Just posted this on another site and thought I would share here too....
My thoughts on the share price.... in three words.
Very (Expletive) Cheap.
But you probably want a little more than that. I have to say I think everyone is very frustrated with the performance of the MPO share price. It is important to note that the performance of the share price however isn't a direct reflection of the perfomance of the company itself. I think management are doing an excellent job running the business. They are focussing on really ramping up production on a pretty lucrative short term cash creator in the Canadian Oil. This makes a lot of sense, and will create a lot of value for shareholders. The Canadian Oil is already worth as much as what MPO is currently trading.
So why doesn't the share price reflect that..... simply because the share price is a reflection of everyones two primal emotions in relation to the stock market.... GREED and FEAR. At the moment, sadly we have NEITHER, and just have boredom. Everyone knows that one day it will have to take off towards the broker targets. But there is no momentum at the moment so they are taking their greed (and money) elsewhere. At the same time though, there is no real fear at the current share price levels, so no one is really selling. Thus we are having some very very low volume days.
The reason the greed is missing is because the excitement has long since burnt out in most holders, and been slowly replaced by boredom. The Canadian Oil progress is great, but most of us bought in on the back of the CSG or Quebec gas potential..... which to be honest has moved at a snail's pace. Again I can understand managements reasons for the business decisions they have made, like playing hard ball over the Anglo acquisition. We ended up getting that for what I believe is a bargain. But I think shareholders would have preferred the result was MPO paid $100m instead of $7m, because then it would imply a lot higher value for MPO. Management never really explained very well why MPO got this so cheaply... it was a factor of many things, including Anglo having quite unfavourable gas supply contracts which would need to be honoured by any acquirer. Anyway... fact of the matter is, nothing much has happened with QLD CSG, nothing has happened with South Africa really... the same 10 wells are just flowing the same gas out.... we have a small gas sale there starting next year, but its not really much to write about, and in Quebec we have had no wells drilled even though we have had the acreage for well over 2 and a half years. These are things that shareholders would really like to see, along with something SOLID on the power station or on a LNG supply deal, and something SOLID on a TSX listing / farm-out of Quebec acreage.
In the near term, I think things are turning around though. The Oil reserves were a big positive. I think the oil production by year end will surpass the 2000b/d target, based on the fact that they seem to be gearing up to drill 60 wells instead of 25 before the end of the year. We should have another QLD CSG reserve upgrade after the current core hole exploration program at Timmy and Harcourt. This was long overdue and was because Anglo was formerly operator, and that meant they decided the work program. MPO is in charge now so things should pick up. Finally we should get flow rate results from Mungi 21 and 23 this month I would think, or initial flow rates anyway. It usually takes 2-3 months of de-watering before substantial flow rates occur.
Ok enough with fundamentals... Technically on the chart, I got a buy signal on the 20th August 2010. There were 2 weekly closes above a trend line. I have done a fair bit of backtesting on MPO and this entry works about 80% of the time. Note there are strict rules in how the trend line is drawn... you don't just whack one on anywhere. Won't explain all the rules, but suffice to say I have followed them on the trend line below.
Since that entry signal, we fell back below the trend line briefly last week, and have this week moved back above it again. This is a pretty common occurence. You normally get a rush of buyers when it looks like breaking up, and when there is no immediate follow through (ie instos stop buying or sell some to halt the run because they haven't got their fill yet), it will pull back. This isn't necessarily a bad thing though... you can see the share price has very strong support around 95c to $1. I definitely think this support will hold... watching the market depth lately you can see there have been a few big buy orders put in around this level. It reeks of manipulation for some of the bigger boys to accumulate more.
You can see on the chart that when MPO makes a move, it does so pretty rapidly. So with that in mind I would be getting set for the next run. $2.20 is the 100% price extension target on the chart, and I would expect that we will be getting around those levels sometime between December 2010 and July 2011.
Good luck to all holders!
MPO Price at posting:
$1.05 Sentiment: Buy Disclosure: Held
