This oil producer could pump cash16 Nov 2016 15:30
http://www.fool.co.uk/investing/2016/11/16/are-aggreko-plc-soco-international-plc-too-cheap-to-ignore-at-current-levels/
This oil producer could pump cash
Today's statement from Vietnam-focused oil producer Soco International contained the disappointing news that a $52.7m payment due to the firm from a Chinese company will be delayed for "at least 30 days".
Soco says that the company, a subsidiary of the China National Petroleum Company (CNPC), does acknowledge the debt, but has requested technical information about the asset from CNPC. In the meantime, Soco remains well financed, with net cash of $83m and no debt.
Indeed, I believe Soco's ability to generate cash could improve rapidly if the price of oil rises. The group's breaks even on cash flow in the "low $20s" per barrel. This suggests to me that a relatively small increase in the price of oil would be enough to trigger a sharp increase in Soco's free cash flow and operating profit.
Oil from Soco's Vietnamese fields usually sells at a premium over Brent Crude of about $1 per barrel. If the oil price stabilises above $50 in 2017, I'd expect earnings guidance for Soco to be significantly upgraded. It's also worth noting that the group's dividend is expected to rise to about 6.1p per share in 2017, giving a forecast yield of 4.5%.
With Soco shares trading at a discount of about 15% to their tangible book value, I believe this stock remains a medium-term buy.