FOR those of a speculative bent, Sound Oil could be worth a look. An independent oil and gas company, the group participates in two production-sharing contract areas in Java and in Kilimantan in Indonesia.
In October, Sound announced that it was in discussions about the possible acquisition of a private company controlled by Frank Timis, which had oil assets off the coast of west Africa.
However, in December it was confirmed the talks terminated and that Sound Oil "will now consider other opportunities and press on with developing its assets at Bangkanai and Citarum and growing the company in Indonesia".
Sound Oil recently figured in Shares magazine, in an article that pointed out the company had no debt and cash of about 11 million against a market value of 12m.
That said, an exploration group with no revenue-generating assets can rapidly burn up its available liquidity so the risks here must be acknowledged. Exploration drilling is expected to begin at the Citaram Project, offshore Indonesia, this summer in anticipation of which the shares could respond positively.
Of course, oil exploration companies are high risk and any further weakness in the crude price itself might take its toll, while there obviously can be no guarantee that the licences controlled by the company will prove fruitful.
On the other hand, the shares do appear to hold few hostages to fortune against the balance sheet worth and there is always the possibility that takeover talks could be re-started.
Sound Oil is not for the faint hearted but could be worth monitoring for those interested in the riskier end of the natural resources sector.
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.
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