Shares in micro cap Greka Engineering & Technology (GEL:AIM) more than doubled this morning on news it secured a contract extension with China United Coalbed Methane Corporation (CUCBM).

The deal was already hinted at in a 9 April full year results statement when Greka said it successfully completed the construction of nine power lines linking state-backed CUCBM gas assets to its power grid.

‘This initial valve group is to serve as a pilot to CMC on the benefits of connecting its remaining fourteen valve groups into our infrastructure,’ chairman Randeep Grewal said in April.

GDG - Comparison Line Chart (Actual Values)

Greka will deliver the new contract by the end of this calendar year, indicating revenues and associated profits will be booked in the same period. It will connect 56 CUCBM wells to its power grid and provide power to them.

Revenue gained 41% in the 12 months to 31 December 2014 to $5.2 million (£3.3 million). Gross margin increased from 9.5% to 22% but its operating loss was slightly higher than the year earlier at $2 million because of higher administrative expenses.

Readers of Shares may be familiar with Greka, a company we previously highlighted in a story on spin-offs (The City's Best Kept Secret, 7 May 2015)

Greka is one of two businesses demerged in recent years from coalbed methane exploration and production concern Green Dragon Gas (GDG).

The other is Greka Drilling (GDL:AIM). Neither have been a success so far, judging by their share price performance.

Greka Engineering’s main customer remains its former parent company, Green Dragon, and it shares the same executive chairman, Randeep Grewal.

Grewal owns 65% of the company’s shares and it has a free float of 17.1% in total. Gewal has a controlling stake in all three businesses.

Issue Date: 13 Aug 2015