Xtract Energy continues moves to more active involvement with its investees

In it first-half results, Xtract Energy (AIM: XTR) said has continued its transformation from being a passive investor to being much more involved in its investee companies. During the six months to end-December 2009, the company’s core investees Extrem Energy and Elko Energy continued to make progress on their respective development projects and since the period-end, Xtract upped its stakes to at least 50% in each company.

"Recent portfolio developments at Extrem and Elko have consolidated the progress of the company towards one with a more active involvement with its underlying assets”, Xtract chief executive Andy Morrison commented. “Whilst technical risks can never be discounted, the company is now positioned and ready for an exciting period of activity. In the success case, this activity could lead to substantial value growth".

During the first half, Xtract made an investment of £2.4m into Extrem which took its shareholding to 34% and covered its share of costs associated with the agreed work programme.

While Xtract has developed an increased focus on its core investments, it consequently took steps to simply its investment structure with the disposal of certain non-core investments. During the first half Xtract sold its interests in fellow resource investor Wasabi Energy (ASX: WAS) and the Timor Sea LNG play MEO Australia (ASX: MEO). Through the disposal of these investments Xtract raised £4.4m.

In December, the company raised £1.2m through a placing of 60m new shares.

The company reported a £2.2m net loss for the period, a substantial improvement from the £10.1m loss in the comparative period of 2008, when the group took a £9.3m impairment charge. After a A period of sustained adverse market conditions and a heightened uncertainty over the outlook for oil prices, Xtract had taken the decision to scale back significantly its projected investment in the development of oil shale technology. 

As at 31 December Xtract had net assets of £13.9m compared to £11.9m at the end of June 2009, and held cash of £7.4m against £3.2m.

The period’s operational highlights were Extrem’s successful Sarikiz-2 production test, as well as seismic and other technical work on Siraseki and Edirne licence areas. Elko Energy had Gaffney Cline and Associates evaluate the chalk interval across its 02/05 licence in Denmark, revealing the potential to hold as much as 375mbbl of recoverable oil and in the Netherlands Elko completed the reprocessing of the block P2 seismic, which showed improved prospectivity.

According to Xtract, it has much to look forward to in 2010, with its increased shareholdings in Extrem and Elko as they company is positioned to could benefit substantially from the success of their endeavours. Extrem’s Sarikiz-3 well has just been completed, which is expected to add to the production potential in the Alasehir field, additionally a well in the Siraseki licence area is planned. There are also exciting exploration prospects in the Edirne and Candarli Bay licence areas, Xtract said.

Xtract said it intends to manage its investments as a portfolio in order to manage its cash position and optimise returns to existing investors, as such it actively monitors the financial position of the company and it is prepared to take the necessary steps to maintain an appropriate balance between a strong growth orientation and the need for an acceptable risk profile.