I’m considering the long term potential of Tullow Oil plc (LON:TLW) (TLW.L), Premier Oil PLC (LON:PMO) (PMO.L), Sirius Minerals PLC (LON:SXX) (SXX.L), Hurricane Energy PLC (LON:HUR) (HUR.L) and Sound Energy PLC (LON:SOU) (SOU.L).
In my opinion, Tullow Oil has made the right move in increasing production. I think it could produce improved cash flow which can be used to reduce leverage and put the company on a more sustainable footing for the long run. With debt reduced after its placing and what I view as a sound asset base, I think the Tullow Oil share price could rise beyond 2017.
I feel a similar way about Premier Oil. It has experienced difficult trading conditions in the last few years as a low oil price has squeezed its profitability. However, the company has taken a long-term and strategic view of the situation. Its acquisition of EON’s assets improved its asset base in my view, while cost reduction made it more financially viable. Due to these strategy changes I’m feeling upbeat about the investment potential of Premier Oil.
Sirius Minerals is still one of my top long-term picks in the mining sector. I think the company has a real opportunity to become a dominant player in its niche. According to recent updates it is making good progress with its strategy, although a recent share price fall shows investor sentiment has declined. I’m surprised by this as Sirius Minerals trades at less than 10% of its project NPV.
Hurricane Energy continues to make progress with its exploration and development strategy. I think the company could benefit from a higher oil price alongside Sound Energy. Both stocks are relatively small and arguably lack the diversity and financial strength of their sector peers. That’s why I feel that with the prospect of a higher oil price, they both have bright investment futures.
I think the price of oil could move higher due in part to continued rising demand from the emerging world, while exploration spend reductions and supply cutbacks from OPEC could also push the price of oil higher. Therefore, while they could be volatile I feel Sound Energy and Hurricane Energy could have investment potential beyond 2017.