Nigel Thomas, manager of AXA Framlington UK Select Opportunities Fund (GB0003501581), explains why he likes Indus Gas (INDI), which is listed on London's Alternative Investment Market (Aim).
"Indus Gas is a fast-growing gas production company in Western Rajasthan, in which we have an investment," says Mr Thomas. "West of Jaisalmer towards the Pakistan border, Indus has 5.4 trillion cubic feet in gross invested resource, and 33.5 thousand cubic feet a day in production and significant opportunities to increase reserves, pricing and production over the next three to five years. The Thar Desert gas field is north-west of Cairn India's massive Mangala oilfield, which is currently producing 175,000 barrels of oil a day.
One of the significant opportunities for Indus Gas is fracking for gas conventionally and in shale. Its subsidiary, Focus Oil, has purchased 18 fracking pumps from SPM Weir. These are set to be used in work over wells to increase production and in new wells horizontally. Indus pipes the gas 90 kilometres through a GAIL (Gas Association of India Ltd) Pipeline to an electricity plant near Ramgarh."
AXA Framlington UK Select Opportunities Fund's overall exposure to oil and gas is 11.6 per cent.
Investors Chronicle rates Indus a hold. In our most recent update in December, we reported that while Indus has plenty of potential the company's growing debt burden could hit sentiment in the near term, leaving significant further share price upside looking unlikely. At time of writing, the share price was 1,130p but today it is around 900p a share.
The net debt pile had risen around 50 per cent year on year in the half year to the end of September 2012 and the $475m (£295m) cost of servicing those loans accounted for 60 per cent of operating cash flow during the period.
Read the full report on Indus Gas
Read our tip on AXA Framlington UK Select Opportunities Fund
