Oil Update: Premier Oil, SOCO International, and Afren
LONDON -- One of the strange things about the oil sector is the gulf between the small explorers, typically valued at £250 million or below, and the giants of the industry.
The former often struggle, with their reliance on one or two projects and a constant need to raise fresh funds to survive. The latter find it hard to gain momentum, due to their sheer size, and are currently embroiled in regulatory scrutiny and compensation claims.
There are a handful of oil firms that sit in the middle, and that belong to the FTSE 250 index. Often the most attractive of these will get snapped up by larger players, but they can generate decent gains for investors in the meantime.
As it happens, six of these oil mid-caps provided the market with trading updates today. Here are the runners and riders:
Market Cap (£bn)
Share Price Change Over the Last Year
The performance of these shares over the last year has been a pretty mixed bag. By way of comparison, the U.K. market is up some 25% over the same period.
Soco International has provided the best recent returns recently, although its share price is effectively flat over the last seven years. A long-term favorite on the Fool discussion boards, it currently operates in Vietnam, the Congo and Angola. Flush with cash, it's planning to return capital to shareholders later this year, and on an annual basis thereafter.
Heritage Oil is the smallest of the group but is quite a complex beast right now, having recently reshuffled its interests, acquiring a producing in Nigeria and exiting Kurdistan. It's also active in Papua New Guinea and Tanzania, and has an ongoing tax dispute in Uganda.
Premier Oil has often been seen as the quiet man of the sector, but its share price has quadrupled over the last 10 years. It's looking to pay its first dividend soon, but seems to be increasingly taking on larger projects, with its recent entry into the Falkland Islands, and just today announced the award of an interest in three deep-water blocks of the coast of Brazil.
Afren's main production comes from Nigeria, but it is also exploring in various East African countries and Kurdistan. Its share price often seem more driven by takeover rumors than its operational activities. After a big ramp up in production last year, more sedate growth is expected this year, but it boasts a very active exploration program.
Cairn Energy is another company that has reinvented itself. It did extremely well out of a discovery in India, but only retains a small interest now, albeit valued in excess of $1 billion. It boasts the best cash position of the six, by a considerable distance, and it is exploring in Morocco, Senegal, off the West Coast of Ireland, and the North Sea. It also hunting for oil in the Arctic.
Lastly, Ophir Energy is concentrating its efforts on East Africa, and is relatively flush with cash right now having raised half a billion pounds or so from investors a few months ago. It's a relatively new kid on the block, having been listed for less than two years, yet still commands the largest market cap of this group. Last month's appointment of Alan Booth, ex-CEO of Encore Oil, as a non-executive director sparked some interest on the Fool discussion boards.
There are certainly still some attractive prospects in this sector, although it's not the quick route to riches that it was a decade ago. If you want to know how to analyze oil and gas companies, I would highly recommend this free Fool report, which points out the pitfalls to avoid and highlights two shares to watch.
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The article Oil Update: Premier Oil, SOCO International, and Afren originally appeared on Fool.com.Stuart Watson has no position in any stocks mentioned. The Motley Fool recommends Cairn Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.