Just sorting thru some old files on my laptop and came across this little gem from my days losing money on NEN. NEN drill was located offshore South Vietnam where they were a minor JV party.
In mid to late 2013 NEN was going thru what OEX is doing now.
I copy and save those things that might come in useful one day. It's a pity I just found it again, it would have come in bludie handy if I'd put the advice to use with OEX instead of filing it.
It's from a very canny investor [I've added one comment of my own in square brackets - please excuse].
OptiontraderMGR 15/6/13 (re NEN) Hello Groucho, In the long run a company's share price will increase due to continual increase in Earnings per Share. Return on capital where for every dollar spent the company returns a profit on that dollar.
For every spec oil & gas stock that ever announced an oil or gas bearing find; yes the share price will rocket, BUT only for the short time. The long time value will depend on the production rate and return on equity.
I am like every other trader or investor; we all are looking to make it big. The only trouble with that is the odds and risk of that scenario happening are very low. So low if fact that you will be losing a lot of your money every year, year in year out hoping, waiting for one of your shares to hit the big time, for it too never happen. You are probably better sticking with Lotto. Its way less expensive and your odds are probably better.
In 19 years of trying, I have yet to be involved with any oil and gas stock from its initial beginning to the time that the company has hit the big time, for one reason or another. This is due to:
A) Not being aware of the stock in its early stage of development. This is why most investors don’t make money.
B) Hearing about the huge success of a stock, and joining in on the buying spree, only to be holding the stock 5 weeks later at a huge loss. That’s the classical approach of most investors and even inexperience/experience traders whereby they buy a particular stock on the increase only to find that their timing was at the last stage, and a massive sell which happens very quickly and all of a sudden you’re holding loses [and then often feel committed to continue holding long term so as not to realize a loss in the short term].
C) The professionals of share market trading coupled with their undeniable influences and massive wealth, using the advantages of the ASX trading platform with differing rules and regulations to the general mum and dad investor will always put them ahead of the curve and way ahead of the general Mum and Dad investor. That’s why they are known as the Sharks and they prey on the smaller fish as they should.
D) What most investors don’t get is (and why 99% of all share market programs, stock brokers, investment houses, investment books and media will keep telling Mum and Dad’s) to DIVERSIFY. Spread the RISK. Well guess what, this will enable you to make some extra pocket money if more of your stocks go up than go down in price over the long term. YOU WILL NOT GET RICH. HELLO. How the media manipulates the minds of the people to believe whatever they want to hear. It’s unbelievable to say the least.
E) Risk comes with taking a large position, and doing lots of homework (Just like the new version of Aussie National cricket players - Homework before bed boys lol) and then and only then if Mother Nature was true to your version of events and all the Ducks lign up, only then can you get the taste of sweet success. BUT, it can disappear very quickly so make sure you are not asleep at the wheel, because when it happens the Captain does not sound the alarm to get out!
[chillam - If you must chase oilies, I would add one more to the list, Dilution. Even if you buy in early you can be diluted out the back-door by CRs, and even if the well is a success your diluted stake means that your potential Return on Capital is considerably diminished considering the extended risk period. It’s often more strategic to buy later in the cycle when it’s been somewhat derisked. Often staggering your buy-in into three smaller tranches – early stage, pre drill & post flow test. That way you can optimise and finesse your position and also pull back and cut losses.]
For those who think they know all about the history of Oil, I will leave you with this thought. WHO is the Captain? The Captain who took the idea from the Chinese; who used a technique to drill for Salt. Captain Edwin Drake.
Here is a list of some of my stocks where Management had the DREAM and ALL THE EXPECTATION from the MARKET to make it BIG. Being unsuccessful was not an OPTION. WELL GUESS WHAT? Being Unsuccessful was always going to be their only OPTION! IF you got in on the ground floor and exited the building on the way up, before the lift hit the doomsday top floor, then and only then would you have tasted the sweetness of success.
Can’t list them all, as the list is endless. Now let’s go over the question again. Is Production the life line of an Oil and Gas Company? Is Production the Key to success? Return on Equity? If you want to be a small Oil and Gas company, then be good at it, otherwise suffer the consequences.
Back to Paloma, get the deal done or SELL IT! Management has a very small window of opportunity and they must be quick in their actions. Why do you think management will not reply to my questioning? The headlights are on, and they’re looking straight back into the lights………..The market is a cruel place.
Good luck
[Same goes for OEX, in spades. IMO there are only a few small windows for investment success with OEX, quite different to and not to be confused with the success of OEX. 1/ after the 31/7 ann, and 2/ any day now, following a positive ann]
OEX Price at posting:
8.1¢ Sentiment: Hold Disclosure: Held
