One to watch: Petroneft Resources

Published on Monday 6 October 2008 21:44

Petroneft Resources 13.75p -0.5p Scotsman says HOLD

PETRONEFT Resources is an Irish oil and gas exploration and development company.

It was set up specifically to develop assets in the prolific Tomsk Oblast in western Siberia, where it owns a 4,991sq km oil and gas licence

A combination of plunging oil prices and mistrust of the Russian authorities has seen any company with an involvement in the Russian natural resources sector suffer sharp share price falls.

Petroneft shares are a far cry from the 60p-plus they were standing at in May last year. Investment is nothing if not a long-term proposition and, on this basis, Petroneft is worth a look.

The recent results, incorporating, unsurprisingly, a loss of $1.3m (740,000), were accompanied by a fairly positive statement about the development of one of the group's existing known oil fields, Lineynoye.

The building of a pipeline from this field is now well advanced and initial production is expected some time over the next few months.

Analysts estimate that Petroneft's proven and possible reserves are about 60 million barrels but this is before taking any account of the group's drilling programme, which many regard as being potentially extremely promising. Nothing, of course, can be guaranteed and if the oil price continues to fall back as the pace of global growth slows, exploration companies such as Petroneft will remain out of favour.

It might be sensible, therefore, to maintain a watching brief on the share price rather than invest now but the shares are interesting for those prepared to accept the risk.

• The value of your investment could fall and you may get back less than you invested.

You should take professional advice if you have any doubt about the suitability of this company for your portfolio.