1st June 2006

By Alfred Donovan

An article published on 22nd May by BrandRepubic.com (printed below) revealed Shell’s plans to appoint a digital agency to turn around the online reputation of Shell.

This represents a very considerable challenge as it is almost impossible to search for any online information relating to Shell without stumbling across websites containing negative content.

For example, if you Google “Royal Dutch Shell Plc”, the number 3 result (out of 867,000) happens to be a Wikipedia article about what is described as a “Domain name oversight”. The “oversight” was actually gross negligence on the part of Shell management which allowed me to obtain registration of the precise dotcom domain name for Royal Dutch Shell Plc (which adorns this website). Shell subsequently attempted to seize the domain name by issuing proceedings against an 88 year old war veteran, me. This act alone generated global adverse publicity for Shell in the news media and online.

OUR WEBSITES

With nearly 9,000 web pages, including news reports about Shell, our own blunt commentary, leaked Shell documents and Shell insider revelations, the two websites I operate with my son, John, represent by far and away the biggest challenge to the restoration of Shell’s reputation on the Internet. Whichever agency has the misfortune to be appointed by Shell, they have our commiserations.

Ironically, we were the founders of a marketing consultancy which had a long term highly successful relationship with Royal Dutch Shell when Shell’s reputation was riding high.
 
Our websites together utilise 15 Shell related domain names. The one which operated under the royaldutchshellplc.com and tellshell.net domain names crashed last week due to the unprecedented drain of available bandwidth. The bandwidth issue first became apparent early in May. A week ago the further sustained drain of bandwidth caused the complete failure of the site. It is still inoperative over a week later.

WEBSITE SABOTAGE?

Our own IT expert suggested that it was possible that an unknown party was deliberately sabotaging the site. It was no more than a passing suggestion. However, on Tuesday, a support representative of the relevant hosting company, 123-Reg.co.uk, independently raised the same possibility without having any knowledge of the suggestion made internally.

There seems to be two possibilities. One is that the problem arises purely from a massive volume of visitors to the site downloading pages and documents. The other possibility is that an unknown party, perhaps having spotted the bandwidth “Achilles heel” earlier in May took steps to deliberately drain bandwidth.

Shell has a *track record of using underhand activity to sabotage the activities of its perceived enemies, so it would not be a first if they are responsible. At the moment this is merely a suspicion, not an allegation.

We know that Shell management is less than enthused about our websites as is evident from the litigation against Dr John Huong and the email threats I have received from Shell International Petroleum General Counsel, Richard Wiseman. Shell has been making threats against us for over a decade, so we are no longer impressed. As previously indicated, we relish the prospect of facing Shell senior management in the libel courts. We have countless boxes stuffed with evidence of management misdeeds.

Over the bank holiday weekend we set up a substitute blog type website and moved the content and domain names to the new site. It has a huge amount of bandwidth capacity. It is faster and has a number of novel features. You are reading this article on the new site. We may merge our websites so that a single search facility will cover the entire universe of web pages – almost 9,000.

In a related matter, Shell is unlikely to welcome the news over the Bank Holiday weekend of a U.S. Appeals Court in California setting precedence by deciding that online journalists, such as yours truly, have the same rights as traditional reporters.  We will as always protect the identity of our confidential insider sources.

It looks like being an interesting battle.

*Titled Shell Transport directors were simultaneously also major shareholders and directors of a private spy firm which Shell admitted using for clandestine activities. The admission came after the activities of a Shell undercover agent were exposed by The Sunday Times. The relevant Shell directors were the ultimate spymasters of the organisation which was founded by former senior British Military Intelligence (MI6) officers with whom we have been in correspondence. 

THE BrandRepubic article

Shell seeks agency for online makeover

By Larissa Bannister
Campaign
22 May 2006

Shell: seeking online agency

LONDON - Shell is searching for a digital agency to handle its online communications and to design its website.

The company is understood to be asking agencies to provide evidence of experience in turning around corporate reputations. This has long been an area of concern for the global energy giant.

The winning agency will also be briefed to help establish an identity for the new company, Royal Dutch Shell, which was formed in July 2005. This came after a merger between Royal Dutch and Shell Transport.

The brief, which was issued by Shell’s web communications division in The Hague, also involves development of content strategy and editorial for the website, as well as online branding.

Shell’s most recent UK corporate ad campaign ran in 2001. JWT created a series of TV ads that highlighted the way the company provides energy while remaining sensitive to cultural and environmental issues.

31 May 2006
By John Donovan

On 16th May I attended the inaugural Royal Dutch Shell Plc AGM located in West London. This was the downgraded (satellite) venue for what are evidently considered to be second class Shell shareholders. I refer to the former shareholders in Shell Transport and Trading Company Plc.

Not a single board member of Royal Dutch Shell Plc was present. Instead we watched the granite faced retiring Royal Dutch Shell Chairman, Aad Jacobs, on a giant video screen during a long-drawn-out AGM with shareholder questions alternating between the two AGM venues – one in Holland and the other in the UK.

The Chairman gave a blunt response when a shareholder in London sensibly suggested that the AGM should itself alternate between London and The Hague. This was immediately ruled out by the arrogant Mr Jacobs on the basis that the permanency of the AGM being held in the Netherlands was a non-negotiable Dutch imposed condition of the unification. It is apparently not an issue open to debate by mere shareholders – the parties who actually own the company.

Although it is true that Shell Transport was always a junior (40%) partner in the Royal Dutch Shell Group, it was in fact a major multinational company in its own right. Shareholders in that business are now reduced to being nothing more than minority shareholders in what is in effect a foreign run business with an overseas HQ; a plc which is registered in the UK for tax purposes.

The AGM was a shambles. It dragged on for several tedious hours until a considerable proportion of shareholders had abandoned their hand held electronic voting devices (in my case after five hours) and moved into the buffet area. The discarded voting devices were left on seats with the validation cards still inserted, thus allowing anyone remaining in nearby seats to have extra votes.

The reason for the marathon sleep invoking AGM was that most of the shareholders asking questions had reams of paper with long lists of questions, many of them boring and similar to questions already raised. Those who self-evidently most liked hearing the sound of their own voices naturally had the longest lists. If I recollect correctly, in the days of Sir John Jennings, questions were rationed to one per shareholder.

Shell directors obviously cannot win on this issue because they will be criticised for limiting the number of questions per shareholder, or for allowing an unrestricted number of questions per shareholder (which disrupted proceedings including the voting). There must surely be a reasonable balance between these extremes.

To the best of my knowledge none of the media reports on the AGM commented on the repeated questions put to Shell CEO, Jeroen van der Veer, on why he insists on local management dealing with contentious issues autonomously.  Mr van der Veer said that he had once been the manager of a Shell refinery and he would have been angry if someone had gone over his head to bring an issue to the attention of senior management. This line of defence allowed Mr van der Veer to evade requests for his intervention in relation to Shell problem hotspots around the globe e.g. the Corrib pipeline project in Ireland.  He and his fellow executive directors can now be left to concentrate on “strategy” and enjoying perks, such as the fleet of luxury executive jets, without being concerned with less important issues, such as the possible extinction of grey whales. 

I have been informed by someone who knows Mr van der Veer that he is a highly intelligent, decent man. To me, he came across during the AGM as a calculating, cold-blooded and dogmatic individual totally lacking charisma and, like the chairman, possessed of the arrogance which appears to afflict most Shell executives.  Perhaps because he was speaking English in a dull monotone, what he had to say had more than a hint of automation about it. Overall, Mr van der Veer does not inspire confidence. This is my personal view. All comments are welcome.

By Zaidi Isham Ismail
xydee@nstp.com.my

May 31 2006

OIL and gas service provider Saag Consolidated (M) Bhd has clinched a US$50 million contract from Russia’s Sakhalin Energy Investment Co Ltd.

Under the contract, Saag will be part of an exploration team assisting Sakhalin Energy, with the aim of stepping up crude oil production.

Sakhalin Energy is a Royal Dutch Shell plc-led consortium, of which the Anglo-Dutch oil giant takes up a 50 per cent interest in the Western Siberian oil field off Japan.

Russia is the world’s fifth largest oil producer.

Saag executive director Anand Subramaniam said the contract took effect May 18 2006 and will last for the next 24 to 30 months.

“We have already sent 35 people there and the project will be undertaken by our 51 per cent subsidiary Australia-based Proteus Global Solutions Pty Ltd,” Anand told Business Times.

The second board-listed Saag posted a net profit of RM3.1 million in its first quarter ended March 31 2006, from RM206,000 in the same period a year ago.

Revenue was RM47.4 million, up 41 per cent from RM33.6 million previously.

RBC, 30.05.2006, St. Petersburg 19:14:02.Gazprom plans to complete asset swap talks with Shell within the terms of the Sakhalin-2 project by July 1, 2006, Gazpromexport’s (Gazprom’s fully owned subsidiary) Deputy General Director Sergei Yemelyanov said in St. Petersburg today.

As reported earlier, Gazprom and Royal Dutch/Shell signed a memorandum of understanding to swap assets within the terms of Zapolyarnoye-Neocomian field and Sakhalin-2 projects, according to which Gazprom would secure a 25-percent stake plus 1 share in the Sakhalin-2 project, and Shell would get a 50-percent stake in the Zapolyarnoye-Neocomian project.

By Emma Amaize
Posted to the Web: Wednesday, May 31, 2006 
 
Warri —  A militant group, the Iduwuni Volunteer Force (IVF) in Bayelsa State, has threatened to shut down all flow stations/oil wells in their area belonging to  Shell Petroleum Development Company (SPDC) if no tenable explanation is offered by the company for its non-challant attitude to the people.

The militant group has been embroiled in a running battle in the past few weeks with Shell over a statement that about N800 million was expended by the Anglo-Dutch oil firm in the execution of development projects in some oil producing communities in Iduwini kingdom.

However, the Bayelsa State government has waded into the dispute. At a recent  meeting with the SPDC, the government  volunteered  to send people to the field to verify the claim of both the militants and the company and complete any project in the  Memorandum of Understanding (MoU) that is found not to be on ground. According to a top official of the state government, “the SPDC would pay for the differential.”

In a letter with reference number, IDU/VOL/FRC/008/2006, dated May 29 to President Olusegun Obasanjo calling for a probe of the N800m projects claim, the self-styled commander of the group, Johnson Biboye said: “Be  also informed that the I.V.F. has concluded plans to shut down all flow stations/oil wells within our communities if no tenable explanation is urgently given for the non-challant attitude of SPDC towards our people.”

External Relations Manager (Western Division) of the SPDC, Mr. Harriman Oyofo, in his reaction yesterday told Vanguard on phone that the projects the company claimed to have executed were verifiable, asking why some people were bent on making a mountain out of a mole hill.

He claimed that the militants introduced fresh items to the MoU, pointing out that the company signed agreement with only nine Iduwuni communities and do not know the new ones that the group was introducing.

The price of crude oil resumed its volatile trading Tuesday, jumping 66 cents a barrel to close at more than $72 on the New York Mercantile Exchange, driven in part by fresh evidence of China’s thirst for oil. Here is today’s news roundup on oil and energy.

* * *
STILL THIRSTY FOR OIL: China’s oil consumption rose 10.8% in April from a year ago, the biggest such gain since 2004, the state-run Xinhua news agency reported. Beijing recently lifted the cap on fuel prices in China, encouraging refiners to buy more oil to make more fuel, feeding the surge in demand. Strong oil consumption in China, the world’s No. 2 oil consumer after the U.S., has helped keep global energy prices high.

NO NEW NATIONALIZATION: Ecuador’s Energy Minister Ivan Rodriguez said his government doesn’t plan to nationalize its oil industry, just days after it canceled contracts with Occidental Petroleum, raising fears it would follow the lead of Venezuela and other resource-rich nations in taking control of its oil assets. The pledge came on the occasion of a visit from Venezuelan President Hugo Chavez, a leader in the global movement to nationalize natural resources.

•Israeli IPO: Israel plans to sell more than 50% of state-owned Oil Refineries Haifa on the Tel Aviv Stock Exchange by November or December, Israeli business daily Globes reports on its Web site.

•Irish Conservation Pact: Ten of Ireland’s biggest companies agreed to save energy and adopt renewable fuels, Ireland Online reports.

•L.A. Oil Spill: An oil spill from an overturned tractor trailer closed the eastbound 60 Freeway in downtown Riverside, Calif., for much of the day, including part of the evening rush hour, the L.A. Times reports.

•As the Turbine Blade Turns: The California Energy Commission will spend $380,000 to study whether grazing sheep can be deployed to help keep eagles, hawks and other predatory birds from being killed by wind turbines, the San Jose Mercury News reports. Apparently, high grass near California turbines invites ground squirrels, which attract the raptors, who get caught in the turbine blades.

* * *

· Staffing is biggest issue for industry, says union
· Firms already offering £10,000 signing-on fees

Terry Macalister
Wednesday May 31, 2006
The Guardian

A skills shortage threatens to derail Britain’s nuclear decommissioning and new building programme, the industry’s biggest trade union has warned.

Prospect, the engineering, science and management union, said the poaching of staff is already endemic among engineering and other companies ahead of a £50bn-plus dismantling bonanza and the final go-ahead for a second generation of nuclear power stations.

The Nuclear Industries Inspectorate, which regulates safety at UK plants, has admitted that it is already finding it difficult to recruit and believes this is a common problem across this energy sector.

“The skills issue is the biggest problem facing the industry. It is top of our list to be sorted out,” said Mike Graham, national secretary of Prospect. “There is a lack of trained staff from craft jobs right up to postgraduates because people have not been training nuclear engineers.”

A long period of public antagonism and lack of government interest in new nuclear plants had encouraged many to leave an industry which appeared to have an uncertain future. But Tony Blair’s decision to hand over to private firms the dismantling of plants that have reached the end of their lives has raised the profile of the atomic sector.

The decommissioning work comes at a time when the prime minister has also signalled an intention to give a green light to a new generation of atomic plants. Up to now the bulk of jobs in the nuclear industry have been within two main operating companies: the state-owned British Nuclear Fuels (BNFL), which controls Sellafield, in Cumbria, and the privatised atomic generator British Energy. But now major electricity suppliers such as E.ON and RWE are considering building and operating nuclear facilities, while engineering firms such as Amec have established specialist nuclear units.

The British problems are being compounded by the fact that already around 30 new atomic plants are under construction in 11 other countries, with dozens more planned around the world, from China to Russia and the US.

In addition there is a more general shortage of unskilled labour due to the large number of big projects under way in Britain, such as Heathrow Terminal 5 and the Channel Tunnel Rail Link. Some of these should be completed before any construction work begins on new atomic plants, but there will be preparations for the 2012 Olympic games. There are also numerous other public sector schemes courtesy of the government’s school, hospital and prison building programme under the Private Finance Initiative. The oil and gas industry is already struggling against similar skills shortages. Shell recently said it was postponing projects because of shortages of people and equipment.

Manouchehr Takin, of the Centre for Global Energy Studies, said: “Industry is always cyclical and a lot of people left the oil industry after the downturn of 1998-99. There is always a limited amount of capacity around, whether it’s for semi-submersible pumps in the offshore industry or the more advanced kind of technology you need for nuclear.”

Top engineering firms such as aero engine maker Rolls-Royce have been forced to move research and development abroad because of Britain’s diminishing skills base. John Rose, the Rolls-Royce chief executive, said recently that the number of electronics and electrical engineering students had dropped by 30% in two years.

The Nuclear Industries Inspectorate has admitted it would like 180 inspectors but has only 165. “It is no secret that we have had problems recruiting the right kind of people,” said a spokesman. “There is an issue right across the industry and various initiatives are ongoing to ensure we can find staff.”

The Nuclear Industry Association, which represents 120 of the leading companies, dismisses worries about future shortages but admits there could be “potential pinch-points” in reactor design, safety and licensing. “The current experienced personnel will be approaching retirement age over the next five to ten years,” it warns, but says there is still time to put training schemes in place.

The association stands by its recent study which found that “companies in the UK nuclear industry have the capability to provide over 80% of the scope of new nuclear power station projects.” The study assumed a programme of ten reactors to be built at five sites over 15 to 20 years. This would generate 64,000 man-years of work, and it claims there is plenty of slack in the system to cope.

“The requirement for civil engineering resources to build a new nuclear power station would represent only a small proportion, around 2% to 3%, of the national capability,” it says. “Any new nuclear build would occur predominantly after construction for the 2012 Olympics.”

Meanwhile, Prospect members are benefiting from the upsurge in interest in nuclear power and demand for those who understand the complexities of decommissioning, says Mr Graham. “Longstanding employees are being offered up to £10,000 as signing-on fees by new employers, who are often guaranteeing to preserve pension entitlements and provide other inducements.”

Explainer: building new reactors

A project to build five new twin-reactor nuclear plants over 20 years would create thousands of new jobs, the atomic industry claims.

The chances are that these new power stations would be located on existing sites, which tend to be in outlying areas of Cumbria, Suffolk or Scotland, where well-paid jobs are often hard to come by. While the public at large has reservations due to considerations about the safety of nuclear power, local people are often enthusiastic because of the jobs created by the existing power stations.

The Nuclear Industry Association (NIA) believes that over the two decades that it would take to build new plants, about 64,000 man-years of work would be created. Some 250 jobs would be created in project management and technical support; 2,400 more from construction and site-installation jobs, with a further thousand in manufacturing. The NIA, which has a clear interest in playing up the scale of these job opportunities, also claims that operating 10 new facilities would bring another 3,000 jobs to oversee operations over their 60-year life cycle.

Some of these jobs would just replace ones that are being lost as the lifespan of the existing nuclear power stations comes to an end. By 2023 only Sizewell B is expected to be still operating.

Terry Macalister

Special report
The nuclear industry

Useful links
British Energy
Department of Trade and Industry
British Nuclear Fuels Ltd
Campaign for Nuclear Disarmament
Greenpeace
HSE nuclear glossary
Come Clean WMD awareness programme
UK atomic energy authority
National Radiological Protection Board
Friends of the Earth
World Nuclear Association
World Nuclear Transport Institute

Business Wire: Deep Well’s Valuation is Set in the Oil Sands Game after Shell’s/BlackRock Takeover Bid; Deep Well’s Reserves Value is Estimated, in Comparison at $16.60 Per Share, Says Investrend Affiliate SISM Research Analyst Ernest C. Schlotter

May 30, 2006
 
(Investrend Research Syndicate) Ernest C. Schlotter, a senior analyst with Investrend affiliate SISM Research and a Starmine four star analyst, has placed an estimated reserve value of $13.20 to $16.60 per share on Deep Well Oil & Gas (OTC: DWOG) reserves.

According to SISM’s Research Note at http://www.investrendresearch.com:

Alberta oil sands are heating up with a focus on the Peace River Oil Sands, the least commercially developed of Alberta’s oil sands areas. BlackRock’s friendly takeover by Shell is the newest push of the supermajors into Canada’s booming oil sands and unconventional oil production. A new valuation is set in the oil sands game, as Shell will pay US$15.50/barrel for BlackRock’s proved reserves and US$2.20/barrel for estimated reserves.

“Compared to Shell’s BlackRock takeover bid of $2.20/barrel for estimated reserves, Deep Well is massively undervalued as the company currently trades at only $0.21/barrel for estimated reserves. Deep Well’s reserves today could be valued at US$1.75 per barrel, which would be $13.20 per share, as its project is less developed than BlackRock’s,” said Schlotter. “In addition, it is expected that the SEC will soon rule whether Alberta’s oil sands can be included in company reserves for reporting purposes. A positive ruling, which is expected, will open the door to one of the largest-scale competitions for energy resources ever seen as big oil companies rush to enter the oil sands business. Both of the above factors make DWOG a prime acquisition target, sometime that would be very lucrative for shareholders.”

Deep Well pays SISM Research $1,750 per month over a two-year period solely to ensure independent coverage.

SISM Research, based in Zurich, Switzerland, is a private investment research firm offering high-quality, independent, fundamental research on public companies since 1995. SISM writes, publishes and distributes research coverage, in both English and German, on micro- to small-cap public companies trading on the OTC Bulletin Board, NASDAQ and AMEX.

This coverage is geared toward institutional and individual investors in both North America and in German-speaking Europe, a market that represents more than 100 million people. SISM is a content provider to Thomson Financials OneAnalytics/FirstCall and Investext, to Reuters Multex, and Investrend.

Both SISM and Investrend subscribe to the “Standards of Practice for Research Providers” at http://www.firstresearchconsortium.com. Complete information is available at the company’s InvestorPower page at http://www.investrend.com/company/list.asp?sPathParam=yes. Investors are advised to read disclosures carefully before trading in the equities of any enrolled company.

The company’s research is enrolled for investor monitoring by the Shareholders Research Alliance, Inc. (http://www.shareholdersresearch.com).

Anyone interested in receiving alerts regarding Deep Well research should email contact@investrend.com with “DWOG” in the subject line.Deep Well Oil & Gas Investor Relations 1-888-OILSAND (1-888-645-7263) or Investrend Research Div. Investrend Communications, Inc. R. Hempel, 718-896-5060 contact@investrend.com www.investrendresearch.com
 

By Thomas Catan
Published: May 30 2006 19:15 | Last updated: May 30 2006 19:15

With energy prices at record highs, oil and gas companies are hardly begging for money these days.
ExxonMobil has posted the largest annual profit in corporate history; BP, Royal Dutch Shell and other “supermajors” are struggling to find ways to use their huge infusions of cash.

Collectively, the largest oil companies have returned well over $120bn to shareholders through share buybacks and dividends over the past two years. ExxonMobil alone is returning $2bn to shareholders every month.

Even so, oil companies continue to sit on record levels of profit. ExxonMobil’s cash mountain has reached almost $32bn, behind only Microsoft and Berkshire Hathaway. It is likely to overtake Microsoft this year to become the wealthiest non-financial company in the world.

“In essence, anybody with significant amounts of [oil and gas] production can probably fund their business without recourse to the equity markets,” says Richard Slape, an analyst at Seymour Pierce, the investment bank.

“On the whole, their problem is not knowing what to do with all the money, rather than where to get some more from.”

Most oil companies are able to fund even multi-billion dollar projects from their own balance sheets, with little need to raise more capital. But there are exceptions.

One is liquefied natural gas. LNG developments require vast amounts of capital and often have half-a-dozen equity holders.

“A lot of LNG projects tend to be financed because you have a number of joint venture partners, some weak, some strong,” says Uwa Igiehon, managing director of energy finance at RBC Capital Markets.

In particular, projects that have a state-controlled national oil company as a partner may wish to turn to project financing.

“Mostly, the oil companies are funding their own projects,” explains an official at one of the supermajors. “But if you get involved with a state company that is resource-rich but cash-poor, that’s where things like project financing can come in. They can help partners to get the money.”

Bankers also claim that the due diligence and scrutiny they bring to projects has other benefits. Financed projects, such as BG’s in Egypt, have mostly been completed on schedule and within budget. By contrast, many self-financed projects like Statoil’s Snohvit have been plagued by delays and cost overruns.

Companies may also wish to secure outside financing for a project if it threatens to be controversial.

For its $20bn Sakhalin-2 project in an environmentally-sensitive area off the east coast of Russia, Royal Dutch Shell has sought financing from the European Bank for Reconstruction and Development (EBRD), among others.

The reason: Shell wants the imprimatur of a public sector lender on the project, which protest groups say will threaten the western grey whale and despoil Sakhalin’s pristine environment.

BP’s Baku-Tbilisi-Ceyhan (BTC) pipeline, running from the Caspian Sea to the Mediterranean, was also built with support from a range of public sector lenders, including the World Bank’s International Finance Corporation and the EBRD. Export credit agencies from the UK, Germany, France, Italy, the US and Japan also backed the project, which was the target of environmental activists.

Turning to such public institutions can hugely complicate the process of financing a project, and gives opponents new and visible targets to put pressure on. But many oil companies feel that the public process can give them future cover from any allegations that they did not live up to international standards.

Record energy prices have obviated the need for even the mid-cap oil producers to tap the equity markets for extra funds.

Companies such as Cairn, Burren, Tullow, Premier or Venture, have now grown large enough to access a variety of funding options, says a banker who has worked on several recent deals.

“If they’ve got booked reserves and production, then they can get bank lending facilities secured on reserves. They can look at the convertible market, high yield bond market, or they can look at equity,” he says.

Soco International, for example, raised $250m in an unusual convertible bond issue this month.

It is the very smallest exploration companies, often with no production or booked reserves, that have been the most active in the equity markets.

In particular, there has been a boom in initial public offerings of oil minnows on the Alternative Investment Market (Aim), London’s junior share market.

The oil sector has been the star performer on Aim over the past couple of years, driving valuations of often speculative stocks to very high levels.

But some analysts say the boom in IPOs could be coming to an end.

“Some of it has been highly speculative to say the least,” says Mr Slape.

“As a group, they’ve massively underperformed the more mainstream companies. Investors are starting to wake up to that and perhaps now starting to be a bit more discerning.”

Last year, oil companies listing on Aim raised nearly £500m. In the first quarter of this year, there have been four IPOs raising just £20m between them, according to Seymour Pierce.

“I think it’s becoming a bit tougher for them to raise money,” Mr Slape says.

By Ellen Kelleher in London
Published: May 31 2006 03:00 | Last updated: May 31 2006 03:00

There are two types of companies in which Luke Newman, manager of F&C’s £50.5m Special Situations fund, likes to invest: those that are undergoing some sort of change and those with share prices that imply little to no growth.
 
Mr Newman’s thesis is that value tends to be found when companies are either in a position of recovery or a turnround. The fund is quite focused as there are just 30 to 50 stocks in the portfolio.It has a bias toward mid- to small-cap stocks.

The sorts of changes, which make a stock worthy of investment, can come in a few forms. A company can have new management or it can be benefiting from changes within its industry. Car dealerships in the UK, for example, began to represent a buying opportunity about three years ago when the government began to allow them to consolidate their operations.

Another example of a “turnround” project was an investment Mr Newman made in Morgan Crucible, the engineering group. He helped to refinance the company and the portfolio was boosted after the company deleveraged its balance sheet, disposed of its loss-making assets and re-established and developed its businesses.

Young industries like online gaming tend to demonstrate considerable potential for unrecognised growth. “I’m trying to find companies that could remain at growth levels ahead of their competitors,” says Mr Newman. “Online gaming continues to look like very very good value to me because there are so many regulatory hurdles to be crossed in the US. The longer the status quo remains, the better the value.”

But mature industries like tobacco can also prove worthy for investors. “The rationale for consolidation within the tobacco industry looks very profitable and rational to me,” he says.

Mr Newman is also keen on pumping money into unfashionable areas of the market. “I like to invest in companies that have a contrarian feel to them,” he says. He is bullish on consumer stocks in the UK as a play on all the speculation that interest rates will have a big impact on consumer spending levels within the country.

The pub sector also presents opportunities as the net asset values of several regional brewers have not been evaluated for years. In many cases, share prices are trading at sizeable discounts to the true net asset value of the company. Further, he believes consolidation may take place.

Mr Newman has continued to build up a strong position in the aerospace sector as he sees strong growth in the number of passengers and the ordering of new planes by both traditional and low-cost airlines.

He is also looking to increase the fund’s exposure to oil equipment companies as he thinks they will see rising profits as oil groups such as BP and Shell send business their way.

The fund opened in December last year. Since its launch, it has returned7.48 per cent compared with a 4.1 per cent return by the UK all companies index, according to data from Standard & Poor’s. Top holdings include stakes in Royal Dutch Shell, Rolls Royce and Cairn Energy.

Ellen Kelleher