Incidental stuff

Thursday, May 21 2009 by
25

NO TA ON THIS THREAD PLEASE - (edit) and no pointless speculations either!

I've created this thread just to park stuff in that is only tangentially-related to SOCO's interests and doesn't relate to any of the specific assets.


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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)
420p
Change
7.4  1.8%
P/E (fwd)
10.8
Yield (fwd)
4.1
Mkt Cap (£m)
1,394



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


1272 Posts on this Thread show/hide all

Spurticus 12th Jan '12 873 of 1272
6

In reply to emptyend, post #872

It seems to me now to be completely self-evident that VN is within a few months of meeting the company's trigger for disposals, even if that might have been debatable hitherto

I hope we are close, but it's still all about TGD really, isn't it?

It remains a pretty big unknown, with value to Soco anywhere from $0 ----> $bn (potentially even more than TGT?)

So are we not still in the position that its hard for a buyer to put a realistic valuation on VN? And, yes, they could have some kind of back-in deal for TGD, but easier to wait until 2013? (Unless a deal might involve 'major' expertise being brought to bear on the Q3 drilling?)

I want to be wrong, obviously..

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emptyend 12th Jan '12 874 of 1272
2

In reply to Spurticus, post #873

And, yes, they could have some kind of back-in deal for TGD, but easier to wait until 2013? (Unless a deal might involve 'major' expertise being brought to bear on the Q3 drilling?)

I'd think the last point is highly likely - which is one reason why I think the "sale and farm-in" route is probable.

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nigelpm 12th Jan '12 875 of 1272
2

In reply to MadDutch, post #859


Has it occurred to you that this could be market manipulation for shorting purposes? If you were selling, you would have just cause for complaint.


Not a chance in hell.

You wouldn't begin to understand the levels of independence these analysts have to adhere to.

Do you actually know anyone who works in the industry?

I have several friends who do and believe me it's not a bit of mucking around with mates trying to manipulate the market.

I won't comment on your other points as they are at a completely different end of the scale to my own.

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emptyend 13th Jan '12 876 of 1272
4

Worth noting that tonight's RNS flags their intention to keep buying shares at the rate of 80-90k per day all the way up to the AGM. Close period programme will apply until the Prelims (14th March).

Of course, it is quite possible that circumstances will change - and intentions will change a bit too.

ee

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kenobi 13th Jan '12 877 of 1272
1

yes, pretty bullish from the management, good for us all I hope,

If all goes well this is very low risk, hopefully they'll buy as much as possible before the price starts moving.

we have to keep this in perspective though, it's relatively small beer, 25 M on a billion pound company, is only 4%, so while a useful contribution at low cost, using excess cashflow its not that significant 4%, and with over 1% bought back already. Of course if TGD comes off, and vietnam is sold off closer to 9 pounds than 6 pounds then the 5% benefit becomes 10% and even at my relatively modest holding, that becomes significant.

good week end one and all,

K

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Spurticus 16th Jan '12 878 of 1272
5

Morning.

http://af.reuters.com/article/energyOilNews/idAFL6E8CG0O720120116

Soco International has told investors it is examining acquisition opportunities in south east Asia, West Africa and Egypt worth in excess of $100 million, suggesting it is targeting more ambitious projects than in the past.....

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loglorry 16th Jan '12 879 of 1272
8

I hope that Reuters article isn't correct. Last thing we need is all the cash flow from TGT being blown on a speculative drilling campaign. There is a perfectly good prospect in TGD that they could work to unlock value on without spending hundreds of millions on deep water drilling. There seem to me to be many better ways to unlock value.

Log

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Fangorn 16th Jan '12 880 of 1272
1

Pity they aren't looking at East Africa (:
But concur, I'd rather they didn't blow cash on an acquisition even if many oilies are currently undervalued

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nigelpm 16th Jan '12 881 of 1272
3

I disagree strongly. What's $100m when you can make that in 50 days? For the chance of leveraging the $100m into 5/10x the amount.

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LongbeardRanger 16th Jan '12 882 of 1272
8

In reply to nigelpm, post #881

Well it all depends on what, precisely, they plan to do, doesn't it? It's all very well to talk about the "chance" of leveraging the cashflow into greater returns, but that is meaningless without knowing what risk they're running in taking that chance...

And with respect, I do hope management aren't so blase about $100m as you appear to be...;-)

If they get a good deal, of course they should do it, but at the same time what is a little concerning about these noises is that it suggests their focus isn't on outing the value already in the company, when we have all been assuming that that was what they were focussing on. Management really need to focus on narrowing the NAV discount IMHO, rather than expansive and expensive ventures elsewhere. It's true that the two aren't mutually exclusive, yes, but at the same time it does feel a little disturbing to hear of grand ventures elsewhere. While on balance I still feel able to trust the management, and am not in principle against a refreshing of the explo portfolio, it's definitely a situation we need to keep a close eye on.

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extrader 17th Jan '12 883 of 1272
2

Hi Longbeardranger,

Don't know how long you've been flwg the story, but there's usually been a 'son-of-soco' in the wings, either as a sweeper for assets the buyer doesn't want or - more cynically - a future job for those (people) they don't.

If Soco management can identify new/extra assets that - for whatever reason- help the Soco VN sale along, that's OK by me .

ATB

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thebuffoon 17th Jan '12 884 of 1272
7

I used to think this company was focussed. I used to feel comfortable with the management we had.

I don't think that any longer. That's why I do not currently have a position.

Sure, I can't see anybody losing if you bought in today, but it's not for me when there are other opportunities out there.

I really hope that TGD eventually lives up to it's billing all those years ago. The elephant that was to be explored when other fields had come up trumps. If it does, and TGT goes to plan, then those in today will do very well.

If there are to be any further new frontiers, then the story will continue for quite some time.

Buffy



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peterg 17th Jan '12 885 of 1272
6

In reply to LongbeardRanger, post #882

 what is a little concerning about these noises is that it suggests their focus isn't on outing the value already in the company, when we have all been assuming that that was what they were focussing on.

I think an essential part of outing the value is to continue what they do best - act as an E&P. 

They currently are throwing off large sums of cash. They have 3 options:-

- Say the growth game is over and start paying out out as divs (may suit some but I'm out of here)

- Sit and twiddle their thumbs and wait for an offer (not, surely, the way to get the best deal)

- Or go on doing what we, the shareholders, pay them to do and look for productive uses for that cash. No one serious is suggesting that involves sticking a pin in a map and throwing bundles of cash that way (though you might get that impression reading some posts on this thread). If they come up with a worthwhile deal, great. It may come to something in the hands of SoS, or it may just get sold on with the rest of the company, but either way it has the potential to bring in further value (and to ensure that any buyers can see that a sale is not the only game in town and that they will have to be serious in what they pay).

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Spurticus 17th Jan '12 886 of 1272
4

Buffy,

My view is that they have to start delivering strongly this year. Phrases like "Considerable amount of near term news flow"  have to start meaning something. The market view seems to be a combination of indifference and/or mistrust, as can be seen from the recent traded volumes and the share price.

And I'm not entirely sure what kind of news is likely to reverse that market sentiment. I have a feeling that reserve upgrades or TGD drilling news will be greeted with an indifferent shrug.

It's a relatively safe holding at these levels, but then so is Tesco Glaxo, and at least there's a divi there (sounding like MD).

Spurticus

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davjo 17th Jan '12 887 of 1272
7

One thing we should note is that the "deep water and larger complex opportunities" comment was Morgan Stanley's, not SOCO's. AFAIAA, SOCO have always shied away from deep water as too expensive, so I'd be amazed if they went down that route. Ditto "complex" unless it was basement but I doubt there's much opportunity anyway.

I thinks there's two possibilities here. One, they're looking for some early production to support explo activities poste a SV sale, or, this is the hoho bit, they're looking to sell the whole company and they're just sowing a $100m poisin pill in order to hurry a buyer into action ;-)

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kenobi 17th Jan '12 888 of 1272


Well we're all in favour of them buying assets that prove fruitful, none of us want them to invest in assets which are not productive.

perhaps some company where they have found oil, but cannot fund development and so have a low share price would be a compromise where SOCO could provide expertise and funding at much lower risk (and return of course ) to soco. An example might be Encore recently sold because they couldn't raise funds to develop its resources.

obviously soco wouldn't have been interested in the encore assets, that's just an example,

K

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REO100 17th Jan '12 889 of 1272
1

I think it all comes down to whether you trust management, cash is king, SIA are generating plenty and in this market IMO that is a major positive. As mentioned in post 887 I took the view management were perhaps just reminding potential suitors that it might be time to show their hand.

I also understand to some past holders and investors it might not seem such an attractive investment, that is always their choice and the grass maybe greener elsewhere, but rightly or wrongly I feel quite comfortable that eventually management will realise the believed value in due course. Simply I am happy to see 2012 play out and go from there.

Reo

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davjo 17th Jan '12 890 of 1272
2

I'd also remind folks that there wasn't, apparently, unanimity within the boardroom regarding buyback of shares. Hence, investing $100m in tangible oil assets might represent the thinking of those on the other side of the debate?

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extrader 18th Jan '12 891 of 1272
3

Hi davjo,

Thanks for adding some permutations ! Isn't it great (hello, Mr Market !) that Soco can AFFORD to do all these things at the same time....;->

ATB

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LongbeardRanger 18th Jan '12 892 of 1272

In reply to peterg, post #885

If they come up with a worthwhile deal, great. It may come to something in the hands of SoS, or it may just get sold on with the rest of the company, but either way it has the potential to bring in further value (and to ensure that any buyers can see that a sale is not the only game in town and that they will have to be serious in what they pay).


I can't deny the logic of this. It will certainly be interesting to see what they come up with. Part of the difficulty we all face, ISTM, is that we simply don't know a lot of what is happening behind the scenes. That can lead to incorrect conclusions about management priorities.  For example, I feel concern that focus should be on TGD, rather than new ventures, but for all I know the decisions could effectively have been made re TGD and require little further input from management. The fact that there haven't been significant announcements about TGD doesn't mean it hasn't been high up on the agenda!

SOCO International (LON:SIA) certainly seems to be an odd case - very large cashflows relative to market cap, and a seemingly undervalued asset base, but little immediate prospect of the market recognising the value. It's interesting to speculate as to what would cause the market to reassess the share price - it seems to me that neither imminent demonstration of the cashflows in the interims, nor the likely revisiting of the reserves, will have much effect.  No doubt a successful TGD well would get some attention - one would hope so at least, given the potential size of the structure ;-) - but short of that or an external catalyst such as a bid, the undervaluation is likely to continue for some while. So I guess new ventures are a logical decision, and surely if anyone can put $100m+ to good work in this market, it's SOCO's management.

 

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