Sirius Minerals (LSE: SXX) is my best performing SIPP holding so far, and Premier Oil (LSE: PMO) is my worst a gain of 36% against a loss of 39%.
When I bought Premier Oilin September 2015 at 99p, I indulged in an attempt to time the market (naughty me). Oil prices must be on the brink of a recovery, and surely wed see $70 per barrel within the next year to 18 months? Premiers debts were weighing heavily, but I reckoned the inevitable oil rebound would solve that.
But two years on from my purchase, oil is stuck at around $50. And at interim time in June this year, Premier was still saddled with $2.7bn in debt.
Time, not timing
Conversely, when I plumped for Sirius Minerals (LSE: SXX) at 18.2p in December 2016, I based my decision on the old adage that its time in the market that counts, not timing the market.
Production at the firms polyhalite potash mine in North Yorkshire isnt expected to start until 2021, and we wont see any profits until some time after that. But the mine is expected to have a 100-year life with peak production of around 20m tonnes of polyhalite per year and its the kind of thing that could provide a nice legacy to help my grandchildren (and even their children) with their lives expenses.
And though Im pleased that Im already in profit at todays share price of 25.8p, its actually pretty meaningless at this point. The Sirius share price has been spiking whenever news is released, and then falling back in the quiet periods in between. Ive always said I expect that to continue until a lot closer to production time, and it does actually perhaps give us some leeway in trying to time the market as long as the dips persist, they do give us better buying opportunities.
Sirius is looking sufficiently well funded to reach its production date, and once the potash starts to flow it should be able to pay down debt levels pretty quickly if it achieves its expected cash margins of 70%-85%.
Should I switch?
Theres an old saying that you should run your winners and cut your losses, so should I dump Premier Oil and buy more Sirius Minerals with the proceeds?
I wish Premier Oil looked as safe as Sirius and that its long-term future was so visible, but at least its debt pile is actually reducing. At the halfway stage this year, chief executiveTony Durrant spoke of excellent operational performance, which will drive free cash flow and the reduction of net debt, and the planned sale of Premiers Wytch Farm assets for $200m should chip away at it further.
And I do think Premier is past its point of maximum pessimism now.
The first half showed operational cash flow of $292m, up from $109m in the same period last year, and operational expenditure of $14.70 per barrel of oil equivalent is among the leanest in the business $50 a barrel is looking plenty for Premier to have a good future.
Expectations for a return to profit in 2018 could well be on the mark, and a forecast P/E of just 4.5 is too cheap to ignore. So, while my next chunk of retirement savings might well buy some more Sirius Minerals, I dont think Ill sell Premier Oil after all.
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