Between now and January 2nd there shall be more than 20 share tips of the year published on ShareProphets – buys and sells. We kick off with one from Gary Newman... Oil has taken a bit of a hammering recently but I can’t really see any reason to completely ignore the sector, so the first of my share picks for 2019 is...
A buy for SOCO International (SIA). This is a company where I do hold some shares myself and I am planning to buy more in the near future – pretty much as soon as oil shows any sign of reversing the current downwards trend. To minimise risk, I’m looking for companies that generate free cash flow and make a net profit, whilst at the same time avoiding those that are drowning in debt, just in case we do see a longer period of weaker oil prices. SOCO fits the bill on both fronts, plus there is plenty of growth potential moving forwards, as over the next few years production is forecast to double following the ongoing acquisition of Merlon Petroleum and its producing El Fayum asset in Egypt, and alongside the existing assets in Vietnam, overall production is likely to hit circa 23,000boepd by 2023 – and that is assuming no further increases in the 7,900boepd currently coming from Vietnam.
El Fayum is low cost at just $6/barrel, and the deal will see SOCO adding 24 million barrels of 2P reserves, with further potential from the 37 million barrels of 2C resources that it has, and which can potentially be converted to reserves further down the line. This deal will cost SOCO $215 million, of which $136 million is in cash, with the rest in shares, and although you could argue that the deal has been agreed when the oil price was high, I can still see value at less than $10 per barrel of 2P reserves. This diversification reduces risk to some extent as the new asset is in a very different area geographically and will be funded from existing cash reserves which stood at $128 million at the end of June, and additionally it has now secured a reserves based lending facility of $125 million, so the balance sheet is strong.
It isn’t one of the more popular AIM shares, but that can quickly change, and given that it pays a dividend – 5.25p per share for 2017, which gives a good yield at the current share price – and had a net asset value of $476 million pre the Merlon acquisition, it is hard to find a reason not to like this one, barring a collapse in oil prices. The shares price is now c71p with a market cap of just £241 million, so I can see plenty of value in this one as a longer term investment.
Filed under: SOCO International, ShareProphets share tips of the year, Tesla, TomWinnifrith.com
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We've put together a panel of top tipsters, including:
Tom Winnifrith, in his 27th year writing about shares, noted fraudbuster & dubbed "The maverick Tipster"
Chris Bailey, City whizz kid turned financial guru, rated as one of the top 50 commentators on shares on twitter, founder of Financial Orbit
Steve Moore, has worked with Tom Winnifrith for all bar 3 weeks of his working life - a noted commentator on value stocks
Malcolm Stacey, The Grandfather of Share Blogging, the founder of ShareCrazy & a best selling autthor of stockmarket books
Lucian Miers, the Bard of the Boleyn, one of the UK's best known short sellers
Gary Newman, writes about value investing on AIM, speciality is in share tips on oil and mining companies
Nigel Somerville, The Deputy Sheriff of AIM, an expert in forensic analysis a skill used to bust frauds but also to tip true value investments
The team from HotStockRockets, specialising in AIM and small cap shares which will fly on a three month view
Remember to book your place at the UK Investor Show 2018. The UK’s top investment show taking place on Saturday 21 April 2018 at the Queen Elizabeth II Conference Centre in Westminster, London. The show will feature a unique line-up of top speakers including Nigel Wray, tech queen Vin Murria, Dave Lenigas, Mark Slater, Tom Winnifrith, Adam Reynolds, Ed, Croft, Nick Leslau Luke Johnson and Dr Johnny Hon as well as 135 exhibiting small cap companies.
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