Shares in PetroNeft Resources, a mid-sized Russian oil producer, have almost doubled since we advised buying them last October. The company has held production forecasts steady, cut drilling costs and seen many similar-sized rivals collapse or succumb to takeover.
PetroNeft's main asset is the right to develop the Lineyoye and West Lineyoye oil fields in the Tomsk region of Western Siberia, which covers an area equivalent to 25 North Sea blocks. The company has “years of drilling there” but five years of preparation are about to start producing a lot of oil. The company’s Russian contractor has completed drilling two wells down to a 2,500 metre pay zone (just five metres apart at surface but 500 metres apart on target) and is working on a third well. In September PetroNeft expected drilling a hole to take 30 days but the average to date is just 20. So that’s good news on costs and the company seems to be sticking with its October 2009 forecast of producing 4,000 barrels of oil a day (bopd) by end-2010 and 12,000 bopd in 2012.
Funding has come via a $27m placing last September and debt facilities. This year’s capital spending may be $35m.
PETRONEFT RESOURCES (PTR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 30.75p | MARKET VALUE: | £ 107m | |
| TOUCH: | 30-31.5p | 12-MONTH HIGH: | 35.25p | LOW: 12.75p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 18¢ | NET CASH: | $15.7m | |
| Year to 31 Dec | Revenue ($000) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2005 | – | -0.26 | -0.29 | nil |
| 2006 | – | -0.50 | -0.49 | nil |
| 2007 | – | -2.95 | -1.74 | nil |
| 2008 | – | -7.71 | -3.81 | nil |
| 2009 | 510 | -6.15 | -2.53 | nil |
Aim: Oil and gas exploration and production. £1 = US$1.4367 | ||||
