf International Cancer Center in Abu Dhabi.
Capital for Colleagues (CFCP) has made a new investment in Craft Prospect, a Glasgow-based satellite engineering business. There will be £800,000 invested in ordinary shares for a 11.3% stake. The cash will be used for recruitment and product development.
VSA Capital Group plans to join the Aquis Stock Exchange on 9 September. It was previously quoted on AIM, although it cancelled the quotation in April 2013. London-based VSA provides corporate finance and broking services and has an office in Shanghai. In the year to March 2021, the main subsidiary VSA Capital increased revenues from £2.14m to £2.98m and pre-tax profit jumped from £278,000 to £746,000. Group net assets were £4m at the end of March 2021.
Polygon Global Partners has increased its bid for Watchstone Group (WTG) to 38p a share, up from 34p a share, which values the company at £17.5m. Watchstone still believes the bid is too low. In the middle of August 2021, there was £14.1m in the bank and £1.8m in escrow. There are potential litigation claims on top of that.
KR1 (KR1) has participated in the Moonriver (MOVR) crowdloan and Kusama (KSM) parachain auction. KR1 contributed 5,000 KSM to the crowdloan auction. In return KR1 has received 19,666,35 MOVR and will receive a further 45,888.15 over 48 weeks. KR1 has already sold 15,643.19 MOVR in return for 5,162.25 KSM. KR1 also invested $500,000 in return for Exponent (XPN) tokens. Exponent is an open source platform.
In the year to December 2020, MiLOC Group Ltd (ML.P) increased revenues from HK$15.4m to $20.5m and it moved from loss to a profit of HK$6.22m. The healthcare company sharply reduced its distribution costs and other admin expenses. This reflected the termination of an endorsement agreement and a write-back of a previous over provision for fees.
First half revenues of Yooma Wellness Inc (YOOM) were $2.78m, with $2.18m generated in the second quarter. The interim loss was $5.5m.
Wishbone Gold (WSBN) has identified seven targets at the Cottesloe project in Western Australia.
Eight Capital Partners (ECP) has launched an issue of €25m 4.8% five-year bonds that will be listed on the Vienna Stock Exchange. They will help to refinance existing bonds.
Evrima (EVA) is raising £720,000 at 5p a share plus warrants to subscribe for shares at 10p each. This will finance investments in existing investee companies and new investments.
Vulcan Industries (VULC) has raised a further £163,000 at 1.7003p a share.
Capital equipment manufacturer Mpac (MPAC) had a strong first half with a combination of acquisitive and organic growth in the Americas. Revenues were one-fifth higher at £44.2m, with organic growth of 2%. Pre-tax profit was 88% higher at £4.7m. Net cash was £10.3m at the end of June 2021. Healthcare and food have been the main markets for the company’s packaging and automation equipment, but a new contract has been signed to supply battery cell assembly equipment. The full year pre-tax profit forecast has been upgraded to £8.2m.
Bigblu Broadband (BBB) is returning £26m to shareholders following the recent disposal of Quickline. That will be 45p a share in cash via the issue of B shares by October. There should still be net cash of £1.7m at the ned of November 2021 with deferred consideration due next year. Interim revenues from continuing operations improved from £10.6m to £13.1m. Growth is coming from Australasia, but the Nordic region is expected to return to growth next year.
Mercia Asset Management (MERC) has made a £1.6m direct investment in Locate Bio, which had previously been backed by the manager’s funds. Locate Bio’s products help to accelerate the repair of bone and cartilage. The total of £10m raised by the company will be used to support trials of its technology.
Pennant International (PEN) says interim revenues improved by 17% thanks to a strong performance by the software division. The three-year contracted order book has fallen to £25m, but there are potential contracts in the pipeline. Pennant should return to profit this year.
Interim revenues have trebled to £820,000 at in-game digital advertising firm Bidstack (BIDS), but there is still a long way to go before it reaches profitability. Losses will continue in 2021 and 2022, although there is enough cash in the bank to cover these, following a £10.8m fundraising.
Trading at Manchester-based Northcoders (CODE) has been strong since the software training company joined AIM during the summer. Applications are 162% of 2019 levels and there is 90% revenue visibility for 2021. There are plans to open a new office in Birmingham.
Real-time financial data software provider Arcontech (ARC) reported flat full year revenues and pre-tax profit of £3m and £1.1m respectively. Even so, the dividend was raised by 10% to 2.75p a share.
Bangladesh Bank has approved the acquisition of a majority stake in Sanofi Bangladesh by Beximco Pharmaceuticals (BXP).
Innovaderma (IDP) has completed its product portfolio review and medical device products have been classed as non-core. Packaging of core personal care products has been refreshed and they are available via Amazon. There are plans to use influencers to build sales.
Dealings have commenced in Caracal Gold (GCAT) following its acquisition of Kilmapesa gold mine. There are plans to increase production to 50,000 ounces of gold each year.
One Heritage Group (OHG) has become aware of financial issues with owned associate company One Heritage Maintenance, where it owns the equivalent of a 34% stake. The stake was valued at £285,000.