New City Energy results for the year to the end of September 2014 show a negative return on net assets of 5.8%. The share price fell by 8.8%, ending the year at a discount of 17.0%. The dividend was increased by 7.4% to 2.04p but was uncovered by earnings.
The manager’s report gives no indication of which stocks in the portfolio contributed to returns. They do justify their investment in largest and fourth largest holdings saying “Vermilion Energy remains the Company’s largest holding not just because of its exposure to European Gas pricing double that of the US, but because of its low cost, low decline diversified production base. Arc Resources is another with a solid balance sheet and a weighting to gas production. Its recent results and expanding inventory in the Montney field of Alberta indicate growing production under most pricing scenarios.”
The Chairman lays the blame for the falling oil price on Saudi Arabia’s shoulders. They have focussed the portfolio on “unconventional producers”, mostly shale plays, and think the extraction costs of these companies are falling. The manager says these companies are “rapidly becoming the low cost producers and will be able to thrive in a rarefied pricing environment that many others will not“.
NCE : New City Energy backing shale producers in oil price war