JXK Oil still a play for brave

The Investment Column

Shares in JXK Oil & Gas have gone nowhere since July's flotation. Having soared to a peak of 226p soon after the offer, they have come back to the 190p issue price after yesterday's 1p rise.

The performance probably says more about investors' initial enthusiasm for the oil company - the offer was twice subscribed - than any change in the fundamentals. Apart from news that an exploration well in the Black Sea had been plugged and abandoned, with no news on the results being released, there has been precious little to report.

However, at least as important for an oil explorer searching in the politically unstable south-western corner of the old USSR, there has been no bad news, either. Yesterday's half-time report showed pre-tax losses mounted from pounds 67,000 to pounds 484,000 in the half-year to June. The figures are said to be in line with internal projections, but are in any case largely meaningless as the company has only just started to trade properly.

Around 5,000 barrels of oil and gas are flowing commercially from Poltava, a field around 350 kilometres south-east of Kiev. That should build to 22,000 barrels a day after further development by the end of next year and provide the principal source of cash- flow for JKX.

In the meantime, the money will help finance the re-entry to an old well in Western Georgia, abandoned in April. But most interest will centre on tests of an appraisal well on the Shromis Ubani field to be carried out over the next few weeks. The company believes this field could hold significant reserves. The results will help determine whether Shell takes up an, in effect, 40 per cent stake in certain of the JKX interests in the region, which would help boost sentiment.

Even if Shell does come aboard, and despite the presence on the board of Bob Horton, the former BP chairman and chief executive, the shares remain highly speculative.

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