LON:PHAR | IMS - May 2011

16th May '11 by emptyend

6 comments 8600 reads

The IMS is out today.

The most interesting element looks to me to be:

The Block V project can be progressed into the seismic acquisition stage over Lake Edward upon approval of the EIA report by the Government of DRC. The Company anticipates the review of the EIA report to be concluded prior to the beginning of the third quarter of this year.

......because if one believed the rhetoric elsewhere one would assume nothing at all will be happening. Soco have been at pains to point out that there was no official response to their EIA report - so lets see how the politics pan out.

I also note more caution about the timing and nature of the expected "new projects" flagged earlier in the prelims.

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Emptyend

Premium Member

6 comments

jseth123

16th May '11

Hi ee,

"I also note more caution about the timing and nature of the expected "new projects" flagged earlier in the prelims."

What do you make of this in relation to the likelihood of a whole-company sale? On another note, I wonder what the company's position would be on selling TGT in an environment of falling oil prices (should that materialise) or with a sharp rise in oil prices (in which case I could see the benefit of holding on to TGT for longer and perhaps even paying dividends!?)...but that certainly does not seem to be the road that will be followed if history is anything to go by. I can rest assured that the history also points to SIA management being better placed than I to determine what creates shareholder value! ;-)

I see on the right that the price has dropped following the IMS. Suffice to say I disagree with the notion that anything in it was worthy of a drop in price. I only wish it would drop towards ~330p at which point I would consider it rude not to top up!

Regards,
JS123

emptyend

16th May '11

"I also note more caution about the timing and nature of the expected "new projects" flagged earlier in the prelims."

What do you make of this in relation to the likelihood of a whole-company sale?

I've not changed my view on that and still expect a deal fairly soon. However, it is quite clear that no-one else (certainly not the analysts!) does. I also noted the comments on the new projects front and found them rather intriguing. It seems to me that there is a change of tone there but whether that has any implications (positive or negative) for deal timing is IMO impossible to say. What it does suggest to me though is that there is more to this than meets the eye - and anyone who thinks there is nothing happening until August first oil from TGT is likely to get a surprise of some sort.

On another note, I wonder what the company's position would be on selling TGT in an environment of falling oil prices (should that materialise) or with a sharp rise in oil prices (in which case I could see the benefit of holding on to TGT for longer and perhaps even paying dividends!?)...but that certainly does not seem to be the road that will be followed if history is anything to go by. I can rest assured that the history also points to SIA management being better placed than I to determine what creates shareholder value! ;-)

My general view is that volatility isn't helpful to getting deals done - and this has very recently been a potential problem. Rising price volatility is in fact one of the reasons why I've been expecting an early deal and pretty keen to see one, though I'd guess recent events are a small blip rather than anything more important. As you say, management has more at stake in that regard than we do.

I see on the right that the price has dropped following the IMS. Suffice to say I disagree with the notion that anything in it was worthy of a drop in price. I only wish it would drop towards ~330p at which point I would consider it rude not to top up!

I topped up right at the bottom on both the last two dips (293p and 330p ish)....now just waiting. The analyst comment I've seen today is generally highly positive about valuations......most agree there was little of note in the IMS, though some point to the small delay in Congo drilling - and the larger target size now being indicated there. None of them have much to say on Vietnam - which I think is essentially because the company has resolutely avoided giving updated guidance. IMO there is good reason for that. One point that Merrill made (which previously no analyst has quantified) is an expectation of $30-60mn being paid retrospectively once the gas issue on CNV is finally resolved.

jseth123

18th May '11

Hi ee,

Thanks for sharing your views. I'm not sure if such praise is irritating or flattering in its frequency but I (and I'm sure all other readers) benefit greatly from hearing your thoughts. So thank you!

"I've not changed my view on that and still expect a deal fairly soon. However, it is quite clear that no-one else (certainly not the analysts!) does. I also noted the comments on the new projects front and found them rather intriguing. It seems to me that there is a change of tone"

Indeed it will be interesting to see how things pan out. It's most futile of me to speculate now - I've taken my position and will not be reducing it until Vietnam is sold (short of anything majorly unexpected), but we are all here to discuss after all! :-) The issue of volatility is one that I also would have thought is not contiutive to making deals and IMO may be one factor which could negatively impact on the sale price.

Regarding topping up, I also got in at 290p (and glad I am too!) but cannot see scope for another top up unless there is a more generalised market sell off. In this situation I'm wary of jumping in too deep although find that exceptions can be made when bargains present themselves (as I would 330p to be!).

Cheers,
JS123

Spurticus

19th May '11

IMS: "The Company continues to evaluate exploration opportunities in South East Asia and Africa. Although it is not guaranteed that any new projects will be introduced in the near term, the TGT oil development in Vietnam is set to transform the cash resources of the Company when it comes onstream in a few months."

- This sounds more like a potentional acquisition / partnership than a sale of VN?

emptyend

19th May '11

The new projects are separate from the sale of VN. There may be some connection between the projects and the sale when facts emerge but the projects do not preclude a sale of VN.

Isaac

19th May '11

ee,

What are your current best guesses for a Sale of Vietnam? Would be nice to chuck a load of Soco cash at Sterling, however not prepared to sell Soco at these low prices to do so just yet.

I do note the following from Carin in their IMS today :

Cairn has been informed that the Government of India (GoI) Cabinet Committee on Economic Affairs which met on 6 April 2011 to discuss the Cairn Vedanta transaction has referred the matter to a Group of Ministers (GoM). The GoM has not yet met.

Accordingly the two companies have agreed to extend the closing date of their Sale and Purchase Agreement in order to secure the necessary consents and approvals from the GoI to complete the transaction.

http://www.advfn.com/p.php?pid=nmona&article=47742583

So perhaps if a sale of Vietnam to Cairn is likely then it probably won't happen anytime soon.

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IMS - May 2011

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Emptyend

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