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Buy IGas Energy (IGAS.L) says VectorVest. The stock offers an attractive proposition for the adventurous investor.
IGas Energy (IGAS.L) is a leading British oil and gas explorer and developer, producing 2,500 barrels of oil equivalent per day from over 100 sites across the country. IGAS has played a key role in Britain’s onshore energy production; exploring, developing and producing onshore oil and gas at its various sites for over three decades. Management and technical teams have many years of experience in onshore energy production and most live and work in the communities in which the Company operates. IGAS is extremely well positioned for the future as the UK moves closer to unlocking Britain’s untapped unconventional oil and gas resource.
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On September 12th 2018, IGAS announced interim results for the six months to 30 June 2018. Net production averaged c.2,300 boepd in H1 2018 (H1 2017: 2,335 boepd) and IGAS expects average net production for the year to be c.2,200 – 2,300 boepd, with operating expenditure anticipated to be on budget at $32.5/boe in 2018. The Company provided a series of updates on its various projects, including the ongoing Stockbridge production recovery programme, and said the Albury gas-to-grid project remains on track for Q4 2018. IGAS reported improved net cash from operating activities of £6.0m (H1 2017: £0.4m) principally due to improved commodity prices, while cash balances at 30 June 2018 were £14.5m (H1 2017: £16.3m) with net debt (excluding capitalised fees) of £7.4m (H1 2017: £7.2m). CEO Stephen Bowler said that momentum in the UK onshore shale industry “continues to build” and looking forward added that IGAS was making good progress on production projects . .”and as cash generation continues to improve, given the higher oil price, we will be able to invest back into the business.”
The VectorVest stock portfolio analysis and management platform flagged a series of positive metrics for IGAS over the summer of 2018. In particular, the RV (Relative Value) metric, (an indicator of long-term price appreciation potential) flagged a sharp move higher in June 2018, and today continues to log IGAS as excellent at 1.43 (on a scale of 0.00 to 2.00), along with an excellent GRT (Earnings Growth Rate) rating of 28%. The GRT metric reflects a company’s one to three year forecasted earnings growth rate in percent per year. The well-documented issues in the UK with shale gas and fracking are reflected in a fair RS (Relative Safety) rating of 0.91 (again on a scale of 0.00 to 2.00). Finally VectorVest records a valuation of 163p per share, indicating that at the current 113.75p the stock is undervalued.
A candlestick chart of IGAS.L over the last year is shown above. The VectorVest valuation is shown by the green line study in the same window as the share price. The share is currently trading within a ascending triangular formation which is regarded by technical analysts as one of the most bullish pattern in a chartists arsenal. The share is on a VectorVest Buy signal. The technical target from a break of the ascending triangle is similar to the VectorVest valuation.
Summary: Some investors may look at our IGAS recommendation and turn away on account of the controversy surrounding fracking and the development of the UK shale gas industry. That would be to ignore a growing, well-managed company that offers a decent spread of risk across a number of UK shale gas projects at various stages of development. From both a fundamental and technical (charting) standpoint, VectorVest rates IGAS as an attractive proposition for the adventurous investor. Buy.
Dr David Paul
October 24th 2018
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