Dana Petroleum

Earlier this week I bought my first oil stock - Dana Petroleum (DNX.)

What is there not to like about DNX? Sometimes an investing decision seems so easy you almost feel guilty for taking it.

So here is what I liked:

1) Very clear reporting about future growth plans
2) Strategy should result in profits doubling by the end of 2007
3) Trailing PE of only 15!
4) London listed - preferable to me that a US stock in a weakening dollar environment.
5) 2005 results are based on a crude price of $42
6) Reasonable chance of share price transforming discoveries

My only explanation for the low share price is that most brokers refuse to believe that oil is going to stay at current levels. They obviously thing that crude will be back to $30 by the end of 2007 and have modified their forecasts accordingly.

If you believe that oil will stay above $60 in the medium term then DNX is a fantastic buy.

EPS in 2005 was 80p. That was based on 20000 barrels per day at an average price of $42. By the end of 2007 DNX should be producing 40000 boepd. And the average crude price by then? Well if it is $50 then DNX will be fine. And if it is $80? That sounds like quadruple profits to me.

My time is up but DNX looks fantastic.