Valuations for oil companies have been in a tailspin ever since the Saudis decided to play hardball with US shale producers midway through 2014. Soco International (SIA) didn't escape the carnage, with the Vietnam-focused producer shedding around two-thirds of its market value since.
Yet here is a company producing commercial volumes of high-grade crude at around $10 a barrel (£7.50) with a break-even level of $20-$25. It produces solid cash flows, has a fully funded exploration programme for 2016 and doesn't owe anyone a penny. Soco has also returned $440m to shareholders over the last 10 years through dividends, capital returns and share buybacks.
Still, there's only so much you can do once the rug has been pulled out from under you. Soco had to make do with an average realised oil price of $40.89 a barrel during the period, representing a 31 per cent decline, which meant that gross profit came in at $4.1m, from $35.3m a year earlier. The driller has been tailoring its spending commitments, reducing capital expenditure to $27.2m from $61.9m in the comparable period, with a focus on "projects that add positive near-term value".
Analysts at Jefferies anticipate gross profit of $16.7m for the year to December, giving rise to a loss of 3.1¢ per share, rising to $62.5m and earnings of 6.8¢ in 2017.
SOCO INTERNATIONAL (SIA) | ||||
---|---|---|---|---|
ORD PRICE: | 151.3p | MARKET VALUE: | £502m | |
TOUCH: | 151.3p-151.8p | 12-MONTH HIGH: | 200p | LOW: 115p |
DIVIDEND YIELD: | 1.3% | PE RATIO: | na | |
NET ASSET VALUE: | 262¢* | NET CASH: | $70m |
Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
---|---|---|---|---|
2015 | 117 | 32.7 | 1.8 | nil |
2016 | 72.7 | -2.5 | -3.7 | nil |
% change | -38 | - | - | - |
£1=$1.31 *Includes intangible assets of $215m, or 65¢ a share |