NIKO Resources – Still Nothing to Cheer Investors

NIKO Resources* (NKO : TSX : $3.20), Net Change: -0.28, % Change: -8.05%, Volume: 743,871
Niko’s share price remains under pressure…According to Canaccord Analyst Christopher Brown, the company continues to fight a storm of controversial media reports coming out of India, which in his view, have more to do with Indian politics rather than oil and gas policy. Nevertheless, opposition parties in India tend to capture media attention with controversial statements that eventually stream into the North American markets. Until Reliance begins to demonstrate production growth on the offshore D6 block, Brown believes there will be ongoing negative pressure on Niko’s share price.
Brown believes the combination of unsubstantiated rumors and Niko’s stressed financial situation continues to raise the
question of how Niko will survive another year. In his view, the value of Niko’s asset base is multiples above the company’s
current trading price, but in order to unlock that value, Niko needs to strategically deploy or conserve capital.

Niko’s recent move to halt drilling offshore Indonesia postpones some interesting exploration opportunities for an indeterminate length of time. Compounding this delay is Diamond Offshore’s (DO) most recent rig report, dated September 19, 2013, whereby Diamond Offshore states that Niko is delinquent on its payment obligations. Niko confirmed that it is overdue on payments, and has indicated that it is currently in negotiations with the rig provider to manage payments going forward.

In Brown’s view, the report highlights Niko’s precarious financial situation. While production and gas prices in India are set to increase for the first time in years, Niko’s working capital remains in a negative balance, and its debt facility is at risk of being reduced .

NIKO Resources, Motley Fool and The AMP Hedge Fund

Mutual Funds for Dummies ... U.S. Funds at War...

Mutual Funds for Dummies … U.S. Funds at War — Too simple? (Monday, June 4, 2012) …item 3.. Music to Help Study and Work – 26:39 minutes … (Photo credit: marsmet545)

The AMP Hedge Fund tracks a good number of stocks for consideration – few as frustrating as NIKO . Great potential – but they used to say that about me.

My advice to myself is that it is better to be a little late into a position than to be early.

Thus we track NIKO ( NKO on Toronto) but haven’t taken a position. Years ago the stock was $ 114 and headed to $ 200 on the basis of massive potential . Natural gas discoveries in India , Indonesia and Trinidad. Swinging for the fences is not an investment strategy it is gambling.

Yet NIKO has the production in India – getting paid a below market rates to satisfy the election bets of the corrupt .

Track and watch and wait.

Similarly – watch the potential natural gas conversion for trucking offered by Clean Energy and Westport Innovations. Westport has been ” touted ” by Motley Fool . Touted to gain paid followers – the bet has not paid off for the followers.

Niko Resources Ltd

NKO

 TSX : C$9.25 BUY 
Target: C$13.50

COMPANY DESCRIPTION:
Niko Resources Ltd. is a Canadian-based international oil and gas company. Niko’s main producing asset is the D6 block in India (10% WI) where natural gas production is approximately 50 mmcf/d net and oil production is approximately 1,000 bbl/d net. Niko has an immense exploration portfolio spanning multiple countries and targeting very large, company-making prospects.

SIGNS OF ENCOURAGEMENT
Investment recommendation
Although a gas price hike in India was highly anticipated, Niko’s share price rallied upwards of 25% on the final confirmation. The new pricing
formula is expected to be implemented in 2014, and Niko confirmed that the government’s new commodity-linked formula should generate a
2014 gas price of ~$8.40/MMBtu (effective April 1). With pricing risks largely addressed, the market has finally rallied behind Niko.
Investment highlights
 We expect reserve-based lending facilities to be adjusted to reflect much higher gas prices. In turn, this should provide Niko with
access to additional debt. Currently, facilities are based on a $4.20/MMBtu gas price.
 As a result of improved economics, Reliance Industries will likely pursue production growth more aggressively offshore India.
Valuation
Using a DCF model, we estimate a 2P F2013E NAV of C$13.55/share. This forms the basis of our 12-month C$13.50 target. We note that even
after Thursday’s rally, the company continues to trade significantly  under its 2P reserve value, which excludes upside potential associated
with Niko’s recent MJ discovery. On a risked basis, our 2013E NAV increases to C$35.85. As such, we maintain our BUY recommendation.
Risks
Niko is a high-risk, high-reward investment. The company’s growth is dependent on high-risk exploration opportunities offshore Indonesia and
development of its offshore India assets

Niko Resources There Really Is Progress But…

Niko Resources

(NKO : TSX : $10.05)

Niko was under pressure after announcing a sub-commercial discovery off Indonesia.
The company said it encountered 23 feet of net pay of liquid hydrocarbons at its Ajek-1 location offshore Indonesia. The
primary pre-drill risk at this location was assessed as reservoir, which was proven with Ajek-1. Although the discovery was a
geological success, net pay was deemed too thin for commerciality.

Canaccord thinks the result will allow the company to reprocess seismic on the Kofiau block to better identify hydrocarbon bearing reservoirs. Reprocessing will take some time but will likely lead to a second location (optimistically later in the year), particularly if the remaining Calon-1, Dugong-1 or Gajah-1 prospects can be refined. Overall, this is exploration work; to prove a working geological system is a big step for Niko, and Brown would expect the next location to target thicker sand packages (and/or a serendipitous carbonate play).

Niko holds a 57.5% working interest on the block, while Hess holds the remainder. He expects Niko was carried on the location, which was drilled ahead of schedule. Ajek-1 was the first well drilled using Niko’s SeaSeep technology. Going forward, the Ocean Monarch drilling rig is mobilizing to the Niko-operated West Papua IV block where it will spud the Cikar-1 well in mid-January, with a projected drilling time of 60-70 days. Cikar-1 is targeting a large Miocene carbonate prospect.

Niko also announced on Thursday that the G2 well on the D19 discovery at D6 was successfully drilled. The D19 discovery is one of four satellite discoveries approved for development by the Government of India. The MJ-1 exploration well in the D6 block is currently expected to spud within the next few months. MJ-1 will target the Mesozoic synrift clastic reservoir, similar to the currently producing MA oil and gas field. Lastly, on a positive note, recent news out of India continues to support a revised gas price in 2014 that should be at least US$8/MMBtu, up from the current US$4.20/MMBtu price Reliance and Niko receive for D6 gas production.

China and India Economies Will Top G 7 (Study)

China Insurance Building (中国保险大厦), Shanghai

China Insurance Building (中国保险大厦), Shanghai (Photo credit: thewamphyri)

Nov 10

The fast-growing economies of China and India will soon be worth more than the combined gross domestic product of the Group of Seven countries, according to new a study predicting global economic growth rates over the next half-century.

China’s GDP growth, however, will slow significantly after 2020, because of a rapidly aging population that will present major policy challenges to the country’s leadership, the report by the Organization for Economic Co-operation and Development predicts.

It says China’s GDP growth will outpace all other countries for the next seven years but will then be overtaken by growth rates in the emerging economies of India and Indonesia.

The expected slowdown in China will be caused primarily by shifting demographics: Its aging population will reduce participation in the country’s labour force, cutting productivity and stressing social-welfare spending.

China, the worlds most populous country with more than 1.3 billion citizens, is getting old in part because of a policy implemented in the late 1970s that prohibits families from having more than one child. There have been calls to repeal the one-child policy, but the leadership of the Chinese Communist Party has resisted.

In the study, published Friday and titled Looking to 2060: A Global Vision of Long-Term Growth, the OECD says the number of people in China over the age of 65 will quadruple over the next 50 years. By 2030, more than 35 per cent of China’s population will be older than 65 and by 2060, more than 60 per cent of the people living in China will be senior citizens.

“More-rapid aging in this country partly explains why India and Indonesia will overtake China’s growth rate in less than a decade,” the report says.

A young and plentiful work force has been a key driver of the rapid economic growth enjoyed by China over the last decade that has propelled it past Japan to become the worlds second-largest economy and soon to be No. 1, ahead of the United States.

But there are already signs of a labour squeeze that could prevent China from avoiding the so-called middle-income gap, meaning its citizens will get old before they get rich. China’s income per capita is currently about $5,000 (U.S.), compared with about $48,000 per person in the United States and $45,000 in Canada, according to the World Bank. The OECD report predicts that both China and India will experience a more than a sevenfold increase of their income per capita by 2060. The rise will be more pronounced in China, the OECD says, reflecting the momentum of particularly strong productivity growth and rising capital intensity over the last decade.

This will bring China 25-per-cent above the 2011 income level of the United States, while income per capita in India will reach only around half the current U.S. level. However, the report cautions that living standards in China, India and some other emerging countries will still only be 25– to 60-per-cent of the level of those enjoyed by leading OECD countries by 2060.

Despite China’s looming demographic challenges, the OECD projects it will surpass the euro area in 2012 and the United States “in a few more years,” to become the largest economy in the world measured by purchasing power parity (which measures purchasing power adjusted to reflect for exchange rates).

By this measure, the report says, India is surpassing Japan and is expected to surpass the euro area in about 20 years. The faster growth rates of China and India imply that their combined GDP will exceed that of the economies of the G7 countries (the United States, Japan, Germany, Britain, France, Italy and Canada) by 2025, the OECD said. By 2060, it will be more than 1.5 times larger.

In 2010, China and India accounted for less than one-half of G7 countries GDP. The OECD predicts that by 2060, the combined GDP

 

Niko Resources – What Is Wrong With This Picture ?

Niko Pirosmani. Lamb

Niko Pirosmani. Lamb (Photo credit: Wikipedia)

Niko Resources (NKO : TSX : $12.05)

 

October 22

Waiting for Godot ( famous French Investor noted for his patience)

 

Niko Resources sold off hard after cutting its full-year production forecast and providing little clarity on how it plans to deal with its maturing convertible debt.

The company cut its full-year production forecast by about 4% due to mechanical issues at one of its blocks in Bangladesh. It now expects production to be 168 MMcfe/d for the full-year ending March 31, 2013, lower than 175 MMcfe/d it forecast earlier. Also, Niko now expects Q2 average sales volumes of 173 MMcfe/d, down 9% from 189 MMcfe/d in the first quarter. The company attributed the lower average sales volumes to anticipated natural declines in its D6 block in the Krishna Godavari (KG) basin off India‘s east coast.

According to a Reuters article, output at the D1 and D3 fields in the KG D6 block has declined 26 million metric standard cubic metres per day (mmscmd) from 60 mmscmd in 2010. Production at the block is now projected to fall further to 20 mmscmd in 2014-15. The article also notes that the block has never managed to reach the forecast peak flow of 80 mmscmd. Niko owns 10% of the block, while India’s Reliance Industries holds 60% and BP 30%.

Alongside the production update, Niko also addressed its maturing convertible debentures. At its Annual Shareholder meeting in on September 6. 2012 the company committed that within the next six weeks it would advise the market on how its planned to deal with the $310 million in convertible debentures which expire on December 30, 2012. At that time it stated that it may it preferred not issue shares in accordance with the terms of the convertible debenture but rather to repay with proceeds from:

1) liquidating assets;

2) negotiating upfront payment on farm-ins;

3) issuing high-yield debt; or

4) combination thereof.

Those six weeks are up…but the story has not changed. The only clarity the company provided was that it would make a prepayment to reduce the amount outstanding on its convertible debenture from $310 million to $220 million utilizing cash on hand and advances under its credit facility. As for the remaining principal, the story was essentially unchanged, with the exception of a couple more options added to the list as ways the principal would be satisfied:

1) sale of equity securities; or

2) issue common shares in accordance with terms of the convertible debenture agreement.

Canaccord has previously said that he expects the to pay the debt through a combination of divesture or farm-ins, a high yield instrument or a new high-yield convertible as it would mitigate near-term dilution, while delaying the issuance of “cheap stock” for a year or two. By that time, he would expect a degree of exploration success to have lifted the stock, resulting in less punitive equity markets…now we wait.

 

Niko Resources – High Risk/ Reward Double Down BUY :Target $26

Sept. 18

Niko Resources Ltd  NKO TSX $ 10.38

COMPANY DESCRIPTION:

Niko Resources Ltd. is a Canadian-based international oil and gas company. Niko’s main producing asset is the D6 block in India (10% WI) where natural gas production is approximately 100 mmcf/d net and oil production is approximately 1,700 bbl/d net. Niko has an immense exploration portfolio spanning multiple countries and targeting very large, company-making prospects

Maintain BUY recommendation and C$26.00/share target Niko is expected to announce the results of its credit facility review later this week. As of Q1/F13, Niko had drawn US$41 million of the US$250 million line.

While Niko previously reiterated that the “maximum facility” would be cut, it recently commented that the facility “will still exist, but at a reduced level”. With these comments in mind, we estimate that facility will be reduced to 40-50% of PDP reserves, or ~US$125-160 million. We believe the market will react negatively to the pending news.

Investment highlights

The reduced credit facility  may provide a buying opportunity. This bank line should increase following a revised D6 gas price by April 2014.  Also watch for the update on the convertible debenture plans within four-to-five weeks.•

 The Ocean Monarch semi-submersible rig is expected to spud Jayarani-1 on the Lhokseumawe block on October 15, 2012. 

Valuation

We estimate a base F2013 NAV of C$23.20 (including existing discoveries in India, Trinidad, and Bangladesh). With a risked 2013E NAV of C$29.70, we maintain a mid-point target price of C$26.00 per share. With a potential return to target of 150%, and multiple high impact drilling catalysts expected over the next two years, we rate Niko  a BUY.

Risks

Niko’s future growth relies heavily on high-risk, high-reward drilling. The company’s ability to fund development and exploration projects has

also become a risk with the underperformance of D6

Cheniere for the coming LNG Market

 

 

August 18

The newsletter Investment U picks Cheniere as a winner in a field yet to be developed .

  • The LNG Shortage

Nearly every gas import terminal in the country (there are nine of them) applied for permits to install natural gas liquefaction plants. The reason? The demand for natural gas is booming just about everywhere else in the world.

Qatar, the world’s largest exporter of natural gas, will soon hit its full annual export capacity of 77 million tons, in the face of global demand that can absorb nearly as much as the world can produce.

In the wake of the multiple disasters in Japan, it’s importing an additional four million tons over the next year from Qatar. It’s in negotiations to purchase even more.

Fatih Birol, the head of the International Energy Agency, commented on the opportunities for LNG producers in an article in The Wall Street Journal: “Post Fukushima, there will be a lot of opportunities. Japan and Korea both have new long-term contracts in the next four years, and China’s demand is booming. As of 2015 they will have to import as much as [all of] Europe today.”

According to Frank Harris, an LNG expert at Wood Mackenzie, Asian demand for LNG is going to skyrocket to 241 million tons in 2020 from 138 million tons in 2010.

With worldwide demand on the rise and no new large-scale LNG projects set to come online in the Asia-Pacific region for at least the next five years, the door is open for the United States to provide some of the slack. Nearly every U.S. company that owns a LNG import terminal has plans to add export capability in the coming decade.

The Best Natural Gas Turn-Around Investment 

But perhaps the best way to invest in the coming rise in LNG exports is via Cheniere Energy, Inc. (AMEX: LNG). It operates the Sabine Pass LNG facility, in Cameron Parish, Louisiana, and it’s going to be the first LNG export facility to come online.

Cheniere recently received DOE export authorization to export LNG. Construction will begin in 2012, and Sabine is scheduled to come online in stages starting in 2015. It’s also negotiating definitive long-term export contracts with numerous customers. It recently inked a big one with India.

It will take a little over a decade for the United States to switch from being a LNG importer to a LNG exporter.

Exporting LNG will also cause the price of U.S. natural gas to gradually rise, and $5 to $6 gas will be the new minimum floor. What a difference a few years – and 2,000 trillion cubic feet of natural gas reserves – makes.

Uranium One

Push Bikes Not Uranium

Push Bikes Not Uranium (Photo credit: Happy Squid)

Uranium One (UUU : TSX : $2.29)

August 15
Shares of Uranium One jumped after the uranium producer announced a 28% increase in second-quarter
production to 3.0 million pounds, impressive average total cash costs of $16 per pound and re-affirmed 2012 and 2013
production guidance.

UUU’s adjusted Q2/12 EPS of $0.01 were was in-line with  estimates. While, U3O8 production of 3.0 million pounds was 6% above  forecast of 2.9 million pounds largely attributed to UUU’s South Inkai mine.

The company reiterated its production guidance for 2012 and 2013 remains at 11.6 million and 12.5 million pounds,respectively. While guidance for the average cash cost per pound sold in 2012 remains unchanged at $19 per pound.

 

Management also noted that sales volumes for 2012 are heavily weighted towards the second half of the year. The company stated that the medium to longer term uranium market fundamentals continue to be positive. Highlighting that Japan has begun to slowly restart its nuclear reactors, and global demand for uranium continues to grow as a result of the increasing reliance on nuclear power in emerging markets including those of China, India, Russia, South Korea and the Middle East.

Commenting on the quarter, UUU’s CEO, Chris Sattler, stated, “Uranium One achieved another solid operational performance with record production from five of our mines during Q2 2012. We also achieved an important milestone with the commencement of commercial production from our Willow Creek mine in the United States.”

Rare Earths Molycorp (MCP : NYSE : US$11.83)

English: Ashwani Kumar, Indian politician and ...

English: Ashwani Kumar, Indian politician and Minister of State, speaks at a plenary session titled Big Bets on Technology and Manufacturing held at the World Economic Forum’s India Economic Summit 2008 in New Delhi, India. (Photo credit: Wikipedia)

Rare Earths
Molycorp (MCP : NYSE : US$11.83)

August 15
Window of opportunity? While China, the world’s largest producer of rare earths, is clamping down on exports, the world’s
second-largest producer is planning to increase its output.

The Wall Street Journal highlighted that, while China bickers with the U.S. and other major rare earths consumers of export limits, India, currently the world’s second-largest producer of rare earths and home to large deposits of rare earths, has been presented with a window of opportunity to boost production to fill the drop  ff in China’s exports.

The WSJ reported that state-owned Indian Rare Earths, which suspended mining in 2004 due to its inability to compete with China on price, is building a rare-earth processing plant in the eastern state of Orissa. A company official said the plant should begin operations in September. The government also has two ships prospecting off the southern coast of India for reserves on the seabed.

Rare earths deposits are abundant on the ocean floor but have never been mined on an industrial scale. India’s rare-earth strategy appears to be driven not just by economic considerations, but also by the country’s rivalry with China, the WSJ stated. In July, Ashwani Kumar, India’s minister for earth sciences, said China was using deep-sea mining with a strategic purpose,” Kumar said.

mining as a way of staking territorial claims in ocean areas. India, he told local media, was being forced to do the same.
“Countries like China have taken to deep-sea mining with a strategic purpose,” Kumar said.

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