Smaller Companies: Gas find tales may be castles in Eire

DUBLIN'S stock market loves rumours about big oil discoveries off Ireland. Family homes in the Emerald Isle are known to have been staked - and lost - on the back of such talk.

One tale doing the rounds last week was that a significant gas find had been made in the Celtic Sea off Cork.

Although there has been no official confirmation, the rumours prompted heavy trading in the shares of three small Irish exploration companies - Bula, Gaelic and Oliver Group.

Market-makers say that share volumes in all three have been unusually high. Oliver was particularly active, 5 million shares changing hands on Friday alone.

The week's turnover is estimated at about 30 million shares, an exceptional amount even for penny stocks like these three.

The word is that an important gas discovery has been made in exploration block 48/19 in which Bula, as operator of the site, owns a 50 per cent stake. Oliver owns another 29 per cent while Gaelic has most of the rest.

All the details of last week's story sound plausible. The Celtic Sea is known to contain commercial quantities of gas. Indeed, block 48/19 is beside two producing fields, Kinsale Head and Ballycotton, which are linked to a pipeline.

Bula has been drilling at the site since last month and the rig Ocean Liberator was expected to complete drilling within a month. Weather conditions in the area have been favourable, so the drilling results should be out soon.

But, while the story has a ring of credibility, investors should be cautious. One reason is that, despite heavy trading, the trio's share prices have not seen any unusual sharp spikes. Oliver's and Bula's shares have doubled to 5p and 4p respectively since the beginning of the month, but traders say such volatility is normal for such stocks.

Keen followers of Irish exploration companies also say that no gas flares have been sighted in the area, a sign that would suggest a promising discovery. The English have their train-spotters, but across the Irish Sea looking out for bright flames from rigs is not uncommon. And the fans tell me they have not seen any flares.

If you missed the stock market party last week, don't worry. There are plenty of share bargains still available.

When the stampede begins, it usually starts with blue chips and smaller companies get left behind. Take Kingston Oil & Gas, valued at just pounds 5m. While big oil companies' shares were surging ahead due to a stronger dollar, Kingston's were stuck at 42p.

The company owns significant producing gas reserves in Ohio as well as Britain's biggest engine oil recycling business, Orcol. The UK arm alone is worth close to Kingston's market value.

Group pre-tax profits are expected to fall from pounds 1.1m to pounds 800,000 this year, but net assets are more than 60p a share. It is also debt-free. Several 'green' investment funds are shareholders. Good value for the long term.