I'm thinking that oil still will move upwards and am looking at ROC oil or TAP oil- any thoughts on OIL stocks?
Emerging oil producer and explorer Roc Oil Company sold a major asset in September, causing its share price to jump from $1.65 to more than $2. While its earnings will dip in the short-term, upcoming projects will provide it with a new phase of growth.
Roc Oil is a small Australian company with oil and gas production assets in Britain. In Australia it has a 30 per cent interest in the Cliff Head field in the offshore Perth Basin. In West Africa, it has a 3.7 per cent stake in the Chinguetti and Tiof oil fields. Exploration efforts are continuing in other Australian, West African and Chinese licences. Roc listed on the ASX in 1999 and used its listing capital to acquire oil and gas production assets in eastern England and in the North Sea.
In September Roc sold its Saltfleetby gas field in Britain for $111 million and it will book a $72 million net profit on the sale. This will leave the company with $180 million in cash - equivalent to more than half of its current market capitalisation of about $340 million. Roc's goal is to establish a well-balanced, international exploration and production company with significant reserves and sustainable production. With the cash, it can now take advantage of new opportunities that may arise in a busy 18 months of exploration. It will also be able to fund its share of developing the Chinguetti and Cliff Head oil fields, which are expected to come onstream next year. Because of the sale of the Saltfleetby field, Roc's total revenue will drop from $36 million last year to $1 million this year, but it will swell to $92 million next year. The net profit for next year is expected to be about $20 million to $22 million.
Oil and gas companies continually need to explore and establish new production to diversify risk and replenish reserves. Growth can also come from acquisitions or buying existing production licences from other companies. In this regard, with the company cashed up it is a possibility that Roc could be a takeover target itself. The high oil price will drive more exploration by making the risks lower and there are a number of emerging junior oil producers. Arc Energy ($350 million market capitalisation), Australian Worldwide Exploration ($533 million), Tap Oil ($286 million) and Hardman Resources ($1.3 billion) are all capable of making additional significant discoveries.