Why OILEX LTD. (UK) Soared Today

oil rigAlthough we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares in Oilex (LSE: OEX) lifted by more than 10% in early trade this morning, following the announcement that the oil and gas exploration and production company has successfully completed plug milling operations at its Cambay-77H well in the Indian state of Gujarat.

So what: Gas was observed near the surface during milling operations, with the well exhibiting “strong flowback and clean-up characteristics”. These are very positive results according to managing director Ron Miller, who went on to say:

“Oilex is looking forward to commencing of the production testing after sufficient frac fluids have been recovered from the well. Further analysis of the fracture stimulation programme and production data will be needed to quantify the reservoir deliverability.  

“It has been a long journey back from Cambay-76H and Oilex looks forward to a bright future, focused on value for its shareholders and methodical in its delivery.”

As Mr Miller comments, the next step for Oilex is to see how the well responds before it can consider production testing. But the signs seem positive, as logs from Cambay-77H compare favourably to the company’s Cambay-73 vertical well — originally drilled in 2008, a gas-sales agreement was subsequently signed for off-spec gas, leading to cash flow from the sale of gas.

Now what: Oilex doesn’t pay a dividend, but at 7p trades at a significant discount to its high of 32.45p in 2007, a year after it became a publicly listed company.

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Sam Robson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.