This thread is intended solely as a place to discuss analysts' notes on SOCO.
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This thread is intended solely as a place to discuss analysts' notes on SOCO.
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Completely different to Encore in every way.
If the wall of cash that's coming isn't enough to make them understand then nothing will.
10 Oct. Morgan Stanley downgrades SOCO International from overweight to equal weight, target price cut from 435p to 350p.
MS's view is predicated on the thought that a deal won't happen for a few months, given that no-one seems to have bid prior to TGT start-up. It is also a reflection of the underperformance of many other sector stocks in recent weeks, which makes others more attractive than they were in relative terms.
But IMO that still doesn't mean that equal weight is justified. As I've pointed out many times, you won't necessarily get any warning at all of a deal......there was no prior warning when they sold out of Yemen (4th Feb 2008) or Mongolia (1st April 2005) or Tunisia (18th November 2004) or Russia (20th August 2001) and there was none when they did the deal with Gazprom re Odex (10th April 2003).
The oil industry in general is extremely good at doing deals without giving the street prior notice. They do deals all the time re farm-ins, farm-outs, asset swaps etc. I don't think one should make ANY assumptions at all about deal timing.....the only thing that matters is where one thinks value lies for a bidder - and the rest will fall into place. We just don't know when.
ee
Like I've said already.
The catalyst will be one of the two :
1) an RNS announcing an agreed bid
2) an RNS announcing the first results with cash flow numbers from TGT
i'm hoping an RNS with one of the above still gives a chance to buy more before the market wakes up.
There is a new sector note out by RBC today, raising NAVs for all UK-based E&Ps as a result of recent FX moves.
For SOCO they have raised their NAV to 569p (of which 511p is core) and forecast 2012 cash flow of $1.92 per share and an EPS of $1.59. This puts SOCO at present on 2012 multiples of 2.9x cashflow and a 3.5 P/E ratio.
Our favourites larger names include:
SOCO International - The stock is trading well below our revised core NAV
of 511p/share, the continued ramp-up in production from TGT should help
unwind this discount.
...as would a deal, of course ;-)
ee
IMS out today. Disappointing in the Congo with MIM-1, though with some interesting data re the Vandji. Also they are slower than planned to perforate some of the Miocene intervals in the TGT wells, due to continuing to assess the Oligocene sweep potential from existing wells (ie trying to answer the question of whether another oligocene well would be needed in due course, due to the underperformance of one of the three wells in the oligocene).
Overall production rates are unlikely to be affected by that, because the Miocene (which hasn't yet been perforated in three wells) is very much more productive than the Oligocene (see the flow data on the explo well tests). Still expecting at 55,000bopd plateau production, but will be a few months later.....
...which RBC say will trim their H2 2011 cashflow forecast and the outcome of the oligocene reservoir assessment (ie if an extra well is needed) could trim their 511p core NAV estimate. The MIM-1 well takes their risked total NAV estimate down by 8p to 561p.
Needless to say, the market has over-reacted initially, as I expect will become clear.
ee
The management need to step down, the continual drilling of dusters is unacceptable wastage of shareholder funds IMO.
4 years and no commercial find, please resign.
Oh give it a break will you?
I'm surprised you haven't called for an assault on Soco Towers with a pitchfork weilding, torch carrying mob for the (temporary) problems with the tgt production.
One minute you laud them, next you're setting up the gallows.
No.
This is not an environment to be spending millions on wells & coming back with dusters.
I don't lose sleep over a few bad wells, but a string of consistently bad wells over 4 years is unacceptable.
Shareholders should look to recruit one or two directors with deep extensive experience of drilling HPHT wells to replace Cagle and Story so we can extract the oil from TGD.
I have 0 confidence in Cagle/Story's ability to extract the value from TGD - Quite frankly I think they are out of their depth.
They need to step down so shareholders can extract the value IMO.
shame about MIM-1, but hey these things happen, I'm more concerned about TGT production figures and the change in emphasis, its not clear to me if we plan to be producing 55k per day any more by the end of the year, or if we plan to have a plan to get to 55k per day in q1 2012 as quoted by chris on the fool,
http://boards.fool.co.uk/and-regarding-tgt-production-quot-12397590.aspx
going beyond 55k as was predicted at the agm, feels further away this morning,
K
What's the difference between "by year end" and "by 1Q12"? If anything, 1 month, 2 months? I.e. nothing significant in the grand scheme of things, meanwhile the oil in the ground ain't gonna get bored and go somewhere else.
Overreaction IMV, probably more to do with Greece/EU related sentiment rather than anything else. Probably a decent top up opportunity actually.
Isaac proposes that Soco should stop drilling dusters. The logic of his suggestion, is that they should stop exploring and restrict themselves to drilling in places where oil is already known to be present. That would leave them with several alternatives:
1) they could acquire unappraised discoveries made by successful explorers and start their own work at the appraisal stage (like XEL?)
2) they could acquire discoveries which had already been appraised and tackle the development (like DEO?)
3) they could acquire developed oil producing assets and just produce them (like ENQ?)
All of which could well serve as the basis for a successful business. But it would not be a full cycle Exploration & Production business would it? Nothing wrong with businesses like XEL, DEO and ENQ. But if that's what you want to invest in, why not do so? Why invest in a self confessed E&P and then complain because it does the E part? It's like investing in Tescos and complaining because they sell groceries. Of course they do. That's what they are in business for.
And as for suggesting that the board of an E&P should resign en masse because of a dry hole......
The time a business needs top class management is when it experiences set backs. Any modestly competent professional can run a successful business where everthing has already fallen into place. It takes a higher order of competence to overcome obstacles and difficulties, to drive through transformative projects and to create a real success in the first place. I'm afraid that Isaac's approach of mercilessly criticising management at every opportunity whilst failing to recognise their tremendous achivements over a long period is the exact reverse of intelligent interaction between investors and managers.
Isaac, for goodness sake, back 'em or sell 'em is clearly the only investment strategy that works. Slagging off the teams responsible for your holdings makes no sense at all.
T
going beyond 55k as was predicted at the agm, feels further away this morning,
The time a business needs top class management is when it experiences set backs. Any modestly competent professional can run a successful business where everthing has already fallen into place. It takes a higher order of competence to overcome obstacles and difficulties, to drive through transformative projects and to create a real success in the first place. I'm afraid that Isaac's approach of mercilessly criticising management at every opportunity whilst failing to recognise their tremendous achivements over a long period is the exact reverse of intelligent interaction between investors and managers.
Isaac, for goodness sake, back 'em or sell 'em is clearly the only investment strategy that works. Slagging off the teams responsible for your holdings makes no sense at all.
Hear hear!!!!
Shareholders appear to feel that simply because they have the technical capacity to communicate with managements via email that they should use that capability to gratuitously and regularly abuse them for well results that are beyond their control. Even if everything goes "as expected" with an exploration well, four out of five wells will fail. It makes no sense whatsoever for shareholders to continually criticise E&P managements for doing what they ware paid to do - which is to risk shareholders' money on exploration drilling!
And it is completely and utterly counterproductive! Stock markets overall are down some 20% since 2007 - and it is observable that the abuse of managements has increased substantially since then, despite things like stock market valuations and the oil price being well beyond the control of ANY management team!
In the case of SOCO's management, they have found and delineated two major fields in Vietnam and still have stong prospects of unlocking a third at TGD. Exploration drilling rarely goes completely as predicted - and it remains the case that, even perhaps in Africa, SOCO's management have added value over the years.....
....we should see just how much has been added at some point in the fairly near future, IMO.
ee
RG
I understand the type of business Soco are involved in, my problem is the consistent failures over a 4 year period. if you continue to piss away money like this you eventually go bankrupt.
So WHATEVER is going wrong needs to be addressed, maybe the person interpreting the seismic needs to be sacked?
What is doubly annoying is the delay in TGT produciton ramp up!
And NO I did not say management should resign because of A dry hole, they should resign because of a STRING of Failures over the last 4 years as they are clearly NOT performing. They get paid HUGE sums of money for taking accountability and responsibility, they ARE responsible for the failure of a string of wells the last 4 years.
The setbacks are operational ones - I have recognised their achievements but I am not going to keep praising them for something they achieved 5 years ago!
The performance SERIOUSLY needs to improve & this level of failure is simply unacceptable - This is an exploration business, it needs to do what it says on the TIN which is to find OIL.
I am a seller of Soco, tell the management to sell up and I will be gone.
going beyond 55k as was predicted at the agm, feels further away this morning,
It is indeed further away - but not by a massive amount.....
>> well this is not really the issue it's more that so far we're a bit below estimates, as you say below,
Oligocene in one well indicates that capacity at that well would be c3,000 bopd lower than expected - but that could easily be MORE than made up by production in the other wells.
>> well yes it could be, made up, or the next well could be c3000 bopd lower than expected too ?
>> then you say,
I believe that management may have hoped to see plateau production at 60-65,000 bopd from phase 1......and the news on the oligocene may mean that this expectation has been trimmed to 55-60,000 bopd, once the Miocene has been perfed and brought on. That would, of course, still be a beat of market expectations!
>> well yes, of course then it depends on what your expectation was. The management clearly flagged their expectations at the agm, mine were in line with that.
but regardless of this, if they put out a IMS saying were were ahead of schedule, and production from zones was higher than planned I would be more bullish. It makes little sense to suggest I should not be less bullish when production is below estimates. Hopefully we'll soon see the plateau figures, and get a bit more info. As I recall cnv (which is different I accept), ended up below expectations ? lets hope it doesn't happen again.
K
PS I'm not blaming anyone for this, I'm just trying to be realistic about the assets and possibility of sale and timing, it's natural to be more cautious if production flows are below estimates