This company might not be a household name, but that hasn’t stopped it. Beazley (LSE: BEZ) is one of the largest specialist insurance businesses in the UK. And with operations around the world, the business is truly a play on not just UK, but international economic growth as well.

Over the past 10 years, shares in the company have produced a total annual return for investors of 21.7%, turning every £1,000 invested into £7,127.

And I believe that this outstanding record of performance is set to continue.

Explosive growth 

After a rough 2017, when some of the biggest hurricanes ever to hit the United States caused billions in damage, which insurers like Beazley had to pick up the bill for, analysts are expecting the firm to return to growth this year. Earnings per share (EPS) are projected to rise 42% to $0.34 (26p) giving a forward P/E of 22. 

Growth is only expected to accelerate for 2019. Analysts have pencilled in EPS growth of 64% to $0.56 (43p). Based on this estimate, the stock is trading at a 2019 P/E of 13.4.

As well as breakneck earnings growth, Beazley has attractive dividend credentials. The dividend yield of 2.1% might not be the highest around, but the payout of $0.16 (12p) per share is covered twice by EPS. To me, this high level of cover suggests that the distribution is shielded from earnings volatility — one of the critical factors I like to consider when evaluating a firm’s dividend potential. Analysts are expecting the payout to hit $0.22 (17p) next year, providing a more lucrative yield of 2.9%.

Overall, looking at the company’s record of producing returns for investors, coupled with its growth outlook, I believe Beazley won’t let you down.

Low risk, high potential reward 

If you’re looking for an investment with more growth potential for your portfolio, you might want to consider Rockhopper Exploration (LSE: RKH). 

There’s lots to like about this oil minnow. For a start, the company is one of the few early-stage oil businesses with positive free cash flow.

According to half-year figures, published today, Rockhopper generated cash flow from operations of $4.9m during the first six months of 2018. With cash operating costs of $11 per barrel of oil produced, this looks set to continue.

Rockhopper’s funds are essential to support the development of its flagship Sea Lion development in the Falklands. Management is targeting year-end net cash of $30m (down from $46.4m at the end of the first half) and is planning to secure further financing for the prospect towards the end of 2018. Its partner on the $1.5bn project is Premier Oil which is pushing ahead with the development of Sea Lion. It could yield as much as 1.7bn barrels of oil in the best case.

What I like about Rockhopper is that the company is already self-sustaining but has huge upside potential if Sea Lion proves to be as good as expected. If everything goes to plan in the Falklands, Rockhopper could be a multi-bagger investment for shareholders.

The post Have £1,000 to invest? Why I believe you can’t go wrong with this FTSE 250 income champ 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.

Off the back of this rally, a lot of oil stocks have already recovered significantly from their 2016 lows. However, not all companies have recovered to the same degree. Here are three stocks that I believe could have further to go.

Uncertainty prevails 

Tullow Oil (LSE: TLW), Enquest (LSE: ENQ) and Rockhopper (LSE: RKH) all seem to have missed out on the wider oil sector rally over the past 12 months. It appears the reason why investors have been slow to return is due to the uncertainty hanging over these businesses.

Tullow and Enquest are both struggling under an enormous mountain of debt while Rockhopper’s future is dependent upon the development of the Sea Lion Field in the northern waters of the Falkland Islands.

Rising oil prices are already starting to lift the uncertainty for Tullow and Enquest.

Last year, Tullow returned to profit for the first time in three years, and for 2018 the producer is projecting free cash flow generation from operations of $650m — a significant figure. During the first half, the group churned out $300m of cash pushing net debt down to $3.1bn.

Compared to Tullow’s market value of £3bn ($3.8bn) this debt mountain is enough to scare away even the most risk-tolerant investors. Still, at the beginning of 2018, the group had net debt of $3.5bn, so the balance is rapidly moving in the right direction. Although a legal dispute with rig operator Seadrill has cost the company $250m, I expect to see a substantial reduction in net debt for the firm at the end of 2018.

Enquest is heading in the same direction. The firm is projecting production to hit between 50,000-58,000 boe per day in 2018, that’s up from 37,000 boe per day in 2017. 

Increased output at a higher oil price should enable the company to start chipping away at its near $2bn debt pile. Indeed, management is confident that higher output, coupled with low levels of capital spending will allow the group to do just that. 

Last year, City analysts predicted that Enquest could generate free cash flow of $700m a year at the higher output rate, which would be more than enough to reassure investors that the company can maintain its obligations to creditors. 

Project green light 

As Enquest and Tullow start to reduce debt, sentiment towards the two companies should improve as the level of risk reduces. I believe this should drive a re-rating in the shares pushing them significantly higher.

Meanwhile, the rising price of oil makes it more likely that Rockhopper’s Sea Lion project will get the green light from its development partner Premier Oil (Rockhopper currently owns 40%). Premier is also set to report a jump in cash flow this year, giving the group more capital to fund development projects.

If all goes to plan, Rockhopper’s management has stated that it believes Sea Lion could be sanctioned by the end of 2018, which would be a significant development for the company. Investors are bound to return when this colossal project gets the green light. After construction begins, it will only be a matter of time before the profits start flowing. 

The post 3 top oil stocks I’d buy today 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.

Currently, the conditions are perfect for the company. After years of slashing costs and investing heavily in production capacity, this year the group is well placed to produce healthy cash flow from operations, which should allow it to reduce debt and soothe concerns about its balance sheet substantially. 

A transformational year

Alongside its full-year 2017 figures, Tullow said it expects production in 2018 to be between 86,000 to 95,000 barrels per day, compared to last year’s 94,700 bbl/d. While the lower production figure is disappointing, higher oil prices should more than make up for the fall. 

For example, last year the average realised oil price for the company was $58.3 bbl. Today, the price of Brent crude is nearly 20% higher at just under $70 bbl. What’s more, Tullow reported a 22% drop in its underlying cash operating cost to $11.1 bbl last year, which only adds to the investment case. 

It is also unlikely that Tullow will see a repeat this year of the operational problems that it experienced in 2017. Due to a maritime boundary dispute between Ghana and the Ivory Coast, Tullow was unable to drill wells at its flagship Ten field off the coast of Ghana. The situation has now been resolved and the group has plans to begin “a multi-year incremental drilling programme” this year.

Cash cow 

All of the above indicates to me that Tullow is on track to beat last year’s free cash flow generation of $543m, giving it scope to make a substantial dent in its net debt balance of $3.5bn as reported for the end of last year. And as group fiscal stability improves, I believe the market will award the Tullow Oil share price a higher valuation.

As well as Tullow, I believe that higher oil prices also bode well for small-cap explorer Rockhopper Exploration (LSE: RKH).

Binary bet 

Rockhopper is essentially a binary play on the colossal $1.5bn Sea Lion field development in the Falklands. This project, which is operated by Premier Oil was put on ice as the price of oil has languished, but with prices heading back to $100 bbl, it’s becoming more likely that Premier will be able to access the funds to press ahead. 

Rockhopper expects the final decision on development will be made towards the end of 2018.

While the firm waits for Premier to start Sea Lion’s development, Rockhopper’s production base in the Greater Mediterranean is keeping the lights on. 

According to the group’s full-year figures, published today, production from this region averaged 1,200 bbl/d during 2017, producing revenues of $10.4m and a cash flow of $1.6m. There’s also $50.7m of cash on the balance sheet to help fund any future developments as well “new venture opportunities” to help improve production and cash flow.

The post Why I believe now could be the time to buy the Tullow Oil share price 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.

A combination of OPEC’s output cut and efficiency gains achieved by oil producers since 2014 means that the oil industry is now ready to start investing again. It looks as if oil prices have stabilised and cost cuts have helped reduce project break-even points to levels that are appealing in the current environment. As a result, Barclays expects total E&P capital spending to rise 7% this year with offshore production capacity of around 15bn expected to be sanctioned.

Time to revisit the sector?

The decision by oil companies to start investing again is a signal to investors that it might be time to revisit the oil sector again. 

And two companies that could generate huge returns for investors this year as confidence returns are Premier Oil (LSE: PMO) and Rockhopper Exploration (LSE: RKH).

Red flag 

The biggest red flag currently preventing investors from regaining confidence in Premier is the company’s ongoing refinancing. For more than a year now management has been trying to negotiate favourable terms for the company’s debt refinancing.  

As of yet, little news on the deal has been released to the market. However, yesterday the company announced that it would finalise the agreement with creditors within weeks. But once again, management held back from revealing any key details. With this being the case, the prospect of the upcoming refinancing will hold shares in Premier back during the near term. 

Once a debt agreement is in place, Premier’s shares have the potential to spring back to 200p. Total production last year from Premier’s assets reached a record 71,400 barrels of oil equivalent a day, up nearly a quarter year-on-year the group is guiding towards production of 75,000 barrels a day during 2017. 

Assuming everything goes to plan in the next two years, City analysts expect Premier to report earnings per share of 29p for the year ending 31 December 2018. Based on this forecast, shares in the company are currently trading at a forward P/E 3, and any guidance that the company is indeed on track to hit this target would likely send the shares shooting higher this year.  

Joined at the hip

Any good news from Premier is also good news for Rockhopper. The two oil producers are partners on the Sea Lion field in the South Atlantic, the development of which has been put on hold thanks to the oil price crash. Premier’s refinancing should be the first stage of getting the development of this project back on track. 

Premier is looking for a buyer for part of its stake, which is unlikely to emerge until the company’s refinancing is complete. With a buyer in place, the £1.2bn Sea Lion project may finally start to move ahead. When the project gets the go-ahead, City analysts believe shares in Rockhopper could be worth as much as 123p, although a more conservative estimate of 80p per share is also in place. As soon as Premier gives the green light on Sea Lion, it’s probable this target will be hit pretty quickly.

The post 2 unloved stocks with the potential to rise 100% in 2017 appeared first on The Twelfth Magpie.

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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.

Most small-cap oil companies don’t succeed, but those that do can generate huge returns for early investors if everything goes to plan. Finding these opportunities is the key. Investments where you can make 10 or 20 times your initial investment in the best case are worth taking a bet on. Of course, not every opportunity like this will work out but those that do more than make up for those that fail.

Pantheon Resources (LSE: PANR) and Rockhopper Exploration (LSE: RKH) are two such companies. Both have the assets in place to generate impressive returns for shareholders over the long-term, but at current prices is it worth getting involved? Does the potential reward make up for the risk taken on?

Double again? 

As the rest of the oil sector has languished, shares in Pantheon have charged higher this year. 

Year-to-date shares in the company are up by 260% as the firm has reported multiple successes on its acreage in Polk County, Texas. However, alongside the successes, there have also been failures. At the beginning of September shares in the company dropped by more than 40% after the company announced that its second well in Texas had to be plugged and abandoned. This dramatic markdown of Pantheon’s shares made it clear that the value of the company may have been too generous for the risk still associated with it. 

Assuming everything goes to plan going forward, City analysts expect the company to report earnings per share of 4.6p for the year ending 30 June 2017, which implies a valuation of 22.2 times forward earnings. This rich valuation coupled with the exploratory work Pantheon still has ahead of it signals that there’s plenty of risk ahead for the company’s shares and as a result, the potential upside may be limited.

Terrible year but plenty of potential 

Compared to Pantheon, shares in Rockhopper have had a downright terrible year. During the past 12 months shares in the company have lost a third of their value, but at current levels they may be attractive for long-term investors.

Rockhopper’s value is tied up in the company’s assets, specifically in the Sea Lion Complex. It’s thought that this asset contains 517 mmbbl of resources and has a break-even cost of $45 per barrel. So, even in the current environment where oil prices are struggling to move above $50 a barrel, Sea Lion will be profitable. 

City analysts estimate that Rockhopper’s net asset value stands at around 93p per share, more than 200% above current levels. There’s $63m of cash on the balance sheet as well to protect against the downside. What’s more, if the oil price returns to $70 or $80 a barrel this net asset value could see significant upgrades. In other words, Rockhopper has the sort of attractive risk/reward profile small-cap oil investors require. 

Overall, Rockhopper looks to be the better investment of these two early stage small-cap producers. 

The post Is the risk worth the reward with Pantheon Resources plc and Rockhopper Exploration plc? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

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.