Soco International slides on UBS downgrade
Soco International was under pressure on Thursday after UBS downgraded the stock to ‘sell’ from ‘neutral’, keeping the price target at 150p.
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It said that with the stock having rallied strongly over recent days it is now trading at 1.24x commercial net asset value and on an implied long-term oil price of $112 a barrel, which is well above the forward curve at $65 a barrel.
“This leaves risk-reward looking skewed to the downside,” said UBS.
Still, the bank said it has been quite consistent in its view that Soco’s TGT field in Vietnam is a solid asset, adding that delivery of $21 a barrel of post-tax cash flow during the first half underlines its high-margin, low cost attributes.
UBS said that while TGT is a high-quality asset, 2015 is something of a transition year with lower oil prices coinciding with relatively high capex on the new H5 fault platform.
It said free cash flow will likely be relatively low as a result, meaning next year's dividend will be lower.
At 1005 BST, Soco shares were down 3% at 181.25p.