Why are shares in this ASX tech stock, which operates in the oil and gas space, charging higher?

Shares in Dug Technology Ltd (ASX: DUG) have raced almost 10% higher after the company reported strong quarterly sales figures.

Strong growth figures

The technology company, which provides software and compute as a service (CaaS) products to big players in the oil and gas sector, said in a statement to the ASX that its total revenue for the quarter was up 35% to US$22.4 million for the third quarter, compared with the same period last year.

The company said it had experienced strong year-on-year growth as well as margin expansion.

The company added:

Notably, the Company’s results for the first 9 months of FY26 have already surpassed the full-year results delivered in FY25. This performance continues to underscore the scalability of our business model and the increasing global demand for our MP-FWI Imaging technology.

The company said its services revenue remained the bedrock of the business and was up 16% year on year to US$15.3 million for the quarter, and the outlook was strong.

The company said:

The pipeline continues to build through new and emerging regions as clients, supported by a heightened oil-price environment, look to increase exploration and production activity. The Company continues to win more 4D projects, these are processing projects that are typically repeated every 18 months and allow clients to visualise how they are depleting a producing reservoir.

Dug Managing Director Dr Matthew Lamont said the company’s international expansion strategy “continues to pay off and our growing pipeline positions us well for the future”.

Broker likes the story

Shaw and Partners recently released a research report on Dug, which suggests the company is undervalued, even after today’s share price boost.

The broker said in a recent research note sent to its clients that Dug had sunk nearly $60 million into high-performance computing infrastructure over the past three years, which it could now leverage for outsized gains.

Shaw and Partners added:

New regions and a growing reputation support contract awards continuing to grow. Dug is favourably exposed to a rising oil price environment, has limited direct revenue exposure to the Middle East currently and has materially underperformed its oil and gas service peers … year to date, creating an opportunity for savvy investors.

Shaw said Dug had only recently expanded into the Middle East, with the region accounting for less than 8% of total revenue.

This was despite the Middle East and Latin America accounting for about 22% of global upstream capex in the sector.

Shaw said Dug was also demonstrating an ability to grow its “share of wallet” with existing customers.

Shaw and Partners has a price target of $3 on Dug shares compared with $2.34 on Friday morning, up 9.9%.

The post Why are shares in this ASX tech stock, which operates in the oil and gas space, charging higher? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dug Technology. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.