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Does anybody know when the next trading update for Somero is due? Have been a bit concerned about the recent weakness in the SP, and am wondering whether there's been a material and adverse change directly affecting Somero? Or, is the soft SP due to factors beyond Somero's control such as possible market impatience with Trump and his (lack of) infrastructure plans?
Hmm - well, I need to declare that I have reduced my exposure to IGAS. To be clear, I still have a holding (so still have "skin in the game") because, assuming the Tories can form a coalition with the DUP, then I agree that the framework for shale gas development will still be in place. But, personally, I can not also ignore the fact that IGAS is by far the riskiest share I am invested in. The political uncertainty is not helpful. There is also the small separate matter of IGAS's plans to consolidate its shares - again, risky in my view if the consolidation throws a spotlight on the reasons for the share price's past poor performances. Ideally, I'd far rather the company announce a share buy-back programme funded by anticipated profits that the company intends to make, rather than do a consolidation. So, for these reasons, I've reduced my exposure, but am not completely out.
Yep, at moment, I still think Tories will win, so not too worried. Even the Guardian is cautioning against reading too much into apparent Labour surge, due to regional differences (apparently, Corbyn still weak in Scotland, West Mids & London). On topic, I see that the volume of IGAS transactions has slowed in recent days. Feels as though SP is now "treading water" until outcome of General Election is known.
Some thoughts on the back of MarktheSpark and MissGolightly (which I agree with)... Long story short, I long for the day when IGAS can knuckle down and focus on its core activities, free from external distraction (ie. general election) and internal distraction (ie. consolidation). In the short term, there is still some considerable risk (IMHO) attached to IGAS that will keep the share price down. The first risk, as I've already flagged before, is the General Election outcome. Whilst I still think the Tories will win, they have not done themselves any favours over the past weekend on their social care plans. Whilst it would be O/T to talk about social care, there is an issue of the Tories' credibility which, until the weekend, was virtually impregnable but may now have been damaged. Whether the Tories are credible for Government is therefore relevant when considering the investment case for IGAS, given that the Tories are the only major party to support fracking. As I say, I still think the Tories will win but, in my opinion, it's not a foregone conclusion. The second risk is the consolidation, which I've been looking into over the weekend. On the one hand, I can see that the consolidation is another welcome act by the IGAS management to get its house in order. I can also see that their rationale is to put the SP on the radar of institutional investors who have policies that forbid them investing below a certain share price. Given that IGAS want to consolidate from 2.4bn to 120m shares, this implies a 20:1 consolidation with the resultant SP at around 100p, given its current sub-5p level. I agree with MissGolightly that, having been placed on the radar post-consolidation, the SP may well fall in the short term if new investors doing due diligence take fright at why the historic SP collapsed. The rationale behind that collapse (ie. a very poor balance sheet) is now in the past, but new investors may not be wise to that. FWIW, I need the current SP to rise to 7p (pre-consolidation) or 140p (post-consolidation) to break-even on my investment. My bottom-line is that, if necessary, I'm happy to see through any post-consolidation SP dip as the IGAS fundamentals are now much-improved. The General Election outcome still bothers me, though! (PS. My thoughts obviously also go to the victims of last night's terrible atrocity in Manchester.)
Yep, for those of us invested in IGAS, good to see the Tories full-square behind fracking (see p23 of manifesto), unlike Labour / Lib Dems who both propose banning it. Assuming the Tories win the election AND there are no environmental PR disasters with the fracking process, the way forward looks bright now for IGAS. IMO
Hi. Personally, there's nothing much to say at the moment. As I've said below, in my opinion, Igas's future now largely hinges on what each political party has to say about fracking during the General Election campaign - specifically, what the regulatory regime will be like for fracking companies after the election. Until then, I'm not expecting anything spectacular (good or bad) to happen to Igas. On an assumption that the Tory manifesto will be the most coherent, what I'm looking for specifically is i) how the in-coming Government balances the need for consumer affordability, energy security, and long-term environmental sustainability; ii) where fracking sits within that picture.
Hi. Yes. According to their latest unaudited results published on 26 April 2017, there were 299,542,623 shares outstanding on 31 December 2016.
Indeed! Incentives to develop shale gas could well be in their thoughts through, as you say, the tax system - I'd not actually thought of it from that perspective. I also noted one of the Tories saying today that, apparently, there will be quite a bit on energy in their manifesto. Will be interesting to see what their thoughts are. My guess is that nuclear power will feature prominently, and I expect lip-service will be given to developing renewables to satisfy the environmentalists. The question mark still in my head is: what place in a Theresa May-led government does shale gas play? Surely they see the strategic benefit of exploiting the known reserves from an economic/geo-political perspective? I guess we shall soon see.
Back to the election and, with the BBC reporting today that the Tories are considering introducing a price cap on consumer energy tariffs, I've been wondering whether this adversely affects the investment case for Igas. My starting point is that, what the Tories giveth with one hand in terms of an ostensibly favourable regulatory/political environment to develop England's shale gas potential (i.e. favourable planning, sympathetic environmental regulation), they taketh away with another hand with a potentially ill-thought through populalist price cap on consumer energy tariffs that will starve the energy industry of investment and/or deters innovation in developing alternative energy sources such as shale gas. Any thoughts?
Oops - with regards to the election, I meant to say in addition that the reason why a Tory victory may not be assured is because of a resurgent Lib Dem party. I agree that Labour doesn't have a cat-in-hell's chance of winning under Corbyn. My concern from an Igas investment perspective is that enough disaffected Labour, Remainer and Scots fed up with the SNP will turn to the Lib Dems to give them the seats needed to deny an overall Tory victory. As said, the Lib Dems have come out against fracking and, if they end up in another coalition, that doesn't bode well for Igas.
Hi pennystocks. Indeed - I agree that a Tory victory is not a foregone conclusion, as this may backfire on Theresa May. We shall see! On a brighter note, it's interesting to see the trades being made - I noted late yesterday that someone bought 1.5m shares, and some fairly hefty buys of 50,000 shares a time have occurred today. I also wonder whether a "tree-shake" is going on...!
Hi pennystocks. I entirely agree. The Tories are the only mainstream party advocating fracking. Along with Labour under Corbyn, I noted recently that the Lib Dems through its spokesperson Lynne Featherstone are against fracking as well. What therefore are the odds of a Tory victory, says he who is invested in IGAS? Well pretty high, if the opinion polls are right. And with a poll today putting the Tories on 48%, there will be something abhorrently wrong with opinion polling if the Tories lose the election. (I must confess to being highly annoyed with Theresa May for calling this snap general election, from a pure IGAS investment perspective. In my mind, IGAS was always going to be a high-risk investment but had thought that, now that it had got its balance sheet sorted it out, it would have time to re-establish itself alongside a gradual acceptance of fracking by the public before the originally-planned general election in 2020. Having unexpected political uncertainty added in at this stage is therefore unwelcome. That said, for me, the investment case in IGAS remains compelling provided the Tories win this snap election. So, I guess the message to IGAS investors is to be prepared for a roller-coaster ride until the election is over and done with.)
Hi investors55 For what it's worth, I think market sentiment may keep the share price down for the time being. I've learnt, often the hard way, that how the market views the quality of management can have a significant effect on the share price. In my view, Igas is a company that narrowly avoided going bust because it was able to re-structure its largely self-inflicted debt problem. How will the market view this? Not kindly initially, in my opinion. The Igas management now need to demonstrate that they can deliver. Two obvious tests for me on whether they will succeed are: 1) can they drive up revenues? 2) over time, can they initiate share buyback programmes to reduce the massive dilution in shares that has taken place to enable the debt/equity swap? Once the management can demonstrate beyond doubt their competence in driving the company forward, then I would expect to see market sentiment change positively with a consequential lift in the share price. (For the record, I've been invested in Igas since 2012 and intend to remain invested for the long-term.)
Interesting observations, MarktheSpark - which I agree with. I've been invested in Igas since 2012 and, like many, have felt the pain of the SP tanking due to their balance sheet troubles. Now, that the balance sheet is much stronger, I am much more optimistic about Igas's prospects (and it is reassuring that institutional investors like Kerogen and PLLG are visibly taking up sizeable positions). In addition to your analysis, I believe that Igas's prospects are dependent on two further factors: 1) that the UK Government remains committed to exploiting the shale gas potential in England; 2) that renewable energy costs remain prohibitively high relative to shale gas exploitation. On 1), it is certainly the case that David Cameron was very enthusiastic about shale gas; I've not heard much (anything?) from Theresa May, but the policy documents available from gov.uk are encouraging. If however Corbyn should be elected (negligible chance, IMO), then Labour are on record about banning fracking in the UK with, obviously, very negative consequences for Igas's share price. On 2), I saw a report recently on the BBC that the costs of renewable energy were coming down. If that trend continues, then this could be a game-changer where the environmentalists ultimately win with, again, negative consequences for Igas. Personally, I judge that shale gas still has the edge over renewables, given the success of shale gas in the USA and the knock-on geo-political consequences it has had to keep the conventional oil price in check (and OPEC tamed!). Hence, for now, I am happy to remain invested in Igas. That said, in my opinion, this remains a high-risk share for the reasons outlined above, and is one for the long-term.
Hi The tax form is called a W8-BEN. Completing it is to your advantage because, without it, the US authorities can deduct tax from any dividends you make (that's because Somero is a US company). However, with it, you are exempt from any US taxes. I'm invested in Somero via Interactive Investor. All I had to do was complete the W8-BEN form once and send it to Interactive Investor, and that's it - any future dividends from Somero then comes to me tax-free! Hope this helps.
Hi metis20 Thanks for posting this. Can I ask - how do you know that the "iceberg" of shares at 255p has been consumed? I'm relatively new to investing, and am invested in Somero. Based on what I've learned so far, I believe that, giving the very positive trading update issued in January, this company has great prospects. I also have access to Level 2 data but, unless I'm missing something, I can't see displayed how many shares the market makers hold in companies such as Somero. As I understand it, it's fairly easy to see on the main SETS screen how many shares are available at a given price for FTSE 100 and 250 companies. However, on the AIM market as shown by the SEAQ screen, it is the market makers who hold a "float" of shares to enable liquidity, but I'm at a loss to understand how big that "float" is at any given price point in order to then determine whether the price is likely to go or up or down. All that seems to be shown is the Normal Market Size (NMS) at any given price point - ie. the threshold price under which the market makers must honour an order of shares. Hope that all makes sense, and sorry for the technical nature of the question. However, hope you can shed light on my query.
Oh rats! This is a forum that doesn't allow links to articles, such as the Telegraph article I suggested. So, instead, tap into Google the words "saudi arabia fracking" and there's a whole wealth of articles covering the geo-political issues at play.
Hello Gameon Wow - I seemed to have ruffled your feathers! Let me respond to your points. Yes, I agree - the spotlight is very much on the BoD now and their next moves, and will continue to be the case for the next month at least. As I hope my original post made clear, IGAS is a very high risk company - it's not for the faint-hearted. However, if the shale industry takes off in this country, then the rewards are potentially very high. On your point about Saudi Arabia - this article from the Telegraph gives a flavour of the geo-political issues at play: http://www.telegraph.co.uk/business/2016/02/11/saudi-arabia-may-go-broke-before-the-us-oil-industry-buckles/ On your point about the Government overturning local planning decisions, are you an ethical investor? If so, I can see why you'd be annoyed with the UK Government and, indeed, your views on the Saudi Government.
Hi. Newbie to this board. Let me declare my position. Yes, I’m invested in Igas – bought in as a “speculative buy” in 2015; I need the share price to rise to 29p to break-even. Igas also represents 5% of my portfolio which pushes the “boundaries of comfort” for me. However, I’m comfortable with taking judicious risks, and Igas (just) remains within that parameter. For me, Igas still epitomises the adage “be greedy when others are fearful”. And, reading this board’s comments and others, boy – there’s a lot of (understandable) fear out there! Following yesterday’s sober RNS release, I agree that the next few weeks will be crucial for Igas. It will test the leadership mettle of its BoD and investor resilience like me to steer it out of this sticky patch. My starting point however is that, much to my (pleasant) surprise, the share price so far today has not tanked. I have access to Level 2 information and have noted that, alongside some big sells, there are also some big buys as well. Are these buyers bonkers?? In my opinion, not yet! For me until recently, the share price was driven by external factors beyond IGAS’s control. Provided that IGAS is well-managed, that doesn’t faze me. What are the external factors? Two obvious negatives: 1) it is well-known that Saudi Arabia has been trying to bankrupt the US shale industry (with knock-on effects for us) by flooding the market with oil, and so driving the oil price down. Igas sensibly protected itself by hedging when the oil price was still high. 2) The environmentalist campaigns are also a negative sentiment on the share price, insofar as it may influence local authority planning decisions. One positive external factor however that persuaded me to keep invested is the current UK Government is committed to exploiting the shale gas potential. Given the very high risks behind Igas, this matters a lot as the Government can ensure favourable planning conditions, tax treatment etc. If the Government turned its back on shale gas, then I’d sell my Igas shares pronto! This was my position until October. However, since Igas announced that it may breach its bond covenants, a new development has clearly emerged – is Igas still a well-managed company? I’m keeping an open mind on this. Whilst its options to remain solvent appear ever-narrower, the point is it STILL has options. It can sell off assets; it can re-structure its debt. Like others, I’m also intrigued by the power-politics within the bond-holders – who is this mysterious major bond-holder; what’s their agenda? My guess is this is a greedy sod trying to force Igas into liquidation so that it can swoop in and buy the assets at a knock-down price. So, this share is not for the faint-hearted and the coming weeks are critical. If Igas can survive November by a) successfully steering a way through its secured bond obligatio