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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Reportedly there is a passing reference to SOCO International (LON:SIA) as a bid candidate in a macro M&A piece from Nomura:
Nomura suggests a pick-up in merger activity and tips 35 possible targets
I'd be quite surprised if Soco wasn't in the list if it was as big as 35. I'd probably put them in the top 5-10 of such a list. They have a stated policy of selling off assets and Vietnam is pretty much the whole company now. TGT has been brought nicely into production so barring any hiccups it is a pretty nailed on candidate.
I'd be quite surprised if Soco wasn't in the list if it was as big as 35. I'd probably put them in the top 5-10 of such a list.
As big as 35???
You realise this list includes the likes of :
Avocet Mining, First Quantum Minerals, SAS AB, Panalpina Welttransport, DSV, Beiersdorf, Distribuidora Internacional de Alimentacion, John Wood Group, TAG Oil, Banco Comercial Portugues, Banco BPI, Piraeus Bank, Schweizerische National Versicherings-Gesellschaft, Nobel Biocare, Spirent Communications, CSR, TomTom, Logitech International, Severn Trent, Pennon, Endesa, Informa, Aegis Group, TDC, and TalkTalk Telecom.
i.e. larger stocks in different countries - you are probably looking at 35 from a total of > 1,000.
MS......EPS: 2011 22.5 cents, 2012 49.1 cents ..... Revenue: 2011 $199.1mn, 2012 $420.1mn
ML.......EPS: 2011 27 cents, 2012 57 cents........ Revenue: 2011 $249mn , 2012 $535mn
RBC.....EPS: 2011 38 cents, 2012 147 cents.......Revenue: 2011 $200.3mn, 2012 $768.1mn
A further datapoint on analysts' forecasts comes from JP Morgan, along with their price target of 420p:
JPM.....EPS: 2011 33 cents, 2012 67 cents.........Revenue: 2011 $256mn, 2012 $519mn
There is an interesting aside to their estimate of NAV, though......
We note the recent sale of assets by ConocoPhilips to Perenco which implied a reserves value of $c.23/bbl vs our NPV of $13/bbl suggesting significant upside to our numbers.
...which strongly suggests to me that they are bonkers to persist with using $13/bbl !!!
And whilst on the subject of "garbage in, garbage out" they also say:
We acknowledge that our models use a relatively conservative oil price deck (2012E $95/bbl, 2013E $90/bbl 2014E+ $85/bbl).
....so bear in mind that Brent is currently about $123.50 and that SOCO International (LON:SIA) have just sold three cargoes at £8-£9.50 premia above Brent!
Their estimates also assume a very gentle ramp up of TGT production to 55,000bopd by Q3...
So I do rather wonder whether their ideas are anywhere close to being in touch with the real world!
Indeed they seem to wonder this themselves, as they say:
We currently value SOCO’s reserves in Vietnam at a NPV of $13/bbl. If we were to
apply the implied $23/boe from the transaction, our core NAV would increase by
70%, from 351p to 598p. Although we acknowledge that we use c.350 mmboe of
reserves for TGT vs guidance of c.300-500 mmboe (booked reserves are slightly
lower as they have not been updated), we note that Conoco’s assets are already fully
cost recovered whereas SOCO’s are not and therefore would likely be more valuable
on a per bbl basis. Although we keep our core NAV as it is, we believe the
transaction underscores that Vietnamese assets are more than the market currently
gives credit to, and that as per previous notes on the subject, SOCO could be worth
c.450-500p in the event of a takeover, just by using a lower discount rate (ie cost of
capital) and without even attributing any value to exploration. However, in the short
term, TGT production and development guidance will likely remain the key
so....suppose that the results show 2P reserves revisions based on 450mn bbls at TGT, and suppose that production increases to 55,000 bopd faster than they assume ....and suppose that there is a NOC buyer prepared to pay $20-23 per barrel. And suppose they commit to drill TGD. Anyone care to hazard a guess what JPM might say then about NAVs for a deal??
I don't follow their comment about cost recovery - AIUI costs are recovered via additional entitlements during cost recovery (but of course the details will be in the PSA somewhere). Lord knows what they have assumed re the cost recovery from the 20% minorit y partner in Soco VN (which we know has been rolling up interest at 9% pa for years)
;-)
ee
ps...re cost recovery, I think I've worked out what they mean now. They mean that SOCO's bbls would be more valuable than Conoco's (which I would have expected).........though how they can then possibly make the jump to sticking with their $13 pb nonsense, I really cannot fathom!
FWIW my own guesses for 2011 numbers are:
Revenue $314mn, EPS: 41 cents
This compares with the current 2011 analyst estimates from Ft.com:
Revenue: Consensus: $213.33, range $133-$308.87
EPS: Consensus 26.19 cents, range 12-61 cents
But of much greater interest will be what the analysts (and the market) make of 2012 and going forward.....so I'll be interested to see what their 2012 estimates are adjusted to after the results, especially in relation to NAV, bearing in mind JPM's comments reported in my previous post. Because, when all is said and done, it is the NAV which is important....along with what the industry's own estimates of that NAV might be.
ee
A busy day beckons then what with news from Soco, but also FXPO, Marstons and IND I believe.
Thanks for the detective work ee and log. Wednesday should be fun!
I have far too much of my portfolios in Soco and Tullow.
I have far too much of my portfolios in Soco and Tullow.
Hopefully you'll be saying the opposite on Wednesday though.
I'm a bit worried that Soco might not say very much as I don't think the market will like that much at all. If they just produce a fairly standard boring report with no forward guidance on ramping up TGT or news on TGD I think we'll be below 300p again. While I think that is a bit unlikely I wouldn't rule it out.
Log
Log, thanks for the gloomy warning!
If that happens, I will be out of gambling with spread bets but holding for the long term; I have been patient for 12 years and a minor delay will not change that!
MD
We were promised a plan to ramp up production to 55k by the end of Q1, I would hope that the plan will be finalised and that we will be told what it is tomorrow, I think this target was set in December, so it's not unreasonable for us shareholders to want to know what's going on and when this will be done. I have no doubt they have good reasons for this, I and the market worry what these good reasons might be. I think a clear plan and target of when production can be expected to hit this target will remove a worry. Updates re tgt phase 2 etc, will help too. I share your worry that the statement will say little, and we'll be left waiting until the end of the month for the plan, and that might be phased in over a few months, pushing full production for tgt 1 into tgt2. Due hope they're no issue with any of the hardware on the ground (or in the sea to be accurate), that is making them cautious about increasing production.
K
Thanks for the detective work
No detective work required. I found out weeks ago it was scheduled for the 14th and said so on a number of occasions - but sometimes people don't believe things until they read them in the papers ;-)
Re the possibility that not much will be said, I don't doubt that there will be some who are disappointed. But IMO the important thing is to get the technical story out in relation to the TGT reservoirs - and if that isn't yet being accompanied by a 55,000bopd RNS or a reserves upgrading then at least the market has had the base information as a proper context for any figures released later.
We were promised a plan (to ramp up production to 55k) by the end of Q1
You need to be very careful how you read that line......I have inserted brackets to make it clearer ;-)
Definitive news on TGT production increase timing or on the TGD drilling plans seems to me to be unlikely (given that the TGD decision has always been flagged as something for April).
It isn't immediately obvious to me whether it is best to play this endgame by laying all the company's cards on the table or by keeping some back to be played later. I'd prefer it all to be laid on the table now (and have said as much to the company) but management are the only ones who can see the cards and they are the only one who have (in bridge terms) have heard the bidding so far - so it is up to them to judge whether they have a "lay-down hand" at this point or whether some finessing is required to make all the tricks on the way to the slam. Ultimately it isn't the way that the cards are played which is important - it is the end result! And all I care about is making the slam - not whether the company can yet lay down all its cards with a flourish!
ee
yes fair cop ee, my point wasn't that clear.,
Definitive news on TGT production increase timing or on the TGD drilling plans seems to me to be unlikely (given that the TGD decision has always been flagged as something for April).
I'm surprised that you don't think news on a tgt production increase is unlikely. I would have thought that the company given the opportunity to announce the plan with the results, after months of planning, would take the opportunity to release the plan a couple of weeks before their self imposed target. I would hope that the plan would give some guidence to implementation timing too. Could be I'm going to end up disappointed here.
PS (I didn't intentionally mention tgd, though there might have been a slip of the keyboard in haste - I have previously suggested that info on tgt 2 and tgd would be the issues I'm interested in hearing more about, thanks for the reminder of the april date for tgd )
I'm surprised that you don't think news on a tgt production increase is unlikely.
I would expect them to RNS that news immediately it was all agreed. Hence I assume that they haven't yet had that agreement/meeting. Therefore I doubt that they will have definitive news by Wednesday, though I'm sure they would like to. And I'm sure it won't be through lack of effort.
All I'm saying is that there is a risk that the report says a bit less than one would ideally wish - unless they get lucky with timings (or have planned timings more tightly than you or I would have assumed). Q1 of course isn't yet up - and it would be a swift job to perf if that was what they agree to do.
ee
Yes I take your point. I was really rather hoping that they would announce details of the plans, (ie we've got the production data we need now, we've agreed to perf the other zones in April, will update when it happens), rather than the news that it'd already been done, but that possibility entered by mind as I was typing. I appreciate Q1 isn't up yet, but given there's only 2 weeks to go, I hoped they might surprise us with a slightly early agreed plan !
We'll see,
K
I hoped they might surprise us with a slightly early agreed plan
They still might. But I've never been one to bet on the timing of news. More importantly, though, I do expect them to put considerable effort into demonstrating that it will be no problem to raise production, as and when they decide to do so.....and it remains the case that production isn't lost but is merely deferred until the field would be coming off plateau - which is unlikely to make very much difference to value, in the context of monetising the remaining assets.
ee