Morning Mumble: Afren (AFR), Gulf Keystone (GKP) and...Wolf Minerals.

Good Morning,

A number of rumours (with BS Caveat) circulating, only as a result of the rebound in oil, the main one being that Afren has found a buyer. Having been a supporter of Afren pre-debacle and even post to a degree, it's quite simply beyond the realms of any possibility that someone would be interested in the company, save for a deal with bondholders. 

Its alleged Gulf Keystone has a very interested interesting party on a joint venture. With limited information its been suggested that they party wants a 50% interest in the Sheikh Adi block, with an element of cash + carry. GKP are far from out of the woods, but all the same, their placing had significant interest and contrary to certain parties, still has interest. 

Wolf Minerals (WLFE) really need to get some decent IR (Investor Relations) in. They stand to be punished for tardiness with slow and absent information. Today, as if by magic after the EMC commented on (EMC WLFE 24 April 2015) the outdated guidance, there is an updated presentation. 

If certain Wolf Minerals employees are a reader, I'm free Tuesday's 9-12 if they need a complete overhaul of their IR, whereby information is timely and specific to the events in the market. In essence, keeping the market informed efficiently, rather than reactively! WLFE is a prime example of where the asset and management are good, the IR is ermm...limited and reactive. 

Next (NXT) came out to with a trading statement that was in-line with guidance, and a significant amount of revisions by analysts in the sector upping their price expectations, circa 7700, the Next LO contingent can feel pleased! 

Goldman Sachs really need to get with the programme, as their analysis really relies on where the price is, rather than where it will be. Quite how much of the growth in Next Directory is via the "new" Label concept. Remembering that the Label is for sale of third party branded products at lower margins.

Next will be thankful of the warmer weather and launch of their 'New-In' Brochure for the summer season, whether this continues is another matter. Perhaps, like most retail, save for "shoe companies", they had an added benefit of an early summer feel. One hopes that the UK summer has not just left us! 

NXT have given the green light on anther special dividend due of 60 pence on 3 August 2015( if registered before close of business on 10 July). Shares will trade ex-dividend from 9 July, and with the benefit of a floor at 6827 (current buyback limit and no doubt under review), Next are likely to be range bound, 7880 - 7100 bottom. 

Atb Fraser.

Morning Mumble: If Boohoo (BOO) and ASOS (ASC) can do it...B(H)S and oil+shipping (as promised).

Good Morning, 

It wasn't so long ago in a meeting about 'where to invest' in a low oil price environment, I found myself recommending short oil/associated products including washing powders and the like, whilst longing holiday companies and retail leisure.

Next's validation will come shortly on Thursday (Preliminary full year results) with the "beat" being reported as a head of consensus. Perhaps not all blue sky as the market is becoming more active, expect margins after this quarter to go under-pressure again. Simply put, if BOO and ASC can do it, then NEXT should be staggering. 

The debacle of BHS, has no doubt been amusing for the sector pundits, but if the journo's don't have a clue, then we hope those fronting the company do. So whilst at the races, there was speculation from those in the industry that BHS has been acquired by a subsidiary of Iconix China Group and the daughter of Silas Chou, Veronica.

Whether Iconix or the Chou's are the reality behind BHS or not, its speculation based on Silas Chou/Veronica Chou alleged desire for a UK acquisition. For myself, if they're behind big brands, why own department stores? Those of you like I thinking,...who, what, where is Silas Chou, being swiftly told off on Friday, apparently they’re behind the IPO (2011) of Michael Kors and the purchase of Tommy Hilfiger in the late 80's, Karl Lagerfeld and Pepe Jeans. Clear as mud to I, but if I'm honest, not something I will be keeping an eye out for. 

Staying in retail, it looks like Richard Chase is exuding confidence in AO World (AO) stock slotting 5,583,475 shares  at £1.80.  John Roberts (Chief Executive Officer) assures the market John Roberts, Chief Executive Officer, said: "The share sale by Richard Rose follows the expiry of the post-IPO lock-up and will help to further increase liquidity and the number of shares in public hands. Richard remains committed to the Company, both as a shareholder and as its Chairman." 

If one thinks selling 85% (circa) of your stock (a sizeable holding) is commitment and confidence, then this week I shall spend a few hours applying for Chairman type positions of stocks that are stonking shorts. Richard Chase has unknowingly made the Christmas card list of every shorter in AO. 

Kefi, the amazing performing Gold stock, you'll note the sarcasm, gives an update on Tulu Kapi. KEFI are apparently only having to find $20m to obtain $100M in debt financing. They have a number of possible sources currently being assembled, including financing from contractors and equity at the project or parent company level. Over to the International Finance Corporation (IFC) to stump up sum (poor!)! if the equity is at the parent company level, one hopes the current shareholders (including yours truly) do not need a snorkel for the impending dilution! 

Ian was discussing his long in HOC (Hochschild Mining) over the weekend. Having spent so much time away from technology, its apparent he's incapable of differentiating between a long and a short. Today, with silver finding significant support its wise to close any shorts on HOC, not for fear of a change in trend but to lock in significant profits since the Christmas Silver bounce. They're also announcing their annual results on the Wednesday, and they might not be as bad as the market expects. One hopes there all in sustaining costs of circa $17/oz. is much better! The common-sense coverage of HOC via EMC from November 2014.

It would be rude not to consider oil and shipping rates, WTI at $44.26/bbl, and Brent at $54.20/bbl. these prices are likely to impact on shipping rates as speculators exit their floating storage rates. These rates have continued under pressure with Suezmax Tanker Spot Rates into Q1 2015, dropping near 20% from the start of the quarter having peaked at $80K+/day down to $47K/day, Aframax Tanker rates fairing much better at circa $38K/day. LR2 Tankers rates at $26k/day. All classes all (excluding Suezmax) are near 50% above the rates of 2013/2014 and Suezmax up near 100% on 2013/14). 

The industry men describe the current rates as very strong. Based on the oil price being low, with continued strong demand (Asia from Arabia) and stockpiling (surely there can't be much more), and the rates benefiting from the storage speculation (albeit reducing). The market has missed the reduction in Russian export duties (circa 40% lower), where oil producers/exporters delayed shipments to save a few $$. So more oil out of the Black Sea, Mediterranean and Baltic! The weather is impacting on the Turkish straits, delays near 6-8 days. 

With the maintenance schedules coming up at refineries around the globe, this will push higher inventories and impact further on the prices. Will the trend in rates encourage speculation in fleet growth depressing the industry? Oh yes, tanker/shipping rates are likely to come under significant pressure end 2016 into 2017. 

There's been contracts placed on around 49 long-term Very Large Crude Carrier (VLCC) and Ultra Large Crude Carrier (ULCC) in the past two weeks, giving a floor to the rates and removing excess capacity from the market. All boding well for the tanker market rates but limiting the spot market delivery capabilities. 

Afren (AFR) down another 20% today, perhaps holders have smelt the roses? Don't be silly...over to GKP! 

Atb Fraser

Morning Mumble (Via Email): Indian Taxation (cost savings), VED+CNE, Polyus Gold (PGIL) not quite what it seems, S'ard Africa and the bets!

Good Morning,

Being dressed very conservatively "autumn warm", with a sense of decency and propriety (as per invite), and with the compulsory braces and hip-flask just in case service slows down, it was rude not to check on the state of the market. Autumn warm? Who writes these things!

Yesterday, Vedanta got slapped with a tax demand. Can Vedanta make a joint claim against India? Unlikely, but it would be wise for VED and Cairn Energy to collaborate and really stick it to the India Tax authorities. They must surely be aware of the damage it is doing to FDI* in India. VED just aren't having a good time of it!

We'll ignore the obvious from Polyus Gold (PGIL) where those with a basic maths qualification can see the obvious in their annual accounts. Afren's coming has happened today, with the term, highly dilutive to existing shareholders summing things up. 

There's rumour's coming up out Republic of South Africa (RSA) that the banks are putting pressure on Lonmin putting the cap around for $500M post Glencore divestment. With common-sense prevailing, Lonmin's Furnaces need some long-term work, their capex expenditure can be pared back to some degree but there's a lot of $ to sink yet. Expect news in due course...Some decent analysts suggest it's as low as $300M. 

The going today is good to soft, having bet the ranch on Road to Riches ridden by Bryan Cooper today. Noel Meade wants the win more than the Grand National, the horse will obviously have the final say. With all the confidence in the world, it’s rude not to back AP McCoy's last attempt, Carlingford Lough as well. 

Atb Fraser

* Foreign Direct Investment

Morning Mumble: Dee Effe Esse, China's Steel Mills (No news), PMO Zebedee BOING! & APR Energy (the Fluke)

Good Morning,

Following on from the EMC February comments on DFS Furniture (DFS), today we are informed (with no surprise) the management and owners of DFS are running for the door selling around 25% of the company. Advent will still hold between 50-55.9% of the company, so those realists will be wise to remember the rules of illiquid stocks at least until the stabilisation facility has been finished!

With Li Keqiang (and as such the Chinese Government) acknowledging the downward pressure on the Chinese economy intensifying. China have finally utilised the over-capacity and pollution to justify the closure of the mills. It’s positive for the Chinese as they're openly stating iron ore demand is reducing and there is currently over-capacity in steel mills even with the closures. With the extended trading hours on the DCE (Dalian Commodity Exchange), the price reacted very positively (for the shorts), dropping 3%. 

We should initiate the Atlas Iron share price watch again, with those holders knowing full well the bounce at Christmas was the time to get out! Only 10% ish off its lows, the holders can fill mailboxes with the abuse despite knowing the realities. Of course it has nothing to do with cost of production and the supplied market. We'll ignore the facts of Russia exports being enticing for India on the back of their currency debacle. As Russia languishes in a mire of contemplation and ignorance, what better time for military exercises (FT). Often children find comfort in playing with their toys after being on the naughty step....

With both WTI and Brent sat on levels of support, one assumes the bulls will return with the ECB printing presses, at least on Brent, whilst WTI focuses on shipping America to Asia to meet demand. Later today I hope to catch up with a shipping chap about the current health of rates and demand. Will update in due course, the delay surely cannot be on the basis it’s his turn to pay (not that one is counting having paid for the last 4!)

Premier Oil (PMO) are getting busy with the drill bit, so the fanfare will no doubt be out for Rockhopper (RKH) over the next few weeks. Wasn't Zebedee a child's spring type character well before my time? RKH Zebedee announcement.

APR Energy, by sheer fluke being short on technicals alone, APR Energy aided EMC et al with a market update. Time to press that button on APR, with a trading update/market update not the best timing with discussions with their banking syndicate in full flow. Its pleasing to see a number of positions utilise yesterday's spike to sell near break-even, how prudent to sell positions. 

One would be wise to consider how much cash APR banking syndicates will expect shareholders to stump up. That alleged offer late last year isn’t looking so speculative and cheeky now is it! The EMC Christmas Card list is bordering on the who do we not send them to. 

Limited time to cover GLIF’ s investment, in Open Energy Group, and the dull performance of Inspired Capital (INSC) not to be confused for those fat fingers with Inspirit Energy (INSP). Both a longer-term hold since circa 2013/2014.

Atb Fraser

No comments required on Afren (AFR) due to the obvious there. The quote of the day goes to one fund manager with, "whoops."