Soco International (SIA) has been characterised as a company with interests in high-quality, yet geologically complex, hydrocarbon deposits, and one that has delivered returns below the cost of capital. Whether or not this is justified, the reality is that its share price has lost 70 per cent of its value since Brent crude collapsed from around $115 (£87) a barrel midway through 2014. Although the driller’s latest half-year figures won’t reverse that overnight, they do suggest it is tailoring its business in the face of the ‘new normal’ in oil prices.
Earnings remain in negative territory, although the net loss was down appreciably on the 2016 comparative. The gross margin has expanded since the year-end from 12.7 per cent to 16.2 per cent, although this reflects lower production volumes and the attendant reduction in depreciation and depletion charges. Lower volumes also meant that production costs in Vietnam increased by 29 per cent, but at $12.99 a barrel they’re still at the lower end of the cost curve. And that’s set against an average realised crude oil price of $53.90 a barrel, representing a $2.13 premium to Brent crude, testimony to the quality of Soco’s output.
Broker Peel Hunt gives an adjusted pre-tax loss of $0.6m for the year-end, with negative EPS of 0.2 cents, moving to a profit of $24.7m and EPS of 7.4¢ in 2018 (from $5.7m and 1.7¢ in 2016).
| SOCO INTERNATIONAL (SIA) | ||||
| ORD PRICE: | 118p | MARKET VALUE: | £392m | |
| TOUCH: | 117.5-118p | 12-MONTH HIGH: | 162p | LOW: 111p |
| DIVIDEND YIELD: | 5.9% | PE RATIO: | na | |
| NET ASSET VALUE: | 250¢* | NET CASH: | $132m | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Jun | ($m) | profit ($m) | share (¢) | per share (p) |
| 2016 | 72.7 | -2.5 | -3.7 | nil |
| 2017 | 74.0 | 5.6 | -2.0 | nil |
| % change | +2 | - | - | - |
| Ex-div: | - | |||
| Payment: | - | |||
| £1=$1.326 *Includes intangible assets of $221m, or 67¢ a share | ||||
