Kazakh oil explorer Roxi Petroleum (RXP:AIM) soars 116% to 8.62p on news it has struck oil with the first well aimed at testing the deeper potential on its BNG asset in the west of the Central Asian state.

Investors in the UK oil and gas space have been starved of drilling success in the last couple of years and although this result is unlikely to prove sufficient to revive the entire sector it certainly offers a reminder of the step change potential offered by exploration. The company has drilled a number of shallower wells on BNG, in which it has a 58.41% stake, but the A5 well is the first to test the deeper potential.

ROXI PETROLEUM - Comparison Line Chart (Rebased to first)

Today's announcement reveals it has detected oil and gas shows at a depth of 4,332 metres. Investors have had to wait nearly 12 months for this result as permitting issues and high pressures have held up operations. Critically though because the company had a turn-key contract to drill the well it did not face any cost over-runs from these delays.

It is important to note that significant uncertainties remain as to the size of the find. Once clean-up work is complete, core samples will be taken to determine the quantum of the oil bearing column.

House broker WH Ireland reaffirms its buy recommendation with its reiterated price target of 6.8p obliterated by today's news. It comments: 'We believe today's update is a huge positive for Roxi given: (i) this was the company's first deep well and (ii) there was a great deal of uncertainty given the challenging technical environment (high pressure and temperatures) at these new unchartered depths.'

Issue Date: 09 Jul 2014