However, fast-forward to today and the situation couldn’t be more different. Both companies have weathered the storm and are now starting to emerge from the cloud of uncertainty that has shadowed them for the past few years.

Profits rising

Gulf Keystone’s turnaround is particularly impressive. At the end of 2016, it looked as if it was heading for bankruptcy and only a colossal debt restructuring helped save the business, although it almost completely wiped out shareholders.

Now, after several years of hard work, the company has not only completely recovered, but it looks to be one of the most well-funded and profitable oil businesses trading in London today.

According to its full-year 2018 results, Gulf Keystone ended 2018 with a net cash balance of $191m, up $135m year-on-year. Profit from operations hit $78m and earnings per share came in at 26p. On this basis, shares in the company are trading at a P/E of around 10, that’s without adjusting for cash which currently makes up around 17% of the group’s £580m market capitalisation.

Management also declared a $25m dividend alongside Gulf Keystone’s 2018 results, which gives a yield of around 3.3% on the market-cap, according to my calculations. That’s quite an attractive return for a company that was facing bankruptcy only a few years ago.

Further to go

And I think this could be just the start of Gulf Keystone’s comeback. Based on its current production and expansion plans, the City believes the firm’s revenues will hit $409m in 2020, up from 2018’s $251m. Earnings per share are expected to more than double to $0.66, putting the stock on a 2020 P/E 5.

These numbers indicate that investors buying today could see an upside of 100% or more on their investment in Gulf Keystone over the next two years.

Undervalued

Genel’s comeback hasn’t been quite so impressive, but that shouldn’t detract from the fact that the stock appears to be undervalued by around 65%. At the time of writing, shares in this Kurdistan-focused oil producer are dealing at a forward P/E of just 5.3 (compared to the industry average of 8.7).

The business is also highly cash generative. After accumulating $241m of net debt by 2016, at the end of 2018, the group’s balance sheet had moved into a net cash position of $37m. Management is planning to use much of these resources to increase the company’s annual production, underpinning earnings growth over the next two years.

The drilling and exploration programme in 2019 has gotten off to a solid start with the business announcing today that the testing of its TT-20z well in the Taq Taq field (of which Genel has a 44% working interest) is complete. Production at the well has started at an initial rate of 2,000 barrels of oil per day. Production is also projected to increase over the coming weeks and months.

If the company continues to issue positive trading updates like these, I think it could only be a matter of time before the market rewards the stock with a higher valuation.

The post These recovery stocks are flying. Should I buy? appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

As such, valuations could be relatively low, while the performance of some industries could still be impressive. With that in mind, I feel oil producer Genel Energy (LSE: GENL) could offer growth potential alongside another energy company which released an update on Monday.

Future potential

The company in question is energy storage and clean fuel business ITM Power (LSE: ITM). It released a trading update to coincide with its AGM, with the company’s trading in the current year having started well. It expects another year of significant financial progress, with underlying project delivery being on track and its financial position being strong. It has £16.9m of cash, while it has a total pipeline of £34.3m. This represents an increase in the size of its pipeline of £3.7m since August, with the non-contracted tender opportunity pipeline being £200m.

The company’s planned move to its new factory is progressing well. It is expected to sign terms in the first quarter of 2019. The new factory should to run in parallel to the existing one until the lease runs out in 2021. During that time it is expected to provide sufficient capacity to support its ambitious sales growth plan. As a result, the stock could offer an improving outlook. While still loss-making and potentially risky, its long-term growth potential could improve as consumers continue to demand cleaner forms of energy.

Value for money

As mentioned, share prices have fallen in recent months. Although Genel Energy is down by 25% since May, its shares are still up by 90% over the last year. The outlook for the oil and gas sector may be relatively uncertain, with the prospect of a slowing world economy unlikely to have a positive impact on demand. But with geopolitical risks in countries such as Saudi Arabia and Iran, there could be a commensurate decline in supply over the medium term. As such, the outlook for the industry may be volatile, but also positive over the next few years.

Although Genel Energy’s shares have risen significantly in the last year, they continue to offer good value for money. The company trades on a price-to-earnings (P/E) ratio of around 6. And with its operational performance having the potential to improve, I feel it could offer further capital growth prospects over the medium term.

Certainly, the company’s shares could record further losses if fears surrounding the global economy persist. The oil price has a track record of being volatile, which could lead to a wider margin of safety being applied to its shares. But with a low rating and the prospect of supply disruption in the wider industry, the company’s shares could perform well versus the FTSE 100.

The post 2 reasons why I think the Genel share price could outperform the FTSE 100 appeared first on The Twelfth Magpie.

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Peter Stephens 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.

Looking ahead, the company’s valuation suggests that it could offer further capital growth prospects. With the oil price having the potential to move higher, it could deliver a rising bottom line. However, it’s not the only growth stock that could be worth buying. Reporting on Thursday was another mid-cap share that may deliver a rising valuation.

Improving outlook

The company in question is gaming business 888 Holdings (LSE: 888). It released half-year results which showed a rise in revenue of 1% to $273.2m, with adjusted profit before tax increasing by 13% to $42.5m. Its performance in the Casino and Sport segments was strong, with it recording impressive performance in continental Europe. In the UK, it has started to see positive trends since the end of the period, while in the US it continues to have a bright long-term growth outlook.

The repeal by US lawmakers of sports betting rules means that there could be a sizeable growth opportunity for 888. It already has established partnerships and a strong presence in the country. This could allow it to capitalise on the changing nature of the gaming industry that could lead to rising profitability in the long run.

With the company continuing to pump cash into innovation so it can improve customer satisfaction, it seems to have a solid growth strategy. Its bottom line is expected to rise by 6% next year, but improved performance could be ahead in the coming years. As such, now could be a good time to buy it.

Rising profitability

The outlook for Genel Energy may also be set to improve. Although the oil price has already risen in recent months, the prospects for further gains seem to be high. Demand growth is expected to remain consistent over the medium term, with a growing world economy helping to keep momentum at similar levels to 2018 through the course of 2019. And with the potential for political risk across various OPEC members, the prospect of lower supply growth seems to be increasing.

This could lead to improving profitability for Genel Energy and its peers. The company has production costs that are among the lowest in the industry, while a reduction in geopolitical risk in the Kurdistan region of northern Iraq in the last couple of years has meant that its financial prospects appear to be improving.

With the stock trading on a price-to-earnings growth (PEG) ratio of just 1.1, it seems to offer a wide margin of safety. While potentially volatile due to the uncertainty of the region in which it operates and the possible changes in the oil price, it seems to offer a favourable investment outlook and could deliver further share price growth.

The post How high can the Genel Energy share price go? appeared first on The Twelfth Magpie.

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Peter Stephens 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.

I think this could be an opportunity for smart investors. Let me explain why.

The trend is your friend

When Tullow’s 2014 results were published in February 2015, the shares were worth around 340p. That’s about 25% more than they’re worth today, after adjusting for the new shares created in last year’s rights issue.

To understand the potential opportunity here, I think we need to compare some figures from the firm’s 2014 results with the equivalent numbers from today’s 2018 half-year results:

Although net debt is roughly the same today as it was in 2014, it’s moving in opposite directions.

Tullow has now largely finished the big projects it was working on when the oil price crashed in 2015. Free cash flow is rising strongly, and the firm has reduced net debt by nearly $800m over the last 12 months.

The figures in this table tell me that conditions in the oil market are now favouring companies such as Tullow, which have cut costs and boosted production with new long-life oil fields.

Now could be the right time

Today’s half-year results show that Tullow sold oil at an average price of $67.50 per barrel during the first half of the year, up from $57.30 per barrel during the same period last year. Revenue rose by 15% to $905m and free cash flow doubled from $205m to $401m.

Although I think a price target of 500p may be slightly ambitious, as debt continues to fall, the firm’s equity value should increase. I expect to see the shares trading between 350p and 400p over the medium term.

At around 220p, the shares currently trade on just 9 times 2018 forecast earnings. I believe this could be a low-risk buy with the potential for decent gains.

Are you looking for excitement?

Tullow’s operations in Africa aren’t without political risk. But Genel Energy (LSE: GENL) operates in much riskier Kurdistan, the autonomous region to the north of Iraq. Despite the conflict that’s spread through much of this region over the last few years, Genel has kept the oil flowing and continued to receive payment for it.

As a result, this seemingly risky stock has become an unlikely cash cow. The firm’s 2017 results showed that its net debt fell from $241m to $135m last year. Free cash flow rose to $100m, thanks to cash operating costs which I estimate at less than $2.50 per barrel.

Although Genel shares have risen by 140% this year, low costs and a strong cash performance means they still look affordable to me. Trading on 9.3 times forecast earnings, this stock isn’t without risk. But if the oil market remains stable, I think shareholders could see further gains.

The post Is the Tullow Oil share price heading back to 500p? appeared first on The Twelfth Magpie.

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Roland Head 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.

Today’s full-year 2017 figures from Genel support this conclusion. After a year of consistent oil payments by the Kurdistan Regional Government and reduced capital spending, the company was able to generate free cash flow before interest payments of $142m during 2017, more than double the figure reported for 2016, even though production slumped from 53,300 barrels a day to 35,200 bbl/d. Revenue increased to $229m from $191m and operating profit reported for the period hit $298m. 

Turnaround in progress

Management expects 2017’s performance to continue into 2018. Production is expected to remain constant at around 32,800 bbl/d, and capital spending is projected to be no more than $140m. 

Considering these targets, it looks as if the company is on track to report another year of substantial free cash generation in 2018. Valuing the business on free cash flow generation alone, the shares are currently trading at a historical price to free cash flow ratio of around four, which is significantly below the oil and gas sector median of 16. 

That being said, due to the risks surrounding Genel’s operations in the Middle East, it’s unrealistic to expect that the shares would trade at a sector median valuation. However, such a deep discount the rest of the sector is, in my view, unwarranted. If the company repeats its 2017 performance this year, the market may take a different view of the business and award the shares a higher valuation, that’s why I’m considering buying in April ahead of this re-rating.

Paying down debt

I also believe shares in Premier could re-rate as well, as the company builds on its robust 2017 performance. 

Last year it generated a positive free cash flow of $71.2m, allowing it to marginally reduced debt to $2.7bn (and my Foolish colleague Roland Head believes it has already fallen further). This free cash flow was achieved on average production of 75,000 bbl/d and management is currently guiding for production of between 80,000 to 85,000bbl/d for full-year 2018. The average realised oil price for 2017 was $52.1bbl, compared to today’s price of $69.1bbl (a third higher). Some of Premier’s production for 2018 is hedged at a lower price, but generally speaking, the firm should benefit tremendously from the uplift in oil prices during 2018. 

Put simply, these figures suggest Premier is going to produce a13% more oil next year at a price 30% higher than achieved during 2017. This should allow the group to pay down a large chunk of debt, proving to the market that it is not going to go out of business anytime soon. And when debt does begin to fall meaningfully, shares in Premier should re-rate higher. 

Indeed, today the stock is trading at an extremely depressed forward P/E of just 5.7, as the market still doubts the firm’s ability to be able to pay down its massive debt obligations. So, when Premier finally proves it has its finances under control, there’s scope for the stock to double as it returns to a sector average valuation. 

The post 2 top growth stocks I’m considering buying in April appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

Today I’m looking at two stocks whose performances have sometimes been disappointing but show promise. Should you buy, hold or sell?

Hunting for customers

Cameroon-focused gas producer Victoria Oil & Gas (LSE: VOG) received a big blow in January when the company’s largest customer, utility group ENEO, declined to renew its supply contract. The firm’s shares have fallen 32% since this news was announced.

Although a new deal may yet be signed, figures released by the firm today suggest that the outlook for the year ahead is now quite uncertain.

Gas sales to ENEO accounted for 53% of related revenue from the Logbaba project last year. With this source of revenue lost — temporarily at least — the group’s finances have been weakened.

Management has been forced to set more modest operational goals for this year. It’s now targeting daily production of 9 million standard cubic feet (mmscf/d) by the end of 2018 if the ENEO contract isn’t renewed.

To put this in context, average daily gas production in 2017 was 10.98mmscf/d, so this guidance represents a cut of at least 18%.

Weaker financial situation

The group’s financial situation has also weakened. Revenue fell from $32.8m to $23.9m last year. Despite raising $23m in a share placing in October, net debt was $14m at the end of 2017, compared to a net cash position of $1.8m at the end of 2016.

As a result of this worsening financial situation, “the company’s previously announced capital expenditure programme for 2018 will be deferred until further clarity is obtained on the ENEO situation”.

The board has maintained its ambitious production target of 100mscf/d by 2021. I’m not convinced that this is realistic. Indeed, if the ENEO contract isn’t renewed very soon, I think shareholders could face further losses.

One growth stock I would buy

Kurdistan-based oil group Genel Energy (LSE: GENL) is another company that hasn’t lived up to original hopes. But I think the company’s management has performed well in very difficult circumstances.

In contrast to Victoria Oil & Gas, Genel has consistently been able to generate cash from its assets. This means that it’s been able to fund capital expenditure and production growth, without having to raise cash from shareholders.

Indeed, the company recently reported free cash flow before interest payments of $140m for 2017. That equates to a price/free cash flow ratio of about 7 at the current share price. Some of this cash was used to help complete a refinancing deal which saw net debt fall to $138m at the end of 2017, from $241m a year earlier.

If this performance is sustained, then I believe Genel shares could be cheap at current levels. The group expected 2018 production to be close to the Q4 2017 level of 32,760 bopd.

There are also opportunities for growth. The Bina Bawi field is estimated to have light oil resources of 37.1m barrels. This field is close to its existing export infrastructure, so could potentially be developed and placed on production quite quickly.

I’d give Genel Energy a speculative buy rating.

The post One monster growth stock I’d buy today and one I’d consider selling appeared first on The Twelfth Magpie.

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Roland Head 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.

However, after a period of growth that has been centred on reduced supply, the price of oil recently increased to above $70 per barrel. This could suggest that the prospects for oil and gas companies is improving, and may mean the sector could have investment potential. With that in mind, here are two stocks operating in the sector that could generate high total returns in the long run.

Growth potential

Reporting on Wednesday was Kurdistan-focused oil and gas exploration and production company Genel Energy (LSE: GENL). It confirmed a 40% replacement of proved reserves at its Taq Taq field, following the success of well TT-29w. The news reflects the stability in cash-generative production that the company has seen from the field in the second half of 2017.

However, the company also announced that the proved plus probable reserves at Taq Taq are now estimated at 54.7m barrels. This is down from 59.1m barrels around one year ago.

Looking ahead, Genel Energy is expected to deliver a rise in earnings of 39% in the current year. This is set to put the stock on a price-to-earnings (P/E) ratio of 8.6. This suggests that it offers good value for money, even when the geopolitical risks it faces are factored-in.

Therefore, while it lacks the diversity and financial strength of some of its industry peers, the company could generate relatively impressive levels of capital growth. That’s especially the case if the oil price continues to gain momentum over the medium term.

Diverse opportunity

Also offering upside potential at the present time is BHP Billiton (LSE: BLT). The company may not be a pureplay oil and gas producer, but its petroleum division remains a key part of the business. As such, it is likely to benefit from a rising oil price.

Additionally, the company’s mix of other operations could help to offset the volatility in one particular commodity. This may mean that BHP Billiton has a lower risk profile than some of its pureplay oil and gas peers. And with the company having spun-off non-core operations in recent years and sought to lower its cost base, it seems to be in a strong position to deliver improving levels of financial performance.

With the company’s bottom line forecast to rise by 21% in the current financial year, it has a price-to-earnings growth (PEG) ratio of just 0.6. This suggests that it is undervalued at the present time and may be able to generate strong share price growth in future. Certainly, its performance is linked to the prices of the commodities it produces. But with a wide margin of safety and a diverse set of operations, it seems to have a favourable risk/reward ratio.

The post 2 shares I’d invest in for retirement appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in BHP Billiton. 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.

Shares in Empyrean Energy (LSE: EME) have exploded higher over the past 52 weeks, making the stock one of the market’s top performers in the past year.

From a share price of 1.65p a year ago, the shares have gained more than 800%. However, since mid-September, its rally has lost a lot of its momentum and the shares are currently trading at less than half of its 52-week high of 31.25p. Does this means it has hit a roadblock, or is this just a short-term setback?

Disappointing well results

Certainly, there’s a great deal of uncertainty about the growth prospects of the AIM-listed oil and gas explorer’s assets. The company has made significant discoveries over the past few years, but there’s still no clear indication of the potential scale of the recoverable resource.

As such, it’s not surprising to see some profit-taking after such a rapid ascent in its share price — especially as concerns grow on the lengthy wait for the important drill test results from its Dempsey well in the Sacramento Basin, California.

Things were only made worse by Empyrean’s disappointing well test results last week, which found gas at its lowest zone of the Dempsey 1-15 well flowing at rates that were “sub-commercial”, meaning those reserves may not be economically recoverable at the current gas prices.

Promising potential

But in spite of the recent disappointment, Empyrean could still offer promising growth potential should its Dempsey well project come good. As the company said in its statement on 18 November, “analysis of this zone, and its full potential, remain at an early stage.” What’s more, the tests are being conducted in the order from the lowest up, and not in priority of interpreted significance, meaning some disappointing results were likely before sufficient commercial flow for production would be found.

Initial estimates put the project’s potential recoverable reserves at between 116 and 352bn cubic feet of gas. But should all the stacked reservoirs be full of gas, the cumulative unrisked recoverable resource within the Dempsey prospect could rise to more than 1trn cubic feet. And that’s even before we consider Empyrean’s other interests outside of California, including in China and Indonesia.

An alternative play

Shares in Kurdistan-focused oil producer Genel Energy (LSE: GENL) haven’t done nearly as well. They have recovered substantially since reaching a new agreement with the Kurdistan Regional Government (KRG) over the company’s historic receivables relating to unpaid entitlements for past oil exports. But political uncertainties in the region continue to overhang the market.

Recent regular payments from the KRG have given Genel’s cash flow a big boost in recent quarters, but the sustainability of such payments in the future remains in question as tensions between Erbil and Baghdad continue to be high after the Kurdistan independence referendum.

Genel is also struggling to prove its worth to shareholders after it sharply downgraded its reserve estimates in the Taq Taq field, one of its two Kurdish mainstays. Still, I reckon investors should not overlook its potentially game-changing gas prospects in the Kurdish region. There’s almost 1,500 MMboe of 2C reserves in its Miran and Bina Bawi gas fields and it is currently in talks with farm-out partners to help fund its development.

Valuations are undemanding too, with the shares trading at 7.3 times expected underlying earnings in 2018.

The post Can Empyrean Energy plc’s extraordinary run continue? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any 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 if we look closer, we see the shares have started to climb back, more than doubling since late March 2017. There’s a good reason for that growth spurt, which I think could be the start of a nice long-term run — and my confidence is boosted by Thursday’s update.

Genel’s problems had largely been twofold. Firstly, remaining reserves in its key Taq Taq field in the Kurdistan Region of Iraq had been downgraded. And more worryingly, the company had been struggling to get payment for the oil it was shipping — and that led to a big loss in 2016.

Cash flowing

But a third-quarter update Thursday reiterated that the company had reached a “landmark settlement” with the Kurdistan regional government, which has led to regular payments so far this year. And production is going as planned.

Unsurprisingly, Genel says that should “materially enhance our cash flows“, but pointed out that even before the start of payments, the company was still generating “meaningful free cash flow” and reducing its debt.

Analysts are already predicting a return to profit this year, followed by a near doubling in earnings per share (EPS) for 2018 — and that would drop the P/E to under 12, which looks like a good valuation to me.

The oil business in Iraq is clearly not without risk, but I reckon the growth story should be back on for Genel. And I see the shares as a bargain right now.

A Woodford pick

The housebuilding business is down in the dumps right now, but you’d never guess by looking at Countryside Properties (LSE: CSP). Neil Woodford snapped up a load of Countryside shares this summer and his funds now hold 10% of the company. It’s not hard to see why.

In 2016, Countryside’s EPS nearly trebled to 16.3p, and the City’s experts are predicting further growth this year of 66%, followed by another 27% in 2018. But that expected rate of growth looks well hidden by the shares’ forward P/E ratings, which would drop from a mooted 13.5 for the end of 2017 to just 10.5 a year later.

And that gives tasty PEG ratings of just 0.2 and 0.4 for the two years, which should have those growth investors who look for 0.7 or less jumping with excitement.

But that’s not all. Countryside is also handing out decent dividends. Now, the forecast yield of just 2.2% this year is not up there with the 6.7% expected from Taylor Wimpey or the 4.8% from Persimmon.

But it’s strongly progressive. From nothing in 2015, through 3.4p per share last year, there’s 8.1p on the cards for this year and 10.35p for 2018. You don’t need to worry about inflation with dividend growth like that.

Strong year

In an update ahead of full-year results (due 22 November), Countryside reported a 28% rise in completions to 3,389 homes, with a private forward order book up 8% to £242.4m. Average private selling prices dropped 8% to £430,000, but I don’t read any fear of a price collapse into that.

The company has a strong land bank of 19,826 plots (of which 83% have been “sourced strategically“), after adding an extra 2,896 plots during the year.

Countryside Properties looks cheap to me.

The post 2 bargain growth stocks that could make you a millionaire appeared first on The Twelfth Magpie.

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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Alan Oscroft has no position in any 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.

I believe Tullow’s improving prospects as a standalone business, as well as the potential for renewed takeover interest, could mean that the shares are primed for take-off from their depressed level.

Significant positive

News at the weekend, which has pushed the shares up about 5% today, represents a further brightening of the outlook for investors. On Saturday, the Special Chamber of the International Tribunal of the Law of the Sea in Hamburg delivered its judgment on a dispute over the maritime boundary between Ghana and Côte d’Ivoire.

The dispute had seen a drilling moratorium at Tullow’s TEN fields but the company said that after Saturday’s determination it “expects to resume drilling around the end of the year, which will allow production from the TEN fields to start to increase towards the FPSO design capacity of 80,000 bopd [barrels of oil per day].”

To put this into context, the TEN fields averaged 48,000 (22,500 net to Tullow) bopd in the first half of this year, while full-year guidance across all the group’s assets is 78,000 to 85,000 bopd. As such, Tullow’s ability to progress the TEN fields’ plan of development towards their full potential is a significant positive for the future.

Increasingly attractive for investors

Its first-half free cash flow and a rights issue in April allowed it to reduce net debt to $3.8bn from $4.8bn. With a new chief executive focused on financial discipline and efficient use of capital, and a balance sheet that should further strengthen from rising free cash flow, I believe Tullow is looking an increasingly attractive proposition for investors.

Before the weekend’s news, the City consensus earnings forecast for 2018 was 9p a share, giving a price-to-earnings (P/E) ratio of near to 21. While the consensus isn’t going to move up as far as the most bullish forecast of over 19p a share (P/E of less than 10), I’m expecting to see plenty of upgrades. In view of this and Tullow’s longer-term potential, I rate the stock a ‘buy’.

Scope for shares to rise

Also benefitting from improved clarity from a recent resolution to a dispute is Genel Energy (LSE: GENL). The company announced last month that it had reached an agreement with the Kurdistan Regional Government relating to unpaid entitlements for past oil sales from its Taq Taq and Tawke fields.

In return for cancelling and waiving its rights to outstanding receivables, Genel will enjoy a range of benefits. The company said the net effect would be that “cash flow is expected to be materially enhanced over the course of the agreement, delivering significant value creation for all stakeholders.”

The shares have advanced over 10% since the announcement to 147p today. With earnings forecast to increase 70% from 6.9p a share this year to 11.7p next year, the price-to-earnings growth (PEG) ratio of 0.2 — well below the fair-value marker of one — suggests there’s scope for the shares to rise a good deal higher yet. As such, they look very buyable to me at their current level.

The post Why Tullow Oil plc could be a millionaire-maker stock appeared first on The Twelfth Magpie.

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G A Chester 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.