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30 Oct | Enter the Dragon Oil Into Our Portfolio

That title’s a little laboured, right? I tried.

Big and cashed up is not a bad place to be in these lawless economic times. Just look at the slashed valuations some of the junior miners are sitting on – especially those that are geared up a little or looking to head back to the market for another injection of filthy lucre. The market is showing absolutely no mercy to the vulnerable.

So with that in mind we tinkered a touch with some settings on our stock screening tool (removing the ceiling from our market cap and adding a cash rich criteria to boot) and we turned up Dragon Oil.

Here’s the spiel from the Dragon Oil website:

Dragon Oil is an independent international oil and gas exploration, development and production company. Their principal producing asset is the Cheleken Contract Area, in the eastern section of the Caspian Sea, offshore Turkmenistan.

Dragon Oil gave every criteria in our updated stock selection process a damn good thrashing. It would have turned up before but on today’s valuation, Dragon Oil comes in with a market cap of roughly £2.8 Billion. We’d previously set a limit of £900 million. It’s got a P/E rolling of a little over 6 and a price to book of 1.61.

And although 2011 and 2012 have been a little range-bound there’s a lot to like about the five year chart below.

 

The month of October has seen two other handy buy signals ticked off by Dragon Oil.

Firstly, we’ve got a CEO – Abdul-Jaleel Al-Khalifa – who has upped his personal stake in Dragon Oil by adding another 3,527 shares at 525.09p a share.

And October has seen the continuation of Dragon’s $200m share buyback program. The programme has allowed as much as 5% of the issued share capital to be purchased. It’s a handy counterweight in times when equity prices are drifting back on little or no news.

On 23rd October Dragon issued a largely upbeat Interim Management Statement in which they mentioned their Q3 2012 output being up by 13% on the same period last year and their cash pile standing at US$1.593 billion which – with a little over 500 million shares in issue – equates to roughly US$3 per share. Not too shabby.

So we decided to have a little financial spread bet action on Dragon Oil, going long at a quid a point (hey big spender, huh!) at 610 pence – which also happened to about the 5 year high and in the region of some recent price resistance. Ho hum! We’ve got a lot of faith in Dragon Oil going forward so a little blip off that bat is not going to deter us.

Thanks again for dropping by.

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Paul
rsvp@investorsoiree.co.uk