Companies: RHEP   

Resource exploration services group Rheochem is moving into development projects after increasing pre-tax profits 92 per cent to £1.4 million.

AIM-quoted Rheochem lifted turnover 40 per cent to £7.4 million in the year to June. The company, which provides drilling fluids and related services to the oil and gas and mining exploration sectors, has made progress in Australia, New Zealand and in India, where the company is focusing renewed attention while Nigeria looks more problematic than formerly.

Haydn Gardner, Rheochem's Australian chief executive officer, says the company is taking advantage of 'the highest ever levels of oil and gas drilling activity in our company's history' and increasing its supply capacity. Rheochem, whose year-end cash was 38 per cent down at £2 million, has signalled a new diversification by establishing a subsidiary, Lochard Energy, to participate in oilfield projects 'with near-term development potential'.

Both Rheochem's established and new activities are related to commodity prices and related exploration cycles, though the company argues that project authorisations and cancellations significantly lag moves in raw material prices. Floated three years ago at 16p, Rheochem shares have since then fluctuated between 26.5p in early 2004 and 8.5p a year ago.

Now 14p, their appeal is speculative.