Contrarian play28 Jun 2023 09:16
Spoke to someone who sold down most of his JOG stake recently. He was exhausted by poor political climate. Though thawing little... the political climate is pretty grim.
I happen to think, that if you look closely - JOG is a now standout classic contrarian play.
1) It's in a horrible place optics wise - trying to breath life into a project right in the middle of the worst NS atmosphere for decades. This explains the current 'good value' (cr@ppy SP!)
But...
2) It's brownfield 'redev', with environmental creds - even by Lab's own guidance it won't be stopped. We know NSTA is very keen on the project.
3) Its value isn't unlocked yet, so hasn't had the chance to get its potential SP pummelled post WFT like the other NS independents.
4) The investment allowance comes at a perfect time to push another operator into FO before Lab gets in. The management team told us this many times - 'it helped'. NEO is running for a tight deadline, giving huge momentum to get to first oil.
4) Yes, its future after tax profits have an extra 35% taken off them. But even then, at first oil current SP is a crime, as per DUs calcs.
5) Once labour is in power, they will be dealing 100% with real, economic problems that will present a clear and present danger to getting re-elected 4 years later. Do we really think they will nudge up NS tax, when NS investment will clearly have gone down the pan by then - threatening the Scottish vote and looking economically illiterate? The political risk is now on the downside for me - probability weight Tories clinging on to power, you have an NS political trade there.
6) History tells us that recessions last a year or two, and at first oil in 2026, with large oil output gap and global underinvestment, Brent inflation adjusted could be double. the $140 high in 2008 with 43% total inflation is $198.
7) in 2026, the mood music may well have therefore changed on oil investment! Put a 1st class management team in their prime in charge of a cash-generative operator, you have an ideal vehicle of growth, at the right point in the cycle.
So when Malcy talks about £10 a share, we know the only way to get there would be another guy thinks it could go to £20. Over a 2 year time-frame, with a fair wind this can easily happen in my view.
I haven't sold a think and have the biggest position I've had since the start.
GLA
Sign In
Follow the stocks
