Investment: Dana seems to have struck oil

OVER THE past year oil exploration has been the worst performing sector in the market by some distance falling by 40 per cent as the price of oil has declined.

Dana Petroleum has fared even worse than most, partly because of the economic collapse in Russia where Dana began its operations, and partly because clients of MMI, the company's troubled Irish broker, have been selling out.

Yesterday the group reported another loss, this time pounds 308,000 in the six months to the end of June. But the future has never been brighter according to Dana's chief executive Tom Cross. This time he could be right.

Current revenues from the North Sea and Russia quintupled over the past year, fixed-price gas accounts for 40 per cent of current cashflow, the company has just bought National Power's oil and gas assets for pounds 1m, and two new oil and gas discoveries have been made in the North Sea.

For the future Dana has a 90 per cent stake in promising offshore areas in West Africa, and as adviser to the Faroes Oil and Gas company it should be well placed to win licences in Faroe waters when they are offered next year.

Analysts have slashed forecasts progressively as oil prices fell but they are still expecting a maiden profit of pounds 2.5m this year, rising to pounds 8m in 1999.

The shares were down 0.5p to 9.25p yesterday but, barring a global melt- down, they are starting to look attractive on a multiple of just nine times next year's earnings.