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Diary of a Dumb Investor: crash-bang oil shares for my portfolio

I want to add a 'junior oil' stock, maybe a little North Sea number.

 
Diary of a Dumb Investor: crash-bang oil shares for my portfolio

Maybe there should be a test.

If you are proven to have enough general knowledge, maths ability and investment nous, you are allowed to invest for yourself. Licenced even.

Those people who fail the test, or don’t turn out to be competent enough, aren’t allowed to have a go. They have to outsource their investment to a fund manager and even – since opting for a fund manager first requires making investment decisions – a financial adviser. Protected from themselves. Protected from their own idiocy, arrogance and the swindling marketing men.

After all, I imagine other would-be investors keep running up against the same problem as I do: I just don’t know enough to invest half of the time and there's too much choice so I can't focus.

For example, I’d like to nail some ‘junior oils’, some crash-bang shares.

For the uninitiated, these are small oil companies that seem to gamble everything on some remote chance of striking vast mineral wealth in shark-infested waters, often off geopolitically explosive shores. Every now and then you gotta ride them right down into the dirt – like Borders & Southern today. According to Citywire, ‘shares have plunged 70% to a three-year low after disappointing drilling news from the Falkland Islands’. Crash!

But when they score… Oh when they score, watch the share price shoot up, up and away… Bang! This is definitely where the action is. And besides, I’ve got to start somewhere (having taken over this portfolio from its previous Dumb Investor, my bro, I’ve sold stuff, but not been brave enough to buy yet) or Citywire will strip me of this column.

My portfolio on Monday: Click to enlarge

The problem is though, the companies are force-field protected: they are shielded by a barrier of impenetrable jargon, which presumably only the chief executive, experts on drilling/mining whatever, and super-specialist, investors understand. Not the rest of us.

So which ones are set to bang and which to crash?

I'm thinking maybe North Sea companies could be the place to start as they are set for 'M&A'/'consolidation'. But beyond that, despite extensive research/Googling, I'm struggling to nail it down. So please, readers, I need recommendations on investable companies in this area. I only want one. Promise I won’t be stupid or act rashly – I’ll do my own research if I can just narrow it all down a bit to start with. Trust me.

39 comments so far. Why not have your say?

Joe T

Jul 16, 2012 at 18:01

Perhaps take a look at Xcite Energy, shares have seen a lot of crashing but they have a 100% owned field making decent progress towards first oil and could be a M&A target in the future.

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Donald Hunter

Jul 16, 2012 at 18:04

XEL. No brainer.

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Donald Hunter

Jul 16, 2012 at 18:13

....and here's why.....

This is a list of the ratios for each AIM listed oil E&P company operating in the North Sea - Mkt Cap / Proven Reserves.

XEL 1.86

LHD 8.6

IAE 5.76

SQZ 8.33

AEY 3.4

VPP 6.77

TRAP 20

ENQ 7.89

When Excite matches up with Enquest... well you do the math. And then there's take over time. As usual, work it out.

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sgjhaghsdg

Jul 16, 2012 at 18:18

I invest in nice tech shares because I can read their patents, pick apart their product roadmaps, understand their route to market, and make a decision.

For the same reason, I don't invest in junior oilies. I know people who *do* know about oil exploration who have done well with such investments, but a key part of being smart is knowing what you know and knowing what you don't know.

If you find the jargon impenetrable (it isn't, you just haven't yet put in the work) then move on. If you find all jargon impenetrable, then use trackers.

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Rustie

Jul 16, 2012 at 18:21

So Donald, you can work out how to make money by doing the "math" and spotting "no brainers" can you?

Gosh, all those investment banker muppets across the globe sitting in their trading offices losing money - if only they knew what you know eh? You clever little genius you!

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Toby via mobile

Jul 16, 2012 at 18:33

Amerisur Resources is the one

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MARK LOCKYEAR

Jul 16, 2012 at 18:44

If you should go skating on the thin ice of life, dont be suprised when a crack in the ice appears under your feet, and you slip out of your depth, and out of you mind

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Michael Hellman

Jul 16, 2012 at 19:31

Dont know enough about the junior oils to pick a no brainer, so I bought the 'Junior Oils' Fund, which is not a buy and forget rather a buy and sell, which has worked for me over the years.

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Anonymous 1 needed this 'off the record'

Jul 16, 2012 at 21:18

Junior Gold Junior Oil,,,russia...india ....distressed debt....etc,,etc..new ideas....

why bother...just follow the rules and you will win...suprising how many cant.

Rule 1 dont lose your money

Rule 2 dont forget rule 1

Rule 3 Buy low

Rule 4 Sell high

Sacred mantra ,.patience.....,patience...patience

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Ian Giddings

Jul 16, 2012 at 23:18

I agree with the XEL rampers and expect a good rise soon. Also in a 'safe' jurisdiction there is plenty of good news to come from Irish Sea driller PVR. A punt on CHAR could also be profitable but that is far from home waters.

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dennis denuto

Jul 17, 2012 at 01:08

Wait until you have enough money to buy at least three stocks so you have a small portfolio so if one goes bang you hope the other two might prosper and/ or add something that is producing oil at the moment to give a little more balance. Try to spread the geography. FOGL looks cheap at the moment (Falklands), also Bowleven (West Africa) and Xcite wouldn't be a bad start. If you want something producing with a bit of exploration I like CEO (Far East)

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walkup

Jul 17, 2012 at 02:48

If you want a crash-bang oil share then look no further than BP.

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Anthony Tinslay

Jul 17, 2012 at 10:55

Oh dear - you are clearly not talking about investing - just gambling. Suggest you read the horse racing section of the morning paper if gambling is what you really have in mind. Xcite Energy - the name alone is enough to put anyone off.

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mike88

Jul 17, 2012 at 21:57

Anthony Tinslay..........Thank you. I've been saying this for ages on here. The Dumb Investor's ideas are little better than rolling the dice or betting on the 2.30 at Newmarket. Investing should be about the medium to long term and not about making a quick buck..............or loss in this case. Of course DI could strike lucky but on the evidence so far it seems to me that DI mark 2's ideas are wackier than his predecessor's.

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Steve H

Jul 18, 2012 at 08:38

When I was at school, we did "maths". Maybe that's where Donald gets his extra ingredient!

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Matthew Charles Flinders

Jul 18, 2012 at 15:46

Go with FOGL. Shares are very cheap thanks for BOR making it a perfect time to get in, prior to the drilling results. (roughly 4 weeks away). Potential for 4.7 billion barrels of oil or a huge amount of gas.

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Donald Hunter

Jul 18, 2012 at 18:05

D.I. asks this...

"I'm thinking maybe North Sea companies could be the place to start as they are set for 'M&A'/'consolidation'. But beyond that, despite extensive research/Googling, I'm struggling to nail it down. So please, readers, I need recommendations on investable companies in this area. I only want one."

Joe T., answers the question.

So do I with just one, of many reasons. D.I. will do his own research after all.

sgjhaghsdg, does not answer the question but does provide a little insight into tech shares.

Rustie, does not answer the question and posts the usual patronising guff seen on iii and lse.

Toby via mobile, does not answer the question but gives a tip for a company operating in Paraguay and Columbia - I will look into them though.

MARK LOCKYEAR, does not answer the question.

Michael Hellman, does answer the question with a different perspective, trouble is that fund may have exposure to the likes of MXP, DES, BOR et al.

Anonymous 1, does not answer the question but does answer a question that D.I. did not ask.

Ian Giddings, thanks for the support, I will look into PVR. Will stay away from CHAR though.

dennis denuto, again thanks for the support for the XEL tip. BLVN will recover eventually, but I would not touch any of the Falkland explorers with your barge pole including FOGL.

walkup, ah yes BP.

mike88, does not answer the question but does slag off D.I.'s past performance. I do not follow D.I. He merely asked a question and I and others tried to answer.

Steve H, actually when I was at school we did Mathematics.

Matthew Charles Flinders, Nope, FOGL is not in the North Sea. What happens if they do a DES or BOR and you find your £10k worth £2k? And when do you think RKH will produce any oil? 2017 or maybe 2018?

There you have it. Bon Chance D.I.

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Rustie

Jul 18, 2012 at 18:17

Donald, far from patronising you, I'm gently chiding you (known in the UK as taking the piss) for your Americanese "Math" and "no brainers"....plus your purporting to actually know. You no more know than the rest of us, just a bit slicker with the bullshit....but then, aren't all Americans?

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MARK LOCKYEAR

Jul 18, 2012 at 18:26

I did answer your question, i said if you go skating on thin ice, you will end up, crashing through the ice, sinking like BOARDERS AND SOUTHERN.

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Donald Hunter

Jul 18, 2012 at 18:31

Ah Rustie dude. Why get all personal? Try answering D.I.'s question. Please, just try. As for slick, the only slick the U.S. had do deal with recently was courtesy of, wait a minute, ah yes... BP!

God Bless America.

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MARK LOCKYEAR

Jul 18, 2012 at 19:01

Trying to bag the next big gusher, it's like playing a very expesive game of PIN THE TAIL ON THE DONKEY.

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Rustie

Jul 18, 2012 at 20:48

Dear Donald

And who were the sub-contractors who precipitated the oil leak....yes, you've guessed it....Americans. How's things in Bophal dude? God bless America.

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sgjhaghsdg

Jul 18, 2012 at 21:24

Yup, that oil leak was as American as apple pie and hand guns.

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Rustie

Jul 18, 2012 at 21:31

....and friendly fire.

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Donald Hunter

Jul 18, 2012 at 22:59

Too bad I was born and raised in the UK. Now, gonna try and answer D.I.'s question or not?

God Save the Queen and here's to a right good Olympics with loads of British success!! Oh yes, and loads of that Bentley heavy oil coming out during the current EWT which commenced 2 weeks ago by - yes you guessed it - Xcite Energy.

Cheers.

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walkup

Jul 19, 2012 at 03:26

I have a friend with shares in FOGL. He's lost about half so far but is hanging on in there like the trooper he is.

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Steve H

Jul 19, 2012 at 20:58

You said it Donald - mathematicS, not mathematic!

As for oil exploration shares, my favourite at the moment is FKL.L.

Not only do they have a significant interest in FOGL.L (so if they do find oil/gas, FKL.L will prosper too), but they''re equivalent to the guys who sold wheelbarrows and shovels to the Gold Rush prospectors (i.e. they made loads of money whether or not the prospectors found gold).

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MARK LOCKYEAR

Jul 19, 2012 at 22:01

BUY FENNER, there make conveyer belts and stuff, for the mining sector.

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Steve H

Jul 20, 2012 at 10:19

Fenner's probably OK as a safer bet, but if you want to bet on something that could really fly, then the likes of FKL.L would be better, although of course, you'd have to be prepared to lose most of your bet.

FKL.L is a genuine trading company and regardless of any oil/gas finds still makes a modest profit and pays a dividend, so it's not the outright gamble that the exploration companies are.

However, to give you an idea of what the exploration companies can return, I bought 20,000 RKH.L shares for 24 pence in 2006 and sold them this year for about £3.50 each after the Sea Lion field was proved and I could have sold them for more if I had timed it better, but I'm not grumbling.

Before drilling in the South Atlantic began, the "experts" were saying that there was about a 1-in-8 chance (or less) of an exploration company finding anything and so far EVERY single company to have drilled has found something, even Desire and Borders & Southern (which is still evaluating its Darwin field results).

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snoekie

Jul 21, 2012 at 23:29

What a pity your brother didn't hang on to his Afren, (and I think him for bringing it to my attention).

Take it slow and read, and read and read. I don't mean books, I mean the comments of the pundits and views of others, because a lot of basics will be instilled.

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Rustie

Jul 22, 2012 at 11:02

Snoekie: Are these the pundits that have brought the Western economy to its knees?

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Anonymous 2 needed this 'off the record'

Jul 23, 2012 at 13:09

USOP (US Oil & Gas) are drilling in the Nevada Desert and look like they are about to announce something pretty big....

They are on the GXG exchange

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Rustie

Jul 23, 2012 at 13:25

Anonymous 2 :

"look like they are about to announce something pretty big...."

Boiler room boy or simpleton? Vote now.

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MARK LOCKYEAR

Jul 23, 2012 at 16:04

USOP...ITS A BIT LIKE THE ADVERT FOR HARMONY HAIRSPRAY...IS SHE OR IS'NT SHE...

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walkup

Jul 23, 2012 at 16:34

FOGL did well today.

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Matthew Charles Flinders

Jul 23, 2012 at 17:59

And we all know how meaningful a days trading is.

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Matthew Charles Flinders

Jul 23, 2012 at 18:01

PS Walkup, what price did your friend buy in at? Very poor timed buy if hes lost 50%

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walkup

Jul 23, 2012 at 18:09

Dunno but he's too punch drunk to care about today. He's in for the long haul but I think its more like a keelhaul.

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ruth karp

Aug 13, 2012 at 17:09

Do you remember that program called the Hillbillies! they found

oil gushing in the back yard.... Premier Oil have been ok to me

in the past... still have a few left, waiting for the next find.

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