A rising oil stock I'd buy alongside IGAS Energy plc for 2018

oil rig inshore

When oil prices hit rock bottom, I reckoned it was time to take a risk and I bought some Premier Oil shares -- and watched them plummet further. Still, thanks to the oil price recovery, I'm now at breakeven. 

I'm seriously starting to think that 2018 could be a very good year for oil & gas investors, and I reckon Soco International(LSE: SIA) could be one to go for.

Soco, focused on Vietnam, has seen its share price crash by 67% over the past five years as the end of a previously lucrative exploration cycle faded. But over the long term the company has produced powerful returns for investors, and we could be heading for a new profit spell coupled with the prospect of a few years of tasty dividends.

New look

In the firm's latest update on Wednesday, chief executive Ed Story said: "The new Soco vision is to build a growth-oriented E&P company of scale, generating through-cycle total shareholder returns whilst adhering to the company's historic focus on financial discipline and an annual dividend." The latest signs look good to me.

Production averaged "8,276 boepd net to Soco's working interest during 2017," and development of the company's Te Giac Trang interest is on time and within budget.

For the full year, the firm's balance sheet has been strengthened and boasts cash and liquid investments of $137.7m. And, of enormous importance, there's no debt. Soco reported an enviable cash operating cost of only $14 per barrel, while the company realised an average crude oil price of $56 per barrel.

And with prices starting to climb, reaching $63 as I write, I think 2018 could be a very good year for Soco.

No profit yet

Another oily that's been making waves in recent months is IGAS Energy(LSE: IGAS), which is moving ever closer to profit. IGAS, with onshore hydrocarbons in the UK being its focus, significantly improved its balance sheet in 2017 after Kerogen Capital invested $35m (£29m) in the firm, an open offer raised a further $22m (£18m), and net debt was reduced from $122m (£100m) at 31 December 2016 to just $9m (£7m) by 30 June.

With £16m in cash on the books at the end of June, chief executive Stephen Bowler told us" "We are well funded for the future and continue to be cashflow generative at current oil prices." And it looks increasingly like we're heading into the sustainable oil price recovery that the industry has been awaiting for a few years now.

Fall arrested

The IGAS share price had been in freefall, but it's bounced back in the past few months, having put on 85% since late September to today's 92p. The institutional investors out there appear to be happy with the company's capital restructuring, and sentiment is clearly far more positive now than in the middle of last year.

I've been basing my own investment thoughts on a sustainable long-term price of around $70 per barrel, and we're heading in that direction. After a flat spell of around $56 towards the end of 2017, the past month has seen a surge to $63, and I'll be surprised if we're not looking at significantly higher levels by the summer.

If IGAS was cash-flow positive at oil prices back when first-half results were released in September, I'm cautiously optimistic that 2018 and beyond should reward investors well.

Less risky growth

I see Soco (less risky) and IGAS (moderately risky) as being at different points on the growth-stock risk scale. And I always reckon it's good to balance out the risk, which is why I'm keen on another UK growth story that has already proved itself with years of solid rewards.

And the Motley Fool's analysts reckon there's a lot more to come, so I'd urge you to take a look for yourself by reading the report. It's completely free, and you're just one click away from your own personal copy.

Alan Oscroft 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.