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ARQ - Arc Energy

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I am just hoping Sugarloaf comes in. If that doesn't move the share price then I will sell all my other stocks and bet the farm on ARQ.
 
speves said:
Even with Oil prices down at the moment surely this SP is significantly undervalued currently???

Thoughts anyone


I hold and am accumulating
Click to expand...

Hi Speves I'm a relatively long term holder of ARQ, currently down about 29% on them, but I'm not really worried about that.... IMO they are very undervalued at the moment.... If I had more cash I'd consider averaging down.

Why is the market selling them down?? simply IMO because of the 55% drop in profit last year... the funny thing is it was just a paper drop, they changed some accounting practices (If I've read it properly) which ended up writing off some exploration expense in a big lump, whereas they had previously been expensing it over a longer period. The underlying business is as strong as ever, and should continue to grow...

The other factor that could be causing concern in the market is that ARQ haven't managed to grow their reserves, in fact they haven't quite replaced those that they have used, however they have an aggressive exploration plan this year, so hopefully we shall see that situation change.

My tip is that once the interim report comes out (due 27th feb) if the sp hasn't picked up already, it will then... this is based however on the belief that the write down of 34 Million in June 2006 was an abnormal event, I have not verified that this is the case.... if they have a similar write off again, then my reasoning is flawed

Tony.
 
Thx Tony for the info. I remain confident in this stock and "averaged down" on a fairly solid performance today as you have suggested.
 
A highly rated weekly newsletter has given the thumbs up for ARQ based on the three case senarios below:

Case 1. Long term US$60/bbl oil as per our current
position.
Case 2. US$50/bbl in CY07 and US$60/bbl thereafter.
Case 3. Long term US$50/bbl from now.


RecommendatIon case 1 case 2 case 3
BHP Accum Accum Hold
WPL Accum Hold Hold
ORG Hold Hold Hold
STO Hold Hold Reduce
OSH Accum Accum Hold
AWE Hold Hold/Reduce Reduce
ROC Buy Buy Accum/Hold
ARQ Buy Buy Buy
TAP Spec Buy Spec Buy Spec Buy
AZZ Accum/Hold Hold Hold
MOS Spec Buy Spec Buy Spec Buy/Accum
 
Geez guys, not sure about ARQ. Fundamentally, sure - the stock looks oversold. Analysts additionally maintain extreme an buy bias. But technically, to me I see an acceleration of the downtrend here. In fact, on Thursday and Friday, the low of 1.245 that was set in June to me acting as the next major support level has been broken. All in all, not good signs. However, much of the oil and gas sector is the same. WPL additionally has now broken its major support and is in strife. From a shorter term outlook, I would want a break on high volume above about 1.50 to be interested in a long position. The only positive I would say is that Fridays close is at a round about the high for the day on high volume, which could be indicative of buyers here. But the chart reeks of distribution, not accumulation.

As for averaging out your losses, personally I say only losers average out losing trades. However, the caveat for this is if you are a long term holder and wish to accumulate, this could be a strategy to employ. But anyone with less than about a 6 month time line on an investment should never average out losing trades IMO, especially when you have lost more than 25% (in fact, I would set my stop my capital exposure at a lot less than 25%, even on a higher geared trade).

Cheers
Reece
 
Thx Reece, it always good to get a contrary (and educated) prospective to keep us alert. I will be watching this stock closely, however I remain comfortable with the analyst's advice (for the moment). My losses are much less than 25% and this one sits firmly in the longer term portfolio.

Time.... as always will tell
 
Fair enough speeves, I didn't add in my previous post that I certainly wouldn't be advocating a short trade here either however, as I think generally the Oil and Gas sector has been over sold. Plus any stock that has been sold down as much as this one are always risky on the short side, its greater than 45% off highs made in Sep 05.

If you like ARQ, have a look at TAP as well. This one paints a similar picture to that of ARQ - however unlike ARQ I think it may have found a bottom at about $1.40. To me, this is my pick for the Oil and Gas sector in 07. Just as disclosure for everyone else and moderators, I don't hold TAP at present and speeves, this is just my view and as always, seek professional investment advice, etc........

Cheers
Reece
 
Hi Reece, I agree with you on how ARQ looks technically, but I've seen it do this before (looking woefull technically, and then suddenly turn around and back up to old levels... Earlier this year I was tempted to buy some around $1.40, but decided I already had enough, in hind sight I could have bought them and sold after they recovered, efectively paper shuffling and getting rid of some of the shares I'd bought at a higher price, but still getting a nice profit, without tax implications... of course at the moment its back in the doldrums, but same strategy could be applied again, assuming that there is another recovery)... since I believe in the fundamentals and I hold long term (ie I have held for over 12 months and plan to keep holding for an indefinite period) I see this as bargain territory and a great time to buy... however I realise there is real risk when being contrarian, and that I could get burnt... my initial stake in ARQ was a small one and was at a peak (bought at $2.22) My average buy price is closer to $1.75...

ARQ has strong fundamentals, however they don't pay dividends, which may be part of the reason the market is shunning them, that combined with what I beleive is only a perceived major drop in profitability, IMO is not helping... I'm very interested in what happens after they release the 1/2 yearly report, if they don't recover any ground then I will probably need to seriously reconsider my position!

I like T/A however the biggest drawback I see with it, is it only tells you it is time to buy way after the turnaround is evident... I like to take the value approach, be confident in a companies fundamentals, and buy in when it seems undervalued, don't necessarily wait till it recovers to signal it is ok to buy in...... only works though if you have a really good handle on things, and right at the moment, I must admit until I see the 1/2 yearly results I'm on somewhat shaky ground

I've been burnt before catching falling knives when brokers are saying buy... I don't trust broker recos anymore at all, in fact sometimes I tend to do the opposite to what they are suggesting!! so based on that maybe I should reconsider!!!!

Tony.
 
5% gain on fairly good volume and finished strong today. By no means confirmation of a turn around but a good result nontheless; tomoro be interesting!!
 
Agreed Speeves - had a look at this one at close and it looked quite strong. If it can get to 1.40 on high vol, recovery may be on the cards. Good luck to all long term holders here - most oil stocks were up today so hopefully there will be a turnaround.

Cheers
 
Two strong days after testing a low.. do others see this as a turnaround? I tend to agree it looks strong. I guess I would have bought today if I had spare cash.

I guess seeing as we want healthy discussion I must raise that as much as it looks like a turnaround what's the estimate on the upside? From my limited understanding of their current situation I would have thought it would be a lot of effort to push to $2 like the good old days of late 2005 when I sold out.

I'll probably be forced to eat my words but I would think that there are other stocks getting coverage on this forum that have better upside to go with.

Still I agree that you've identified a pretty solid looking buy point and it appears good value.
 

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Brittishcarfreak
Whilst it was a good test of the lows today, I personally wouldn't be looking at going long until say 1.50 was broken and thereby moving the stock out of the downtrend its been in for some time. Plus I agree for someone with a short time frame, there are better opportunities available. But those with a value long term hold mentality may find something they like here and best of luck to them.

Cheers
 
yeah I think $2.00 in the medium term (6 months) is a bit of an ask... I'm thinking maybe 1.75 by June is doable but is going to depend on the 1/2 yearly report.... This is only based on production though... they have a lot of exploration over the next 12 months, so if they have any major increases in reserves as a result of that, then there should be added upside one would think.

Tony.
 
Tomahawk said:
I am just hoping Sugarloaf comes in. If that doesn't move the share price then I will sell all my other stocks and bet the farm on ARQ.
Click to expand...


G'Day Tomahawk

As you are an experienced oil stock follower, are you able to do a similar valuation for ARQ, as you did previously with GGP?

PS:If you do own a farm (my area of expertise), you would know that at the momement it is very difficult to free up some working capital in order to do any sort of punting. I wouldn't think that too many bookies would let you use the farm as security either for a bet like that. Unfortunately, I also think most margin lenders would take a similar view at the moment.

Cheers
 
Anyone else noticed that every time ARQ makes an announcement about the Canning basin the sp takes a dive!!! Seems that the market isn't impressed with them doing any exploration in this area...

Tony.
 
I wonder why? It seems to be a reasonably prospective area near to infrastructure. Maybe they're switching into more highly leveraged partners in the block?
 
could be just coincidence, I just looked at the 1 day 5 minute chart and the main drop is about an hour after the announcement, and it had cooled off a little before that.

But I'm pretty sure I've seen it do similar in the past.... Only thing I can think of is that people are concerned about them taking over what might be regarded as "others explorers rejects"... ARQ seem pretty positive about this basin though, and they have done very well in the Perth Basin, so I figure they know what they are doing and I'll trust their judgement

Tony.
 
The ADI (Adelphi) factor aslo appears to be being ignored by the market.
ADI has gone from below 40c to 95+c since Sept 06. with more gains looking likely - and yet there is no flow on to ARQ - the major shareholder... whats with that? ... Beats me!

- Holding both ARQ and ADI
 
I'm not much of a Tech Analyst when it comes to charts, but does ARQ look like it's coming off a "Double Bottom".

Too early to call perhaps?
 
Speeves - It's a little early to call yet, but the price action on 23 Jan 07 in candlestick charting is referred to as a doji and could signal a change in trend. The large volume additionally indicates significant activity. The days following have seen it bounce back, but this may just be to do with the positive movement in the price of oil. But as I have said before, it's making lower highs and higher lows, indicating a bearish stock (however we have discussed your reason for a long position here in the past). I would still wait for about 1.45 to be taken out before thinking about a long position.

Cheers
 
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