Companies: AST    UMN    VGAS   

Bids and rumours of bids continue to keep the markets interested, while oil and gold show scant sustained excitement and base metal champions nickel and copper have shed a little of their latest lustre. Investors have even been wondering how brittle the market darling uranium could prove in certain circumstances.

Namibia-focused UraMin is at a 12-month high of 325p, 79 per cent up on our February recommendation price of 181.5p. This suggests a suitable case for partial profit-taking, while holding some for longer-term prospects.

High stakes for Volga Gas

AIM newcomer Volga Gas argues that Russian pricing changes could help it unlock potentially massive reserves. Backed by private equity group and successful sector player Baring Vostock, Volga raised £58 million at £3 with its AIM float in April and expects in four weeks to start producing modestly from a shallow well on its Karpenskiy licence in European Russia’s Saratov region.

Russia faces an acute shortage of gas as its economy grows and plans to allow regulated domestic prices to rise 25 per cent a year until 2011, thus providing the industry with a strong incentive to develop its resources. With ex-schlumberger and Baring Vostock luminary Mikhail Ivanov as chief executive officer and Baring Vostock founding partner Alistair Stobie as chief financial officer, Volga Gas professes particular excitement about Karpenskiy’s long-term potential, although the company sees the first significant cash flow – around £15 million a year – starting in 2009 from another deposit, Vostochny-Makarovskoye.

Stobie says that proven and probable reserves of 7.2 billion cubic metres have already been established there, with a claimed net present value of £141 million. Volga hopes to increase this to 18.3 billion cubic metres, worth some £383 million.

Developments at Karpenskiy are at an earlier stage, but Stobie argues that prospective resource estimates range from 15.3 billion to 48.8 billion cubic metres. He adds that the company has future off-take deals with a floor price of US$60 (£30.5) per thousand cubic metres for Vostochny-Makarovskoye and $80 for Karpenskiy, and contends that the proximity of these deposits to pipelines and population centres will give them a big price advantage over larger but far-flung rival producers, mostly operating thousands of miles away.

Baring Vostock, also a key early-stage backer of star performer Burren Energy, now holds a diluted 54 per cent of Volga Gas, which, says Stobie, has ample cash for its current programme. At 300p, valuing the company at £155 million, the shares offer significant long-term speculative potential.

Swiss ambitions fire Ascent

The Swiss hills are alive with promising gas projects, according to Jeremy Eng, managing director of AIM-quoted Ascent Resources. The Europe-oriented company has 90 per cent joint ventures there at Hermigan (where another group may farm in) and elsewhere in the Vaud and Bern regions. Eng declares that Ascent could ‘prove in the next 12 months’ that these hold one trillion cubic feet of gas, worth around £1 billion gross.

That would bring cheer to Ascent, which recently suspended operations at one of its wells in Hungary after finding ‘only residual gas’ in a deeper section of the reservoir, only a month after a dry well in Spain. Elsewhere in Hungary, Eng says he sees potential for 400 billion cubic feet of gas overall in Ascent’s prospects, with ‘high production rates’ possible from at least one, PEN-104.

The company, which is deriving modest cash flow from Spain’s Ayoluengo oilfield, is looking for contributing partners for two projects in Italy’s Po valley, which Eng suggests could hold 250 billion cubic feet of gas, worth around £250 million. Recommended by Growth Company Investor two years ago as a ‘flutter’ at 5p, Ascent shares are now 15p, which suggests partial profit-taking might be prudent though long-term potential could be significant.