OPEC+ cuts oil output by 100k bpd on weak oil prices

Natasha Doris
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OPEC+ cuts oil output by 100k bpd on weak oil prices

OPEC+ announced its intention to cut oil output by 100,000 bpd in its meeting on Monday.

The organisation confirmed the reduction, which translates to 0.1% of international demand, for October this year, essentially rolling back its earlier adjustment of 100,000 for September.

“The OPEC and Non-OPEC Ministerial Meeting noted the adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning,” said the cartel in a statement.

“The Meeting noted that higher volatility and increased uncertainties require continuous assessment of market conditions and readiness to make immediate adjustment to production in different forms, if needed, and that OPEC+ has the commitment, the flexibility, and the means within the existing mechanisms of the Declaration of Cooperation to deal with these challenges and provide guidance to the market.”

The minor change still sent oil prices higher, with Brent crude rising 4% to $96 per barrel after the OPEC+ meeting.

Prices have been fluctuating on the back of the Ukraine war and fears of a recession, with continued lockdowns in China fanning production slowdown fears and Chinese city Chengdu going into lockdown last week.

“OPEC+ is wary of protracted price volatility generated by weak macro sentiment, thin liquidity and renewed China lockdowns, as well as uncertainty over a potential U.S.–Iran deal and efforts to create a Russian oil price cap,” said Matthew Holland at Energy Aspects.

The news comes on the heels of Russia’s announcement that it would not supply oil to countries in support of a price cap for the country’s energy supplies due to its invasion of Ukraine.

“An output cut won’t make them any friends at a time when the world is facing a cost-of-living crisis,” said Oanda analyst Craig Erlam.

FTSE 100: Stocks dip as Truss confirmed as PM and Euro hits 20-year low

Natasha Doris
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FTSE 100: Stocks dip as Truss confirmed as PM and Euro hits 20-year low

The energy crisis took a sharp turn over the weekend, after Russian energy giant Gazprom shut down the Nord Stream 1 pipeline after three days of maintenance works.

The company cited oil leaks in the pipeline as its reason for closing the supply line, however European leaders have accused Moscow of using Nord Stream 1 as a weapon in its war against Ukraine, a claim which the administration has denied.

Markets dipped across the board, with the FTSE 100 down 0.5% to 7,243.3 in early afternoon trading on Monday.

“The FTSE 100 started the week lower as Russia’s decision to turn off Europe’s gas hangs over the continent like a grim shadow ahead of winter,” said AJ Bell investment director Russ Mould.

“The US is in the enviable position of having relatively high levels of energy independence which insulate it from Putin’s proxy battle in the energy market as he looks to punish Europe for its support for Ukraine in the current conflict.”

“This step was not entirely unexpected and everyone will be looking for answers to the current crisis, however it seems unlikely investments in new sources of energy will bear much fruit in the short term.”

European markets sank, with the German DAX suffering the hardest blow as the index fell 2.3% to 12,744.6. The French CAC slid 1.5% to 6,070.9 and the Italian FTSE MIB dropped 2.1% to 21,455.5.

The Euro tumbled to a 20-year low, falling to 0.9930 dollars as the energy crisis ravaged Europe.

“Predictably, wholesale gas prices are soaring, raising the prospect of even higher energy bills for businesses and consumers and sending the pound and the euro to new multi-year lows against the dollar,” said Mould.

Liz Truss appointed Prime Minister

Analysts were vindicated after Liz Truss was appointed Prime Minister at lunchtime today, with the former trade secretary set to replace Boris Johnson instead of former chancellor Rishi Sunak.

The entering Prime Minister will have a tough term ahead of her, to say the least, with the war in Ukraine, the energy crisis and the dual hangovers of Covid and Brexit set to bring a challenging year for Johnson’s successor.

“Top of the agenda will have to be some kind of answer to the current energy crisis, with the protracted process of appointing a new leader leaving companies and consumers hanging for weeks after the alarming outlook for energy costs became clear,” said Mould.

The Pound fell against the dollar following the announcement, dropping to 1.14926 at 14:00 on Monday.

Oil companies rise as OPEC+ cuts output targets

Shell and BP shares gained 1.4% to 2,358.5p and 2.1% to 463.3p, respectively, after oil prices rose. The price of benchmark Brent Crude climbed 3.5% to $96 per barrel after OPEC+ announced plans to cut oil output targets by 100,000 bpd.

The organisation is expected to cut output, bringing further strength to the black gold’s prices.

Asian markets sink

Asian markets sank after China announced an extended lockdown in Sichuan Province capital Chengdu, keeping its 21 million population under quarantine. The city commenced a new round of testing, which is scheduled to take place from Monday to Wednesday this week. The Hang Seng slid 1.1% to 19,225.7.

Investment Theme: The Digital Economy

HANetf
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Investment Theme: The Digital Economy

The digital economy is defined as the intersection of technology, digital assets, and finance. Investing in this theme correlates to the opportunity of investing in the Internet in the early 2000s.

The digital economy is defined as the intersection of technology, digital assets, and finance – these are its three pillars. The first, technology solutions: the leading-edge developments in technology that continue to shape how we live, work, and play. The second, digital asset infrastructure: an emerging and growing ecosystem supporting blockchain and cryptocurrencies. The third, financial foundations: the players and platforms that underpin the digital economy, a new generation of financial institutions. 

From an investment perspective, investing in the digital economy is an infrastructure play, not unlike investing in the Internet during the late 1990s and early 2000s. At the time, it was clear the Internet was growing and that it would be transformational, but no one knew how it would evolve and what that transformation would ultimately look like. That same initial uncertainty currently applies to the digital economy, so rather than invest in the uncertainty of its future, invest instead in the certainty of its emergence, its growth, and the fact that it is already re-shaping the future.

Michael Sonnenshein, CEO of Grayscale Investments, an asset manager with a product focused on capturing the digital economy, said “the digital economy represents a fundamental reimagining of the global financial system to a new paradigm that harnesses the speed, convenience and capabilities of modern financial technology. Our own Grayscale Future of Finance UCITS ETF (GFOF) is one product that aims to capture these themes in a single convenient fund, but there are many ways for investors to receive exposure to this global megatrend.”

Examples of companies that fall under the digital economy theme include digital asset miners, hardware providers, exchanges, asset managers, brokerages, payment platforms, and others. Together, these firms are creating greater utility for consumers, reshaping business models, reorganizing competitive dynamics, and redistributing value across industries. Digital assets, as perhaps the most ‘unfamiliar’ group within the three pillars, is disrupting technology and finance in ways that are generating immense social and economic improvements in the realm of payments, privacy, data, and more.

Every investment theme should be considered within the context of the macroeconomic environment, and the reality of today’s rising interest rates combined with inflationary pressures has resulted in global growth coming under pressure. Global equity markets experienced a broad-based downturn that began around the start of 2022 as we continue to face an ongoing battle with COVID, geopolitical conflicts, and supply chain issues. The companies building the digital economy have been affected and suffered in performance as well. However, it’s important to remember that this theme is new, and it is this ‘early’ quality that represents an unique opportunity for investors. In fact, research has shown that the adoption curve of digital assets makes it the fastest rate of technology adoption in human history (vs. TVs, computers, and even the Internet). Investors should consider how companies and projects building this transition to the digital economy could positively impact a diversified, long-term investment portfolio.

Truss triumphant: ‘I will deliver’, says new PM

Natasha Doris
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Truss triumphant: ‘I will deliver’, says new PM

Liz Truss has been announced as the new Prime Minister and leader of the Conservative party.

Truss was elected after weeks of campaigning against former chancellor Rishi Sunak for the position, and was voted in with 81,326 votes against Sunak’s 60,399.

The vote reported an 82.6% turnout from an electorate of 172,437 Conservative party members.

“I know that our beliefs resonate with the British people. Our beliefs in freedom, the ability to control your own life, in low taxes, in personal responsibility. And I know that’s why people voted for us in such number in 2019,” said Truss in a speech.

“As your party leader, I intend to deliver what we promised those voters right across our great country.”

“I will deliver a bold plan to cut taxes and grow our economy. I will deliver on the energy crisis, dealing with peoples’ energy bills, but also dealing with the long-term issues we have on energy supply.”

Truss congratulated Sunak on his campaign and expressed admiration for former Prime Minister Boris Johnson during his tenure in the position.

“Boris, you got Brexit done. You crushed Jeremy Corbyn, you rolled out the vaccine, and you stood up to Vladimir Putin. You were admired from Kyiv to Carlisle.”

Truss promised to deliver on her campaign selling points, including assistance with the energy crisis, as well as the NHS and taxation initiatives.

The new Prime Minister faces a challenging situation, including the war in Ukraine, the raging energy crisis, and the double headache of Covid and Brexit left in the wake of her preceding administrations.

Belvoir lettings and financial services income grows

Andrew Hore
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Belvoir lettings and financial services income grows

Property income has held up relatively well in the first half at franchised lettings and estate agency business Belvoir Group (LON: BLV) and financial services continue to grow.
The removal of incentives for property buyers has reduced activity in the property market, but it is still at similar levels to the past. There was a decline in like-for-like income from property sales. This was offset by like-for-like growth in lettings income as rents increase, plus acquisitions.
Financial services accounts for 50% of revenues, although margins are lower, so the main profit still comes from property....

AIM movers: Oil and gas companies dominate risers

Andrew Hore
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AIM movers: Oil and gas companies dominate risers

Oil and gas explorer Block Energy (LON: BLOE) has commenced drilling on the JSR-01DEEP well in Georgia. The target is an undrained part of the Middle Eocene reservoir. This is the first in a series of wells. This news was enough to make Block Energy the best performer of the day on AIM, with an 18% jump to 1.8p.

Nine of the top ten best performers on AIM today are involved in oil and gas. The shutdown of the Nordstream pipeline has caused concern about gas supply, while the oil price has fallen, and this may lead to a reduction in OPEC production. Potential lifting of restrictions on oil and gas exploration, including fracking, in the UK is behind the rises in Egdon Resources (LON: EDR), up 16.1% to 8.125p, Angus Energy (LON: ANGS), ahead 12.2% to 2.75p, and IGas (LON: IGAS), up 16.9% to 96p.

Interim results from Surface Transforms (LON: SCE) were in line with expectations and the carbon fibre brake discs developer could breakeven in 2022. Interim revenues were 140% ahead at £2.9m. Increased volume expectations for two contracts mean that the 2023 pre-tax profit forecast has been more than doubled to £2.4m and 2024 raised by one-fifth to £6.8m. The contracted order book is worth £190m. Working capital requirements mean that Surface Transforms could fall into net debt in 2023 before an upsurge in cash generation in 2024. The shares rose 5.56% to 47.5p.

Itaconix (LON: ITX) and Croda have renewed their odour control ingredients supply agreement, adding an additional product. The plant-based polymers developer supplies ZINADOR products to Croda, which has secured initial customers for them. The Itaconix share price is 5.15% higher at 5.1p.

Two recent contract wins in the US by 1Spatial (LON: SPA) has boosted the share price of the geospatial data services provider by 5.13% to 41p. A seven-year contract worth $1.2m has been won with the state of Arkansas for 1Spatial’s 911 geospatial service. This is the eighth state that has been gained for this service. The other contract has been awarded by a buying collaboration between 18 states and is worth $400,000 just in Massachusetts. It involves merging data assets into one database. If secured, deals with all 18 states could be worth up to $15m over eight years. Edison believes there is potential upside in its 2022-23 forecast operating profit of £2m.

Clontarf Energy (LON: CLON) is bucking the trend among the AIM oil and gas companies and the shares have dived by nearly one-third to 0.0825p. However, they have not lost all the recent gains even though management says it does not know why the share price rose. Clontarf Energy is assessing its block on the North Western Shelf in Australia, where it has a 10% working interest. In Ghana, there are talks concerning the completion of delayed ratifications of signed petroleum agreements that will enable exploration in Tano Basin. A reason for the recent share price rise may be the move into lithium exploration in Bolivia, where there is an agreement in principle for a joint venture to test brines in medium-sized salt lakes.

Shares in Seed Innovations Ltd (LON: SEED) have fallen 7.46% to 3.1p following last Friday’s portfolio valuation update showing a decline in NAV from £20.5m to £17.8m at the end of August 2022. The main reasons for the fall were the investments in 43.49% owned Leap Gaming, which had been hoping to float, and ASX-listed Little Green Pharma, whose share price has fallen by 37%. Seed Innovations will make a presentation at its AGM, and it will be broadcast via the Investor Meet Company platform.

Technology Minerals receives ABTO status for Tipton Recyclus site

Natasha Doris
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Technology Minerals receives ABTO status for Tipton Recyclus site

Technology Minerals shares gained 4.7% to 2.2p in late morning trading on Monday after its 49%-owned battery recycling group Recyclus received ABTO status from the Environmental Agency for its recycling site in Tipton, West Midlands.

The approval means Technology Minerals has received the green light to immediately kick off manual recycling operations at its lead-acid facility.

The company said Recyclus was authorised to produce up to 15,000 MT per year of lead and store up to 300 MT of inbound stock at any one time on site, under ABTO status.

Technology Minerals confirmed the new authorisation marked the start of phase one for its recycling operations, which will shift to a fully-automated recycling process in phase two later in 2022 after the receipt of the variation licence.

The Recyclus system breaks down and recycles batteries into their constituent parts, to ensure the recovery of acid, lead and plastic materials.

The components are subsequently reused in a variety of industries, such as hard lead used in grids, soft lead used for battery paste and sulphuric acid used for agricultural purposes in fertilisers.

“We are delighted to have our ABTO status confirmed by the Environmental Agency, so we can kick-start recycling operations, close deals in the pipeline, and start generating revenues from this site. Once fully operational, the Tipton plant positions us to become one of the leading accredited battery recyclers internationally.,” said Technology Minerals chairman Robin Brundle.

“The lead-acid battery recycling industry is currently a major polluter, with over 18,000 tonnes of spent batteries incinerated or sent to landfill each year in the UK alone. It is vital that companies look to strip back ‘greenwashing’ and promote homegrown waste management solutions if the UK is to achieve its COP26 net zero targets.”

“Our operations will help to divert waste from landfill, enabling key resources to be kept in use for longer, minimising waste and reducing the environmental impacts of spent batteries. These efforts underscore our commitment to developing a truly circular economy for battery metals that will help propel the green transition and meet the net zero 2050 targets. We look forward to reporting on our progress in the coming weeks and months.”

1Spatial expands US reach with three new contracts

Natasha Doris
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1Spatial expands US reach with three new contracts

1Spatial shares rose 4.4% to 40.7p in late morning trading on Monday following its announcement of several new US opportunities, including a $1.2 million seven-year contract with the state of Arkansas for the firm’s Next Generation 911 (NG911) solution.

Arkansas marks the eighth US state to select the solution, which incorporates 1Spatial’s flagship 1Integrate and 1Data Gateway to ensure compliance with the NENA standard for 911 call processing.

1Spatial said it would receive $700,000 in committed revenue over the first four years, with the following three years under option.

The company currently expects $1.1 million linked to software licence annual recurring revenue, alongside the $1.2 million value of the seven-year agreement.

“Being selected by Arkansas State to deliver its NG911 system is a great competitive win for us,” said 1Spatial CEO Claire Milverton.

“Arkansas is now the eighth State so far to choose our solution, demonstrating the value and uniqueness of our proposition and reinforces our strategy to launch this as a SaaS-based solution to US cities and counties later in the year.”

1Spatial confirmed its technology had also been selected by the Eastern Transportation Coalition as a vendor for conflation solutions in its Traffic Data Marketplace.

The group further noted its first contract through the marketplace for $400,000 with the Massachusetts Department of Transportation.

“We are proud to be using our automated rules-based technology to ensure the safety and efficiency of the ETC states and it is extremely encouraging to have already secured our first contract through the framework with Massachusetts DOT,” said Milverton.

1Spatial confirmed a total potential contract value for conflation within the ETC framework agreement to be up to $15 million across eight years.

“These are fantastic wins for 1Spatial, demonstrating our expanding presence in the US market and offer further validation of the size of this opportunity,” said Milverton.

“We are hugely excited about the further potential prospects in the US that our innovative business applications bring.”

Westminster Group – giving money away

Mark Watson-Mitchell
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Westminster Group – giving money away

How would you like to buy a ‘penny share’ for just 1.6p that could make 1.6p per share in earnings next year?

What is more this company’s brokers are looking for the shares to more than quadruple in price.

Currently capitalised at only £5.2m the Westminster Group (LON:WSG) offers investors big profit potential.

The Banbury-based group is a specialist security and services group that operates worldwide through an extensive international network of agents and offices across the globe, situated in France, Germany, Saudi Arabia, Ghana and Sierra Leone.

Its Business

The group is involved in the design, supply and ongoing support of advanced technology security solutions. Its aim is to keep people safe, secure assets and maximise prosperity in high growth and emerging markets around the world. ​

Its range of products is extensive and covers all forms of personal and site safety, anti-terrorism, risk reduction, defence and homeland security products and systems.

Those products can be delivered to the group’s clients anywhere in the world. 

It takes in a wide range of surveillance, detection, tracking and interception technologies and the provision of long-term managed services contracts.

They include screening and x-ray, detection, fire, vehicle and pedestrian management, surveillance, health and safety, inspection and search, and even explosive ordnance disposal and improvised explosive device disposal.

Ongoing Contracts

The group provides its clients the management and running of complete security services and solutions, for such locations as airports, ports and other such facilities, together with the provision of manpower, consultancy and training services. 

The majority of its customer base, by value, comprises governments and government agencies, non-governmental organisations, critical infrastructure, and blue-chip commercial organisations.

Operating through two main divisions

It operates through two divisions, which include Managed Services and Technology.

Its Managed Services division is focused on long-term recurring revenue managed services contracts. Examples are the management and running of complete security solutions in airports, ports and other such facilities, as well as the provision of manpower, consultancy and training services.

Its Technology division is focused on providing technology led security solutions, offering a range of surveillance, detection, tracking, screening and interception technologies to governments and organisations across the world.

In the year to end December 2021 on a sales per business basis, Managed Services made up 72.1% of the group’s sales, while Technology accounted for 27.9%.

On a sales per region basis, Africa represented 60.9% of the group total, while the UK and Europe made up 30.6%, while the Middle East was just 1.7%.

Impressive customer list

The company has customers in some 50 countries across six continents, including national governments, sports stadia, educational facilities, conference and exhibition centres, shopping malls, financial institutions, the hospitality sector and medical centres.

The group has leading customer names like BP, Mitie Group, the Royal Navy, HM Prison Service, the British High Commission in Ghana, Aberdeen Harbour, Menzies Aviation, AirBridgeCargo, BAT, the UN, Bhutan’s Anti-Corruption Commission, the Northern Ireland Prison Service, the International Atomic Energy Agency – they are just a few of those on the list.

Recent Contract Wins

In the last few weeks, the Group’s Technology Division has been awarded a couple of contracts to provide a Mass Entry Screening solution. 

The most recent was one to a significant theatre and exhibition complex in Northern England as part of its preparation for the UK’s forthcoming ‘Protect Duty’ legislation.

Shortly due to come into force within the UK, it will set out standards to protect patrons and the general public from terrorist attacks when in crowded spaces by putting in place appropriate security measures. 

This could include settings such as sports stadiums; festivals and music venues; hotels; pubs; clubs; bars and casinos; high streets; retail stores; shopping centres and markets; schools and universities; medical centres and hospitals; places of worship; government offices; job centres; transport hubs; parks; beaches; public squares and other places where gatherings of people occur.  

The Home Office estimates that 650,000 UK businesses could be affected.

Westminster’s Mass Screening solutions address this issue, allowing for the screening of large numbers of people entering an event or venue without slowing the natural flow, improving both security and visitor experience.

A Certain Professionalism

The group is a solutions provider not a manufacturer and therefore it is product agnostic. That means that its clients receive products and services that meet their exact needs.

Group CEO, Peter Fowler’ has stated that

“Our vision is to build a global business with strong brand recognition, delivering advanced security solutionsand long-term managed services to high growth and emerging markets around the world, with a particular focus on long-term recurring revenue business enhancing shareholder value.”

Equity Holders

There are some 330m shares in issue. Peter Fowler, CEO, owns 6.601,794 shares, some 2.00% of the equity.

The larger professional shareholders include Henderson Global Investors (4.69%), CRUX Asset Management (3.49%), HSBC Holdings (2.99%), Harwood Capital (2.57%) and SpreadEx (1.67%).

Analyst Opinion – 1.6p per share earnings next year

Colin Smith, at the group’s corporate brokers Arden Partners, has a Buy out on the group’s shares. His Target Price is 7p a share.

For the current year to end December he looks for the group to report doubled sales at £14.3m (£7.1m), while its adjusted pre-tax profit of £1.1m would be a convincing turnaround from the previous year’s loss of £1.9m. 

That would lift earnings to 0.3p per share against the 0.6p loss last year.

But the exciting part comes now!

For the 2023 year, Smith has an estimate of £23.7m sales and a massive £5.3m profit, worth 1.6p in earnings per share.

What is more, Arden Partners are going for a 2023 end-year cash balance of £4.5m, which is close to today’s total market capitalisation, thereby almost throwing its operations in for nothing.

Conclusion – an absolute steal

That profit estimate for next year is equivalent to the Group’s current market capitalisation.

To me it feels like the market is missing this one completely.

It may well have been spooked by previous operating losses but on the back of Arden’s estimates the shares look like an absolute steal at just 1.6p.

Euro hits 20-year low as energy crisis ravages Europe

Natasha Doris
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Euro hits 20-year low as energy crisis ravages Europe

The Euro hit a 20-year low, sinking 0.43% to 0.9911 dollars on Monday as the energy crisis ravaged the European continent.

The plunge followed Russian gas giant Gazprom’s announcement that its three-day suspension of the Nord Stream 1 pipeline would be extended indefinitely, after maintenance works uncovered apparent oil leaks in the vital gas supply route.

The pipeline was scheduled to reopen on 2 September before Russia announced the prolonged shutdown.

The new direction sent European markets into a spiral, with the German DAX plummeting 2.7% to 12,689.4 in morning trading.

European leaders have accused Russia of using the Nord Stream 1 pipeline as a weapon against the continent in its war against Ukraine, a claim which Moscow has denied.

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