Analysts reports

Thursday, Aug 06 2009 by

This thread is intended solely as a place to discuss analysts' notes on SOCO.


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SOCO International plc is an international oil and gas exploration and production company. The Company has oil and gas interests in Vietnam, which includes Block 9-2 and Block 16-1; Republic of Congo (Brazzaville), which includes Marine XI Block and Marine XIV Block, the Democratic Republic of Congo (Kinshasa), consists of Nganzi block and Block V and Angola, which include Cabinda Onshore North Block. The Company's operations are located in South East Asia and Africa. It holds its interests in the Republic of Congo (Brazzaville), through its 85%-owned subsidiary, SOCO Exploration and Production Congo SA (SOCO EPC). It holds its interests in the Democratic Republic of Congo (Kinshasa) through its 85%-owned subsidiary SOCO Exploration and Production DRC Sprl. The Company’s net entitlement volumes were approximately 15,500 barrels of oil equivalent per day. more »

Share Price (Full)
-0.1  -0.0%
P/E (fwd)
Yield (fwd)
Mkt Cap (£m)

  Is SOCO International fundamentally strong or weak? Find out More »

673 Posts on this Thread show/hide all

extrader 1st Sep '13 654 of 673

Hi all,

Hat-tip to ohisay from another place with this link to an RBC update. It's worth following the link to the expanded commentary


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Fangorn 1st Sep '13 655 of 673

Access forbidden!

You don't have permission to access the requested object. It is either read-protected or not readable by the server.

If you think this is a server error, please contact the webmaster.!!!

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extrader 1st Sep '13 656 of 673

Hi fangorn,

Oops ! Passed on in good faith. - honest !

If you go via the source on TMF, do you get the same result ?



Postscript : I've just checked - and it works from there. How strange !

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Fangorn 2nd Sep '13 657 of 673

Morning Extrader.
Not to worry. Tried the TMF link - works okay. Very strange.

Thanks for the link. :)

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lightningtiger 10th Oct '13 658 of 673

This one is not for me I would sooner be digging the allotment. Not moving at the moment. I just missed GWP this week +50% or so but still have good momentum with CLIN GBO & TEP. It is about time TEP got to around£14.00 mark. Wondered whether the dip was anything to do with the directors taking huge pay rises around 10%? Cheers from Lightningtiger

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redhill 10th Oct '13 659 of 673

This one is not for me

'Bye then.

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tournesol 10th Oct '13 Reported for Abusive Language

Lightning tiger
"...I would sooner be digging the allotment...."
frankly, the rest of us feel the same - ie we'd rather you were digging your allotment......

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Fangorn 11th Oct '13 661 of 673

Eh how is ""...I would sooner be digging the allotment...."
frankly, the rest of us feel the same - ie we'd rather you were digging your allotment" using abusive language?

I thought the insinuation was eloquently posed. without recourse to the usual vulgarity employed by many these days.

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nigelpm 11th Oct '13 662 of 673

In reply to Fangorn, post #661

It's not a helpful comment - that was the closest reported comment I could choose.

Best to ignore people rather than inflame them.

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redhill 11th Oct '13 663 of 673

In reply to nigelpm, post #662

Surely the appropriate reaction to an unhelpful comment is a red thumb? Reporting as abusive is more than a bit OTT.

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nigelpm 11th Oct '13 664 of 673

In reply to redhill, post #663

It would in most circumstances but not when "18"! other people have given it the thumbs up. Astonishing.

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nigelpm 11th Oct '13 665 of 673

Don't see the point in posting on here when there's such a herd mentality.

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emptyend 11th Oct '13 666 of 673

In reply to nigelpm, post #664

It would in most circumstances but not when "18"! other people have given it the thumbs up. Astonishing.

Lets see. The OP popped up in the early hours of the morning, apparently to ramp some unrelated shares and to suggest that directors had awarded themselves a 10% pay rise. Since the accounts from spring show a c.5% rise was awarded, I assumed that he'd simply posted in the wrong place. Certainly there was no value added - which is why I gave a thumbs down.

I was surprised that tournesol bothered to respond, but couldn't disagree with the thought that nothing of value had been provided.

What surprises me even more though is your reaction, nigel. Are you the same chap as I met some years ago in Edinburgh? If you are, it seems you've wandered off into a parallel universe somewhere along the way.

I'm not bothered about people making negative posts if they wish. The only thing that bothers me is that they are considered and factual - and actually add something to the discussion. Just for the record.

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nigelpm 11th Oct '13 667 of 673

In reply to emptyend, post #666

Agree with you completely on the value point. In fact I noted this myself recently. What I dislike is the way posters responded. Just let it be. Isaac soon went away when people ignored him. Interacting with these posters makes it a lot worse and wastes more time

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emptyend 24th Jan 668 of 673

A number of analyst sector notes have been published in the weeks before and after Christmas. I post a few extracts below:

First....Numis 6th December:

In our view, for the E&P sector to re-rate, management need to demonstrate: 1) an
ability to generate peer-leading, sustainable returns significantly above cost of capital -
greater clarity of project ROIs and IRRs may help. 2) Strong capital discipline through
investment in only prime prospects. We believe there is potential for boards to impose
capital discipline through capital returns. 3) In our view, management need to be
incentivised by returns made on their investments. Management should be incentivised
to deliver value (ROI, IRR) over volume (production and resource growth). We believe
delivery of LTI and social responsibility targets should be pre-requisite.

Amongst our coverage we like stocks that are well placed to benefit from increased
focus on capital discipline and returns in a flat to declining oil price environment. We
prefer companies that have robust investment selection processes and have show
capital restraint despite the availability of capital. We found that companies with high
management and board ownership are aligned with shareholders and have historically
delivered superior share price perfromance. We believe that stocks EnQuest, SOCO
and Genel fit well with our overall investment thesis. All three companies have shown
an element of capital restraint, despite healthy balance sheets, and returns on historical
investments are being realised through strong cash generation. Excess free-cash
generation makes shareholder returns an option.

EnQuest, SOCO and Genel may not be the cheapest in the sector (0.71, 0.8 and 0.82
times RENAV respectively vs. sector 0.75 times) but importantly, we believe that a
highly selective approach to investment and suitably incentivised board will start to pay

In this note, we look at which E&P remuneration structures have delivered the best
shareholder returns. We conclude that companies with high management ownership
generate the best returns for shareholders. Stocks amongst our coverage with
significant management/board ownership include: SOCO, Genel, IGas, Providence,
Borders and Southern and EnQuest

The Numis note is actually quite a perceptive and interesting comparative piece on the sector. For example, it compares project IRRs for various well-known mid-cap projects - and concludes that the TGT project has an IIR of about 53% - substantially better than every other project (next best was Tullow's Jubilee at 32% with Genel's Tawke close behind). Most projects had IRRs of 15-20%.

In other charts, SOCO International (LON:SIA) also leads in terms of CEO/Board share ownership (34% - next best Genel at 23%), and....interestingly..... in a chart showing 3 year shareholder returns per £1mn of senior management compensation (next best IGas and Providence).

Numis have a buy rec, with a NAV &price target of 490p:

SOCO may not be the most exciting stock in the sector, but successful debottlenecking at TGT could see a step-up in cash generation and dividend payments over the course of the year.

Others follow shortly...

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emptyend 24th Jan 669 of 673

In reply to emptyend, post #668


Citi sector note 10th Jan:

....we now see insufficient
upside to our new price target of 437p/share (increased from 398p/share) to
maintain our Buy-rating and downgrade to Neutral. We look for greater clarity on the
ultimate production capacity of the TGT FPSO in 1H14, which could drive higher
production than our base case estimates, and make us more positive on the stock.

My observation on that note is it completely lacks any original thought - and is as dull as the Numis note is perceptive.

Nomura sector note 13th Jan:

Soco management should be given significant credit for the milestones achieved in
2013: i) production at the TGT field remained robust; ii) drilling success on the H5 fault
block helped to prove-up reserves at TGT; and iii) Soco fulfilled its promise of cash
return. However, this progress is largely priced in given the 34% absolute return for
shareholders in 2013. From here, we see the main issues as: i) ramping-up group
production, which is largely dependent on output at TGT; ii) firming up resource at TGT,
where an update on recovery factors will be key and; iii) rebuilding the exploration
portfolio, with near-term wells in Angola unlikely to move the needle.....

The resource assessment by RPS (announced in February 2013) pointed to lower
recovery factors at TGT and introduced a downside scenario. Soco has been
encouraged by the initial results from its reservoir model, which it believes supports a
higher range recovery factors (45-50% vs RPS estimates of 28-35%). From a 2013
forward perspective, we are carrying c290mmboe (gross risked) for TGT (ex H5 for
which we carry 23mmboe, gross risked) in our NAV, which implies an effective recovery
factor of 41%, assuming the RPS mid-case STOIIP of c710mmboe. Therefore, we
believe that the scope for further upside from a movement towards management’s
recovery factors (45-50%) is limited, with potential risks to the downside. We expect
Soco to provide an update on recovery factors in a 1Q update (date TBC).

[nb....they seem to have overlooked the prospects for a big STOIIP rise, based on the H5 well and the gas deal]

We estimate free cash flow generation could average cUSD 240m (pre-dividends)
across 2013-15 and a distribution of c50% would represent a c5.5% yield.


Morgan Stanley Sector note 23rd Jan:

Our top picks are Afren and Cairn. We would avoid Enquest and Soco and are tactically bearish on Premier....

2 stocks to avoid: Enquest: 1) Development and
exploitation focused strategy skews risks to downside;
2) High UK North Sea maintenance; and 3) Unattractive
valuation, leaving little room to accommodate
development issues. Soco: 1) Only modest near-term
production and reserves upside at the TGT field in
Vietnam; 2) c5% dividend yield based on a single asset,
which is in-line with the majors; and 3) shortage of
meaningful catalysts to drive the shares up further.


You'll note that their two "avoids" are two of the shares in Numis' top 3 picks :-)


Investment case: Soco management policy is to payout half of
its free cash flow. Following c25% outperformance versus its
peers in 2013 we estimate this now implies a one year forward
dividend yield of c5%. This is amongst the highest dividends
paid by EU E&Ps under our coverage, and we see little upside
from here. This compares to the Integrateds average dividend
yield, which is c5%, too. Soco has no gearing, but the dividend
is based upon a single asset called TGT in Vietnam. We think
reliance on this single asset puts the dividend at a greater risk
than those of the Integrateds, and so Soco should command a
higher yield or lower share price.
In addition to the high single asset risk, we also see limited
upside to our one and two year forward production estimates,
limiting Soco’s ability to organically increase its payout. Finally,
Soco has the least upside to our Base NAV, or put another
way, the market is already ascribing upside to the proven and
probable reserves. While this is possible, it assumes near
perfect execution of the appraisal program. We think the
upshot of all these factors is a negative risk-reward skew.

Risks: Risks to our investment view relate to the accelerated
increase in the TGT oil field production plateau and/or
reserves. With a light capex program, Soco's dividend policy
provides the company with a large amount of comfort and
flexibility to provide three years of ~$100m of payouts.....

.......we find that even making more optimistic, albeit
credible, assumptions, SOCO’s share price implies little
upside. On our estimates, we believe that you need to assume
all of the following to more or less achieve the current share

1. More oil in TGT: c850mbo in-place resource versus our
estimate of c750mbo, plus attributing value to the recent
50-150mbo of additional in-place resource discovered with
the TGT-10X well.
2. Higher recovery factor: A 50% recovery factor, which is
at the higher end of management guidance of 45 - 50%. It
compares to our estimate of c40% and the Competent
Persons Report of 28-35%, albeit this was based upon
limited available data.
3. Higher oil price plus lower discount rate: $100/bbl
long-term Brent oil price at an 8% discount rate versus our
estimate of $90/bbl at 10%.
4. Higher payout ratio: 95% payout ratio versus the current
guidance of 50% of FCF.


......We'll see Jamie, lad  ;-)

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rhomboid1 24th Jan 670 of 673

Thx EE

As ever analysts seem to veer off in all directions but the Numis note looks a better way of approaching the task of valuing disparate entities..but I'm biased.

Barring a VN disposal the 2 key points for SIA valuation are connectivity/recovery factors and agreeing a solution to FPSO capacity constraints.

The next 2 months should see how adeptly mgt address the lack of clarity amongst analysts.

I've got my money firmly on mgt delivering big style

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emptyend 23rd Feb 671 of 673

Stumbled across this recent research piece on Vietnam's Oil & Gas industry, written by a Vietnamese broker. There are a number of references to the continuing depletion at Bach Ho....and, more specifically, this comment:

Vietnam no longer looks capable of producing 400,000 barrels per day like it could earlier in the century. Meanwhile, the demand for oil and gas increasingly continuously. Vietnam is trying to increase its crude oil production by expanding Exploration & Production (E&P) activities abroad at the same time, the State and PVN will have to open up foreign investors to reaping more of the reward. According to PVN, the country’s oil production will reach 420 thousand barrels per day (kbpd) at its peak in 2014, reflecting a CAGR of 3.7% in 2009 to2014. Domestic production is then estimated to decline dramatically to only 150 kbpd by 2020.

......In other words, there is a big production gap to be filled - 420k falling to 150k in only 6 years, based on current plans - and relatively few fields capable of filling some of that gap!

Watch this space, IMO......

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emptyend 14th Apr 672 of 673

FWIW, Numis update:

Numis Securities has labelled its top picks in the oil sector in the aftermath of the recent Oil Market Report by the International Energy Agency (IEA).

The broker’s top picks include SOCO International, Genel Energy, Premier Oil, Faroe Petroleum and Borders and Southern.

These are ‘stocks that we expect to continue to perform in a flat oil price environment despite rising costs’, said analysts Sanjeev Bahl and Kathryn Leonard.


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rhomboid1 14th Apr 673 of 673

Thx EE

That's an eclectic mix of stocks by any measure, I'd prefer to back those stocks who show due regard to shareholder returns , both in terms of ROCE and , selfishly I know, dividends or the equivalent thereof.


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