Unlike some, Soco is generating cash and paying dividends — the 5.25p per share for 2017 was ahead of forecasts and provides a yield of 5.4% on the current 98p share price.

The firm did record a big loss of $157.3m, including a $152.3m write-off of exploration and evaluation (E&E) assets, although excluding those E&E assets gives an underlying loss of $5m. That’s not a big loss, but it’s close to the restated $6.4m loss from last year and it comes after a year of rising oil prices.

What do I like?

But the company stressed its “strong and robust balance sheet, zero debt, solid cash flow, and low cash operating costs.” Operating expenditure, while up slightly on last year, amounted to $13.73 per barrel and it ended the year with cash and equivalents of $137.7m. 

Based on my colleague Roland Head’s evaluation of Soco’s asset value, the shares look to be trading at a discount to NAV of around 26% and I find that tempting. But what’s likely to out the hidden value that I see in Soco?

The abandonment of the firm’s mooted merger with Kuwait Energy was, I think, a disappointment, as it could have produced a combined entity with nicely diversified assets. Something along those lines could still happen as Soco said it “continues to pursue growth opportunities of scale, which meet our investment criteria.”

No profit

Frontera Resources (LSE: FRR) is more typical of a startup oil explorer, still in its cash-burn phase and with no forecast profits on the horizon. But with the oil price having recovered strongly over the past 12 months and now pushing at $70 per barrel, we’re arguably in much better times for such enterprises. And exploration progress has been going well.

At Frontera’s T-45 well at the Taribani Complex in Georgia, drilling has uncovered 98.9m of combined pay interval in three targeted zones, with an additional 14.9m combined pay interval at a fourth zone. The firm “observed a number of oil and gas shows during drilling operation.” Wireline and pressure pumping companies are now set to move in.

In the last week, drilling operations have commenced at the next well in the complex, Dino-2, with a depth of 2,700m expected to be reached during April — aimed at three of the same targets as T-45.

Well stimulation

The latest update from the company on Thursday announced that pressure pumping equipment, intended for well stimulation operations at T-45, will start its journey from Romania in the next few days.

Fundraising in February raised $4m through two equity issues and Frontera appears fully funded for exploration at its three main targets. 

With no revenue or profits, it’s hard to put a valuation on the shares. But if a well-funded oily with promising assets is what floats your boat, Frontera looks like a good candidate — especially if you expect, as I do, oil prices will recover further in 2018.

The post Why I’d buy this 5% yielder alongside Frontera Resources Corp today appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But is the latest mini-recovery too little, too late, to save Gulf Keystone Petroleum (LSE: GKP)? I fear so. There’s cash finally trickling in from the Kurdistan Regional Government, but at $12m net to Gulf per month it’s small. The outstanding arrears ($298.4m at 30 September 2015) have yet to be tackled. Payments should switch to a variable basis dependent on the price of oil, so will that help Gulf meet its debt obligations?

The company faces repayments of $250m in April 2017 and $325m in October 2017, so even if all arrears are paid by then, we’d still need a bigger rise in the oil price to make that possible — or alternative funding, which the company is working all-out to try to achieve.

But when I look at Gulf Keystone I’m reminded of Afren, whose only hope was a restructuring that would have led to creditors taking almost the entire company — and even that fell through. With Gulf’s shares down 86% over 12 months, to 5.6p, and down 99% from their 2012 peak, I can’t see there being much, if anything, left for existing shareholders when the debt crunch hits.

Better shape?

Xcite Energy (LSE: XEL) seems to be in better shape, but it too has debt repayments to make. Xcite’s shares have picked up a bit since their January low, to 16p, for a less-bad performance than Gulf — down just 64% since last May and only 96% since 2011’s high.

Xcite has some exciting prospects in its North Sea Bentley oil field, where it managed to get lifecycle costs down to around $30 a barrel. That means every dollar added to the price of a barrel provides a geared-up incentive for potential partners in the Bentley field.

But a problem, in addition to finding the funding to develop Bentley, is a tranche of bond payments that the company needs to make in June — although Xcite says it’s in discussions to “develop financial flexibility” ahead of that date. Will the financing happen in time? I think it’s likely, and any further oil price rises will surely strengthen Xcite’s position.

Risky explorer?

Thirdly, there’s smaller Frontera Resources (LSE: FRR) with a market cap of just £15m and a share price of 0.4p. Frontera, which is focusing on emerging markets around the Black Sea, is still in the capital-raising stage of its existence, and has no profits on the horizon yet.

An issue of 165m new shares was announced in March, followed by a further 120m shares in the firm’s latest operations update. There’s sure to be a fair bit more of the same needed before Frontera starts recording annual profits — and we can’t quantify the eventual dilution yet. But chairman and CEO Steve C Nicandros did describe the stimulation campaign at the South Kakheti Gas Complex’s Oil Window as “extremely exciting“, getting oil from wells that were unproductive using older technology.

Frontera has a long way to go and it’s too risky for me, but oil price rises could boost its chances.

The post Can Rising Oil Save Gulf Keystone Petroleum Limited, Xcite Energy Limited & Frontera Resources Corp? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Look at Gulf Keystone (LSE: GKP), which was in serious trouble back when it wasn’t actually getting paid for the oil it was delivering to the Kurdistan Regional Government. But since a schedule was agreed and the company received its first installment of $15m in September, payments have been coming in steadily.

These payments aren’t sufficient to cover Gulf Keystone’s medium-term debt commitments, and there’s no sign yet of when payment for back-supplies will be made. Still, should a repayment crunch be not too far beyond the horizon, Gulf does have a very impressive asset on the table in the shape of its 36,000-bopd Shaikan field, and I can see investors keen to take part in a shorter-term refinancing.

It’s clearly a big risk investing in Gulf now, but after the share price has lost nearly 80% since February 2015, depressed by those horribly low oil prices, it could be a perfect time to buy in — if (and it’s a big one) the payments tide really is turning.

Tiny cap

Frontera Resources (LSE: FRR) seems a popular one among small cap investors right now, with its market cap of £16.5m and share price of just half a penny — down from the heady heights of 1.2p back in March 2015. So what’s the story?

Frontera is exploring in Eastern Europe around the Black Sea. And in an update released on 14 January, chairman and chief executive Steve Nicandros told us that “Frontera is now able to advance early in 2016 to continue to unlock the giant oil and gas potential that is contained within the South Kakheti Gas Complex” in Georgia.

There’s a lot of work to be done, and Frontera is still in its equity-issue stage to raise the funding it needs — 46.2 million new shares were issued in November as part of its debt repayment schedule. So it’s an unquantifiable risk right now and those are not for me — but when they come good, they can come good big.

Xciting?

My third smaller cap possibility is Xcite Energy (LSE: XEL), which is a bit bigger with a market cap of £39.5m. But the share price is down 70% since its recent peak in May 2015. And it’s down a massive 97% since February 2011, which really underlines the enormous risks associated with investing in oil explorers — those that are successful reward their investors handsomely, but how many crash to nothing for every big winner?

Xcite’s weakness now is that it operates in the North Sea at its Bentley field assets, and that’s far from the cheapest region in the world in terms of extraction costs. However, Xcite puts its costs at around $35 per barrel, and though that’s below today’s price, it could look good when oil gets back above $50 as it surely will.

Again, debt is the big problem — will oil prices recover in time? I don’t know, and that counts me out.

The post Which Is The Best Oil Recovery Play: Gulf Keystone Petroleum Limited, Frontera Resources Corp Or Xcite Energy Limited? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

However, picking a single stock as a play on the sector’s recovery is a risky bet. Picking stocks is tough. Even the so-called experts get it wrong most of the time. That’s why investors should always build a well-diversified portfolio, to reduce risk and improve their chances of long-term wealth creation. 

And with this in mind, the best way to play a recovery in oil prices could be with a broad selection of oil producers and explorers. Four of the best producers and explorers are Gulf Keystone Petroleum (LSE: GKP), Premier Oil (LSE: PMO), Falkland Oil and Gas (LSE: FOGL) and Frontera Resources (LSE: FRR). 

Four diversified plays

Gulf Keystone, Premier, Falkland, and Frontera are four different companies, in four various stages of their lives, all operating in four different regions around the world. You couldn’t pick a more diversified basket of stocks.

Frontera Resources is the smallest of the group, but that doesn’t mean that the company should be avoided. Frontera is a small company with big ambitions. Management is targeting production of 7 million cubic feet per day of gas and approximately 1,000 bbls per day of oil by the end of 2015.

Frontera’s exploration activities within Georgia have also yielded significant results. The company believes that its South Kakheti Gas Complex is a world-class gas play, which could yield substantial results for the company over the long-term. Moreover, unlike many other small-cap oil and gas explorers, Frontera is already generating revenue. Revenues from crude oil and gas sales totaled $3.2m during the first half. 

Falkland Oil and Gas isn’t generating any income, but the company’s cash-rich balance sheet will help it fund the development of its prospects in the Falkland Basins. These prospects look set to yield excellent production numbers over the medium to long-term.

Falkland and its regional peer, Rockhopper Exploration, are planning to begin oil production from the Falklands prospects, assuming everything goes to plan, by 2019. The recently revised field development plan will cost the two companies $2bn. And as I’ve written before if everything does indeed go to plan, Falkland’s shares could rise by more than 700%. 

Oil producers

Both Frontera and Falkland are exploration plays, Premier Oil, and Gulf Keystone are two production plays currently trading at rock-bottom valuations. Premier is trading at a low not seen since the financial crisis, but 60% of the company’s production for the rest of the year is hedged at $92/bbl, and 30% of 2016 production is hedged at $68/bbl.

Analysts are expecting a pre-tax profit of £65m for 2016, and Premier’s principal $2.5bn bank facility is not up for refinancing until mid-2019. So, the group has plenty of balance sheet flexibility. 

Gulf Keystone is also trading near its all-time low, but the company is in a stronger position now than it has been for many years. Payments from the Kurdistan Regional Government have started to arrive, and the company is finally starting to repair its bruised balance sheet.

Gulf Keystone’s production costs are some of the lowest in the industry, so the company is better placed to weather the industry’s storm more than most.

The post Could Gulf Keystone Petroleum Limited, Premier Oil PLC, Falkland Oil and Gas Limited & Frontera Resources Corp Make You Rich? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Eight-bagger

Amur Minerals (LSE: AMC) shares have soared by nearly 750% in the past 12 months to 28.8p, with the bulk of that coming since 21 May. The news on 22 May, which led to an 85% leap on the day, was that a licence had been granted for production at the firm’s Kun-Manie nickel copper sulphide deposit in Russia’s Far East — and that topped a months-long period of good news on Amur’s minerals prospects.

There are no forecasts available for Amur, but it’s a good example of what can happen with speculative investments in exploration and prospecting companies. Amur still has a long way to go to get into actual production, and it’s sure to need more cash for its operations before it starts earning profits — and it’s exposed to Russian political control. But for those who know the risks, it could still be a good buy.

Recent uptick

The gain at Xcite Energy (LSE: XEL) has been far more modest and more recent. In fact, the shares are down 47% over 12 months — but we’ve seen a 35% recovery since the end of April to 36p, even though full-year results released at the end of March did little to generate any enthusiasm.

The firm’s year-end reserves report looked tempting and that gave the shares a nice boost. And since then we’ve had a first-quarter update that has lifted estimates, with reserves at its Bentley Field now estimated at a value of “…approximately US$1.9 billion, US$2.3 billion and US$2.6 billion on a 1P, 2P and 3P basis”.

We’re back to the old problem of having healthy reserves but not the cash to get them pumping, so the value of Xcite is going to depend very much on its future funding. I’m cautious, but Xcite could do well.

Biggest risk?

A company that’s even harder to call is Frontera Resources (LSE: FRR), a tiddler with a market cap of only £27m (as of 9 June), and a share price spread of 9% on a mid-price of 0.82p as I write — but it is up 15% in the past week. Frontera recently marked its first year of production in Georgia, though it’s yet another of the many small explorers and producers that have yet to turn a profit.

How will Frontera fund its future? It recently issued 350 million new shares at a price of 0.8p each which it placed with institutional investors, raising £2.8m. The firm told us the cash should help achieve production by the end of 2015 of approximately 7 million cubic feet per day of gas and approximately 1,000 bbls per day of oil. Is that enough to make the shares good value today? That’s for you to decide.

The post Are Amur Minerals Corporation, Xcite Energy Limited And Frontera Resources Corp Good Value Despite Recent Gains? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Ophir

Ophir Energy (LSE: OPHR) is a reasonable size with a valuation of around £1bn, but its share price is down 45% over the past 12 months to 144p, so what is there to fear? Forecasts suggest two years of losses per share for this year and next, so the company’s cash position is surely going to be crucial in the short term.

As of 31 December, Ophir had $1.17bn in cash and equivalents in its books — which was up on the previous year, and appears adequate for its current drilling programme. What’s more, the firm is cutting costs, while at the same time “…there is a unique opportunity at the moment to acquire exploration acreage at low cost and with minimal work commitments“, in the words of CEO Nick Cooper. He told us the firm had “doubled its exploration footprint during 2014” without committing to too much spending over the next few years.

Although the cash is there for now, Ophir is going to have to spend a lot in exploration over the next few years — the big question is whether it will find enough oil before it needs more cash.

Sound Oil

Next up is the much smaller Sound Oil (LSE: SOU), valued at just £100m — and whose share price is up 170% since January! Sure, at 25p the price is still some way below its 2011 peak, but what’s been happening?

Well, the Europe- and Mediterranean-focused company has issued a string of releases in recent months with news of its Nervesa gas discovery in Italy and authorisation for the start of operations generating some excitement — and it was soon followed by the commencement of drilling.

Better-than-expected results also helped and, judging by the share price, the reaction to the firm’s plan to raise £12m through a new placing has been positive. Caution is still needed, though, as profit is not here yet, even if forecasts suggest it’s just around the corner.

Frontera

Finally we come to Frontera Resources (LSE: FRR), a relative tiddler with a market cap of just £25m (as of close of play 5/5/15) and a share price of a shade under a penny. Frontera was founded in 1996 and explores for oil and gas in Georgia, and is typical of many smaller companies in the industry in still being in the net investment phase with no profits to show yet.

It’s actually been producing gas in Georgia for a year now, which is promising, but with no forecasts available and the firm carrying a fair bit of debt (which it has been paying down by the issue of new equity), I’d say it’s impossible to quantify right now. For me, Frontera could go either way and I have no clue which — but I hope for success for its shareholders.

The post Are Ophir Energy Plc, Sound Oil plc And Frontera Resources Corp Heading For The Big Time? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.