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AWE Limited (AWE) downgraded its production guidance for FY10 to 6.2 million barrels of oil equivalent, citing a further extension of the BassGas maintenance shutdown and work-over project in addition to some production decline in the onshore Perth Basin. The company’s previous guidance was 6.5 million boe.

AWE made the announcement in its December quarterly report, which revealed a 22% drop in production compared to the previous month and a 31% reduction on a year earlier to 1.46 million boe.

The company said revenue of $81 million for the quarter, down 26% on the previous quarter and 42% below the prior corresponding period.

AWE said Bass Basin, New Zealand, East Java in Indonesia and Yemen would all be focal points for exploration over the next 6 to 12 months.

The company said its balance sheet remains strong with cash reserves of $296 million.

“When combined with the recent refinancing, this provides flexibility and certainty of funding, particularly if global financial markets deteriorate again,” AWE said.

”It will support any development activities resulting from success in AWE exploration campaign, as well as underpinning the pursuit of other growth opportunities.”

As at 1334 AEDT, AWE shares were down 13c to $3.63.

The Aussie market had lost 1.6% by noon Friday after a weak lead from global markets, with many heading for their worst month since the end of the bear market. The major sell-off in resource and energy stocks continued on a morning of broad-based losses.  

At midday, the All Ords was down 75.2 to 4,622.5, while the ASX/200 fell 75.2 to 4,598.1. About 1.7 billion shares worth around $3.7 billion had changed hands.

CBA shed $1.32, or 2.4% to $53.78 to be the major drag among the big four banks.

Westpac lost 46c, or 1.9% to $24.12, while ANZ and NAB were 1.3% and 0.6% below the gain line.

The Banks and Financials sector lost 1.3%.

Macquarie Group slid 56c to $50.46 as Charter Hall confirmed it was in discussions with the investment bank regrading the acquisition of parts of its real estate funds management platform.

Charter Hall shares rose 1c to 66.5c to be one of the few stocks within the Property Trusts sector in the black. 

Goodman Group and Mirvac fell 2.5% and 2.3% to 59.5c and $1.465. 

The sector weakened 0.9%.

BHP Billiton and Rio Tinto took a combined 17 points off the broader indices to be trading at $39.75 and $68.80 respectively. The Materials and Resources sector fell 2.7%.

This morning, BHP said it would invest $2.15 billion into growing its Western Australia iron ore business, representing the start of the company’s Rapid Growth Project 6 project, aimed at increasing BHP’s iron ore capacity to 240 million tonnes by 2013. The company also announced it had reached an agreement to buy Canadian potash miner, Athabasca Potash Inc. for $357 million.

Metals prices dropped overnight on the LME, including a 4.6% fall in the price of copper.

Fortescue fell 4.1% to $4.45, while steelmakers Bluescope and Onesteel shed 2.2% and 3.7% to $2.63 and $3.10.

Newcrest dipped 31c to $31.82 as UBS cuts its target price on the nation’s largest gold producer.

The price of the precious metal reached its lowest level in almost three months in early trade last night before recovering most of the fall.  Lihir lost 8c to $2.81.

Chemicals companies Orica and Incitec Pivot had lost most of the ground made yesterday to be trading at $24.10 and $3.37 respectively.

The Energy sector was led 2.1% lower by consistent falls among the major and even sharper declines from coal stocks.

Woodside shed $1.14, or 2.6% to $42.54, while Oil Search fell 13c, or 2.4% to $5.23.

AWE lost 13c, or 4.7% to $2.63 after downgrading it FY10 production forecast as a result of an extended project shutdown.

Whitehaven continued its slide after UBS downgraded its rating on the coalminer’s shares to ‘neutral’ due to recent share price appreciation, while also upgrading its target price. Whitehaven shares were down 23c, or 4.9% to $4.47.

Coal stocks Centennial, Riversdale and Aquila were between 4.2% and 5.5% in the red.

Oilfield engineering firm WorleyParsons was relatively flat at $23.53 after securing, alongside JV partner Transfield Services, a $700 million contract to supply brownfield project and maintenance services to Woodside.

Transfield shed 7c to $3.61 as the Industrials sector weakened 1.6%.

Asciano and CSR fell 4% and 2.9% to $1.68 and $1.825.

Yesterday, it was revealed the airline industry experienced its largest drop in passenger traffic since the end of World War II in 2009. However, expectations are for a recovery in 2010.

Virgin and Qantas slid 0.9% and 0.7%, while Air New Zealand rallied 7% to $1.00.

The Consumer Staples sector weakened 0.5%. Wesfarmers shed 1.1% to $27.95.

Woolworths edged 5c lower to $26.14 after announcing yesterday it would introduce permanent price reductions on 3500 packaged grocery products.

Beverage makers Coca-Cola Amatil and Foster’s gained 7c and 5c to $11.00 and $5.37, with latter announcing the appointment of John Pollaers to the role of managing director, Carlton and United Breweries.

Retailers and media stocks led the Consumer Discretionary sector 1% lower.

Harvey Norman and JB Hi-Fi fell 3.4% and 3.6% to $3.70 and $20.24, while Ten Network dropped 4.8% to $1.495.

Gamer Crown gained 9c to $7.75.

A 6c fall to $3.36 saw the Telecommunications sector 2.2% lower.

Around the region, the Nikkei 225 lost 189.2 to 10,225.1, while the Straits Times Index shed 21.1 to 2,736.6. Meanwhile, the NZSE50 fell 27.8 to 3,155.8.

Spot gold was trading at US$1,082.90 per ounce, and the Aussie was buying US$0.8908.  

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CHC in talks to buy MQG real estate platform
Charter Hall Group confirmed that it was in discussions with Macquarie Group regrading the acquisition of parts the latter’s real estate funds management platform. The announcement was in response to recent media speculation.

At noon, Macquarie Group shares were down 58c to $50.44, Charter Hall Group securities added 1.5c to 67c and Macquarie Office Trust securities added 1c to 30.5c.

ESG expects increase in production rates
Eastern Star Gas expects gas production rates to increase significantly after dewatering of, and gas production from, a tri-lateral pilot was temporarily suspended during January. The suspension was owing to access road restrictions preventing mechanical adjustments to handle rapidly climbing gas production, the company said.

Half way through the day, Eastern Star Gas shares were down 1.5c to 80c.

Macarthur updates market on transactions
Macarthur Coal has updated the market on its bid for Gloucester Coal and other conditional acquisitions of assets from Noble Group. The company said it expects to hold a shareholder meeting in relation to transactions in mid April 2010.

At lunchtime, Gloucester Coal shares were down 12c to $8.40, while Macarthur Coal shares dropped 70c, or 6.8% to $9.56.

ERA FY profit jumps 23%
Energy Resources of Australia reported NPAT for year ended 31 December 2009 was $272.6 million, up 23% on the previous year. The company said revenue from both sales of uranium and continuing operations were up 55% in the same period to $767.8 million and $780.6 million respectively. 

As at 1016 AEDT, ERA shares were down 10c to $20.78.

AIA completes insto offer
Auckland International Airport completed the institutional entitlement offer component of its 1 for 16 fully underwritten entitlement offer.  The offer was announced on 27 January 2010, and is expected to raise a total of approximately NZ$126.4 million ($99.4 million).

Auckland International Airport shares remain halted at $1.465.

PRG downgrades guidance
Programmed Maintenance Services downgraded its FY10 EBITA forecast from $63 million to a range of $57 million to $60 million citing lower than expected discretionary or expansionary works being committed by customers in painting operations across Australia, New Zealand and UK. In addition the company said the Maritime Union of Australia is pursuing a wage claim that is not “acceptable” to its business or any clients.

At midday, Programmed Maintenance shares were trading down 39c to $3.27.

Transfield, Worley JV secures $700m contract
Transfield Services and oilfield engineering firm WorleyParsons said their 50/50 joint venture Transfield Worley Services had secured a $700 million contract to supply brownfield project and maintenance services to Woodside Petroleum Limited’s (WPL) onshore LNG facilities in Western Australia.

Half way through the day, WorleyParsons shares were down 8c to $23.41 and Transfield Services shares were down 7c to $3.61.

BHP buys Canadian potash miner for $357m
BHP Billiton said it had reached an agreement to buy Canadian potash miner, Athabasca Potash Inc (“API”). The Aussie miner said it would acquire all the shares of the company for C$8.35 per share (A$8.75), for a total consideration of C$341 million (A$357 million).

By noon, BHP Billiton shares were down 98c to $39.72.

BHP invests $2.15bn into WA iron ore
In another announcement Friday morning by the big Australian, BHP Billiton said it would invest $2.15 billion into growing its Western Australia iron ore business. The money represents the start for the company’s Rapid Growth Project 6 (RGP6) project, aimed at increasing BHP’s iron ore capacity to 240 million tonnes by 2013.

Charter Hall Group (CHC) confirmed that it was in discussions with Macquarie Group Limited (MQG) regrading the acquisition of parts of the latter’s real estate funds management platform. The announcement was in response to recent media speculation.

Both companies stressed that the potential acquisition was incomplete and that there was no certainty that any transaction would proceed.

Macquarie Office Trust (MOF) noted the announcement made today by Macquarie and Charter Hall and said it could potentially include the manager of Macquarie Office Trust.

At 1115 AEDT, Macquarie Group shares were down 64c to $50.38, Charter Hall Group securities added 2.5c to 68c and Macquarie Office Trust securities added 0.5c to 30c.

Eastern Star Gas Limited (ESG) expects gas production rates to increase significantly after dewatering of, and gas production from, a tri-lateral pilot was temporarily suspended during January. The suspension was owing to access road restrictions preventing mechanical adjustments to handle rapidly climbing gas production, the company said.

The company said about one month after commencement of dewatering of the Bibblewindi West tri-lateral production pilot, gas production from the pilot exceeded two million standard cubic feet per day from the Namoi coal seam within the Maules Creek Formation.

ESG said the outstanding gas production was achieved while water production from the pilot exceeded 3,500 barrels per day and with in excess of 550 metres of water pressure still on the coal.

The company said it is undertaking a programme of work with the objective of progressively increasing 2P coal seam gas reserves of the Narrabri Coal Seam Gas Project to support major new gas market initiatives.

As at 1101 AEDT, Eastern Star Gas shares were down 0.5c to 81c.

Macarthur Coal Limited (MCC) has updated the market on its bid for Gloucester Coal Limited (GCL) and other conditional acquisitions of assets from Noble Group. The company said it expects to hold a shareholder meeting in relation to transactions in mid April 2010.

On 22 December 2009, Macarthur announced its intention to acquire 100% of Gloucester via an off-market takeover by an all-scrip offer with cash alternative.

At the same time as the Gloucester takeover announcement, Macarthur also announced that it had entered into a conditional binding term sheet to acquire Noble’s interest in the Middlemount JV, taking Macarthur’s ownership to 100% including all marketing rights for product.

The company had also said that that it was continuing discussions with Noble to acquire a majority stake in Donaldson Coal Holdings.

Together, the Noble transactions are for a total consideration of $175 million in cash and 22.5 million Macarthur shares issued at a price of $9.70 per share.

Today, the company advised that it has now entered into definitive legal documentation with Noble, which gives effect to the terms agreed in the binding term sheet announced on 22 December 2009.

In addition, certain aspects of the binding term sheet have been amended. The amendments include a reduction in the future royalty payable to Noble.

The Middlemount transaction will remain conditional, amongst other things, upon FIRB approval, the Gloucester offer becoming unconditional and Noble accepting the Gloucester Offer.

In relation to the Gloucester offer, Macarthur said it is intended that its bidders statement will be despatched to Gloucester shareholders in early March 2010, as it has received relief from ASIC to allow it to despatch its Bidder’s Statement no later than 5 March 2010.

At 1047 AEDT, Gloucester Coal shares were down 10c to $8.42, while Macarthur Coal shares dropped 41c, or 4% to $9.85.

There is really only one outcome from such a flat price action that Seven (SEV) is displaying and that is an explosion in volatility and price so let’s examine the odds of which way that will direct the price.

SEV has endured a classic period of deflated expectations brought about by the overblown response to the big recovery in its fortunes by the share price (2003 – 2007) which is quite a normal excess however this has now corrected and alas exacerbated by the bear and has thus brought SEV’s share price back from $15.00 to $5.00 – a hearty correction! Now as the market recovers SEV has so far been left behind in a strengthening market and recovering Media sector.

However I don’t buy just on that basis but it does set good foundation and heightened odds that any move from here is more likely to be up than down and this is again supported by the stock market cycles of trend, distribution, trend, and accumulation, and the fact the market trends higher over time. A sound basis for beginning my simple process of assessment of a down trodden stock (read opportunity!) and approaching SEV from the long side should we be given the right price action that supports this repetitive historical behaviour.

So now let’s look at the price since I last reviewed it on the 19/12/2009 in Stockradar’s Weekly Sector Update on the Media sector. The same holds true now as it did then as the stock is still within the trading range boundaries and all I’ve really changed on the chart since then is to add a couple of self explanatory text annotations to underline my point. There is a unique simplicity about using charts and price analysis in reducing the myriads of complex fundamentals, and SEV isn’t getting any easier, and the points of significance on the chart are remarkably simple and easily identified.

A Gann or Elliot Waver may have an opinion on when a break will occur but I’m not overly concerned about knowing when I just want to play when it does and for sure the price will tell me when the time is right to have a go.

The SEV share price is simply being strangled by the trading range boundaries of $5.00 to $7.00 with $5.00 being a high odds low point for reasons mentioned above. As to the explosion well that is likely once the upper band of this constraining trading range is violated to the upside. Down I simply don’t care as a long only trader. SEV goes on watch primarily because the odds are escalating of a break because SEV is now trading in the upper echelons of this trading range and the period in the latter part of last year saw the volume (demand) expanding holding the price up a level from support at $5.00 to support at $6.00 – constructive and positive.

This doesn’t mean it’s going to break but it is solid evidence of demand as the potential trade looks more interesting and I know then there is a very high odds chance that should the stubborn selling be taken out at $7.00 then the buyers can easily swamp the sellers and in their absence or retreat and run the price higher. A common price affliction! I look for volume expansion to validate a break with level up around $9.00 a likely target for a market imbalance of buyers and sellers to take the price too initially. This is arrived at by focusing on the most recent overhead selling level and by extrapolating up the height of the trading range ($7.00-$5.00=$2.00) from the potential break point at $7.00.

A breakout sees SEV escape free from a long term accumulation pattern and when this happens after a downtrend the next phase is to trend higher and as the SEV business seems to be running hot and Stokes who always keeps us guessing is behind its fortunes then it seems too good an opportunity to ignore as the stars align and the odds skyrocket to just where I want them, firmly in my corner. Until $7.00 breaks then……………..   “As a weekly long only equity trader my foremost rule is to protect and preserve and this WILL happen if I follow the rules and that’s why I don’t fear losses.”
– Richard Lie

Energy Resources of Australia Limited (ERA) reported NPAT for year ended 31 December 2009 was $272.6 million, up 23% on the previous year. The company said revenue from both sales of uranium and continuing operations were up 55% in the same period to $767.8 million and $780.6 million respectively.

Uranium oxide sales for the year were 5,497 tonnes, the third highest on record.

ERA said revenues from the sale of uranium oxide increased mostly due to an increase in the average realised sales price.

The company reported a slight weakening production for 2009 of 5,240 tonnes, down from 5,412t in 2007 and 5,339t in 2008.

”In 2009 underlying earnings of $272.6 million were the same as net profit after tax,” ERA said.

”In 2008, underlying earnings were $119 million, with net profit benefiting from an insurance settlement related to events in 2006 and 2007 partially offset by exchange losses on US dollar debt.”  

The company’s directors also declared a final dividend for the year of 25c per share, fully franked.

Looking to the year ahead ERA expects production, sales and average realised sales price to remain broadly similar to 2009, however the company added that production and sales would be significantly weighted towards the second half as an effect of mine sequencing, lower grades and scheduled maintenance in the processing plant in the first half.

“Higher expenditure on scheduled cyclical maintenance on the mining fleet, along with the expenditure on ERA’s development projects, will adversely impact earnings over the year,” the company said.

As at 1016 AEDT, ERA shares were up 4c to $20.92.

Auckland International Airport Limited (AIA) completed the institutional entitlement offer component of its 1 for 16 fully underwritten entitlement offer.  The offer was announced on 27 January 2010, and is expected to raise a total of approximately NZ$126.4 million ($99.4 million).

AIA said the proceeds of the offer would be used to repay a portion of the debt drawn down to pay for the purchase of a 24.55% stake in Cairns and Mackay Airports.

The institutional component raised gross proceeds of around NZ$54.6 million.

The company said it received overwhelming support from existing institutional shareholders, with over 99% of eligible institutional shareholders electing to take up their entitlements.

Auckland Airport’s chairman, Tony Frankham, said the success of the institutional component of the offer demonstrated strong support for the company.

The shares taken up under the Institutional Entitlement Offer are expected to be issued on 4 February 2010, and commence trading on the NZSX on 4 February 2010 and on the ASX on 5 February 2010.

The retail component of the offer will open on Tuesday, 2 February 2010 and will close on Thursday, 18 February 2010.

Eligible retail shareholders will be able to subscribe for 1 new share for every 16 Auckland Airport shares held on the record date 1 February 2010.

Auckland International Airport shares remain halted at $1.465.

Programmed Maintenance Services Limited (PRG) downgraded its FY10 EBITA forecast from $63 million to a range of $57 million to $60 million citing lower than expected discretionary or expansionary works being committed by customers in painting operations across Australia, New Zealand and UK. In addition the company said the Maritime Union of Australia is pursuing a wage claim that is not “acceptable” to its business or any clients.

”We, along with other operators, have endured with the support of all our clients a number of industrial stoppages to date,” Programmed Maintenance said.

”Despite our best efforts, the dispute remains unresolved and more stoppages are likely in the coming weeks.”

The company said some clients have now decided to defer work planned to commence in January until the industrial dispute is resolved to mitigate the significant costs the industry is bearing as a result of this dispute.

“The rising legal costs of this dispute along with the revenue fall from the deferral of works is now forecast to cause a material fall in Marine earnings in the second half, with the full year Marine FY10 EBITA result now expected to be similar to the prior year, due to a stronger first half result,” Programmed Maintenance added.

The company expects full year revenue from its painting operations to be down an average 10% across all three countries, while the sub zero temperatures and snow conditions being experienced in the UK have resulted in additional difficulties for its UK operations during December and January.

Programmed Maintenance forecast FY10 NPAT to be in the range of $26m to $29m compared with a reported $28m last year.

At the close of trade Thursday, Programmed Maintenance shares were trading at $3.66.

Transfield Services Limited (TSE) and oilfield engineering firm WorleyParsons Limited (WOR) said their 50/50 joint venture Transfield Worley Services had secured a $700 million contract to supply brownfield project and maintenance services to Woodside Petroleum Limited’s (WPL) onshore LNG facilities in Western Australia.

The joint venture said the contract would be made up of two components. Firstly a four-year deal, worth $600 million, to deliver brownfield project services to Woodside’s offshore and onshore facilities, including King Bay Supply Base and the Angel platform.

The second component would be worth around $100 million over two years, is for maintenance and shutdown services to Woodside’s onshore Karratha gas plant and offshore facilities.

The two components have four and two year options to extend respectively.

The joint venture also affirmed its work on LNG projects in Qatar and the Philippines.

At the close of business Thursday, WorleyParsons shares were $23.49 and Transfield Services shares were $3.68.