Strong net cash balances and a well-funded, low-cost production base have enabled Soco International (SOCO) to navigate through the pricing storms that have hit world oil markets, but whether the frontier driller emerges unscathed is another matter.
The driller's market valuation has contracted by two-thirds since the onset of crude's downward trend. And the surest sign of a resource company under the cosh - a nod to an exemplary health and safety record - features prominently in the full-year returns. But despite Soco swinging to a full-year earnings loss, we feel the shares will outperform the wider energy sector as crude markets edge back towards equilibrium.
Unsurprisingly, Soco pared back capital expenditure by 46 per cent in 2015 and will remain in belt-tightening mode through this year. Average production was down 12 per cent on 2014, although at the upper end of guidance. Management expects another pullback this year, although operating expenses remain at the fag-end of the cost curve at $10 (£6.94) a barrel - a rate that would even please the Saudis.
BoA Merrill Lynch anticipates adjusted profit of $66m in 2016, leading to EPS of 8¢, against $2m and negative earnings per share of 10¢ in 2015.
| SOCO INTERNATIONAL (SIA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 157p | MARKET VALUE: | £522m | |
| TOUCH: | 156.5-157.3p | 12-MONTH HIGH: | 201p | LOW: 117p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | na | |
| NET ASSET VALUE: | 269¢* | NET CASH: | $104m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 234 | 159 | 26.4 | nil |
| 2012 | 622 | 446 | 62.7 | nil |
| 2013 | 608 | 333 | 31.7 | nil † |
| 2014 | 448 | 153 | 4.3 | nil † |
| 2015 ** | 215 | 8.2 | -10.3 | 2.0 |
| % change | -52 | -95 | - | - |
Ex-div: 26 May Payment: 17 Jun £1=$1.44 *Includes intangible assets of $212m, or 64¢ a share †40p a share was returned to shareholders via a B/C share scheme in Oct 2013. 22p was returned to shareholders in Oct 2014. A cash return dividend of 10p was paid to shareholders on 19 Jun 2015 **Soco anticipates that the board will at mid-year results propose a special payout to be distributed in the second half of the year | ||||
