Xtract Energy

Watching the weather keenly is Xtract Energy (XTR), as it awaits US oil major Chevron's drill rig to arrive on the P2-10 gas prospect in the Netherlands.

P2-10 is one of two wells the AIM-quoted company sold to Chevron last year for £3.28m and an overriding royalty of up to 5% on gas that will be priced on the Dutch system, tied to oil and more than twice its UK equivalent.

Bulls believe these Dutch prospects could prove highly significant once the gas starts to flow, perhaps as early as 2014. Chief executive Peter Moir is even more enthusiastic about Xtract's oil interests in offshore Denmark, where the company, originally a spin-off from the entrepreneurial Cambrian Mining, has a 33% stake in the Luna well in what he describes as an 'under-explored' area that could become a new oil province.

Norwegian operator Noreco has 47% of Luna, where drilling is expected to start early next year. Estimates put Xtract's potential Luna share anywhere between 35 and 153m barrels and that could be dwarfed by its other interests there, Lead 'A' and Chalk Channel. Longer term and more speculative, but potentially much larger is the company's stake in the Julia Creek oil shale project in Queensland, Australia, where potential resources are put at between 240m and 1.9bn barrels, notwithstanding possible environmentalist oposition.

Moir argues Xtract's present programme needs no new funding, especially with the potential Dutch royalties in prospect, though clearly a major discovery could change the picture. The market has been sceptical and the shares are down from a year's high of 4.53p to 1.85p today.

That seems overdone and the shares, though clearly carrying risk, could well reward a medium-term punt.