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)
417.06p
Change
4.9  1.2%
P/E (fwd)
10.5
Yield (fwd)
4.2
Mkt Cap (£m)
1,369



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


1272 Posts on this Thread show/hide all

oilretire 14th Nov '11 733 of 1272
2

Just a general article on Russian (Lukoil in the main) moves within Vietnam

http://www.upstreamonline.com/live/article288879.ece

.....A senior Petrovietnam official said last month that Russian oil and gas players are expanding their presence in Vietnam with three operating companies - Gazprom, Zarubezhneft and Lukoil -- while TNK-BP is in the process of taking over assets newly acquired from its shareholder BP.

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emptyend 14th Nov '11 734 of 1272
1

Complete aside this time - but there is a major volcanic eruption going on at the southern extreme of Block V in DRC. Nowhere near Lake Edward, where the seismic is likely to be shot in the coming months, but perhaps an interesting diversion for the few tourists?

ee

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extrader 15th Nov '11 735 of 1272
2

Hi ee,

Re your 732, I assume that when RC talks of "acquiring" the whole of the co, he means "selling" - I'm not sure where shareholder return would otherwise come !

Unless it's a Freudian slip - and Soco's thinking of using some of its TGT cashflow to keep/expand that exploration pipeline from Africa ?

ATB

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emptyend 15th Nov '11 736 of 1272

In reply to extrader, post #735

Yes - I imagine it is a misreporting by the journo. The meaning is clear.

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StrollingMolby 15th Nov '11 737 of 1272
6

Another forward oil sales snapshot:

SINGAPORE Nov 15 (Reuters) - Asia-Pacific crude market rose on Tuesday after Vietnam sold Te Giac Trang for January at higher premiums as the grade gained acceptance among end users.

* TENDERS

- Vietnam's PV Oil sold three cargoes of Te Giac Trang crude for January loading to Shell and Taiyo Oil at premiums between $3.50 and $4 a barrel to the Minas formula, traders said, although this could not be confirmed.

The cargoes will load on Jan. 1-5, 9-15 and 16-31. The cargo sizes vary between 200,000 barrels and 400,000 barrels.


http://af.reuters.com/article/energyOilNews/idAFL3E7MF1B420111115

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Spurticus 15th Nov '11 738 of 1272
6

and Minas formula is currently at a healthy premium to Brent, of $3-4:

http://af.reuters.com/article/energyOilNews/idAFSGE7A900U20111110?sp=true

This would put the Minas formula at $3-$4 a barrel above dated Brent, traders said. "Minas must be the most expensive crude in the world," the trader said.

So TGT crude is "probably the most expensive crude in the world." Where's Orson Welles when we need him?

(current sp = 306 pence, I'm Baffled)

Regards,

Baffled

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emptyend 15th Nov '11 739 of 1272
7

In reply to Spurticus, post #738

So TGT crude is "probably the most expensive crude in the world." Where's Orson Welles when we need him?

(current sp = 306 pence, I'm Baffled)

...mmmmmm....it is a puzzle. c$120 per bbl and an entitlement to nearly 60% of TGT production will tell its own story in the figures by the year-end....ballpark revenue from TGT should be running at c. $2.4mn per day (c20,000*120).....maybe $2mn net cashflow per day? Even with production at present of only 35,000bopd at TGT.

$2mn net cashflow per day is a rate of $730mn pa.....which isn't bad for a company with a market cap of about $1.67bn....... ;-) 

ee

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ExTownie 15th Nov '11 740 of 1272
1

Do we have a figure for the recoverable costs which give rise to the increased share of production - In other words after how much revenue does the 60% share of TGT revert to 30 percent?

Thanks,

ET

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Isaac 15th Nov '11 741 of 1272
1

In reply to emptyend, post #739

...mmmmmm....it is a puzzle. c$120 per bbl and an entitlement to nearly 60% of TGT production will tell its own story in the figures by the year-end....ballpark revenue from TGT should be running at c. $2.4mn per day (c20,000*120).....maybe $2mn net cashflow per day? Even with production at present of only 35,000bopd at TGT.

$2mn net cashflow per day is a rate of $730mn pa.....which isn't bad for a company with a market cap of about $1.67bn....... ;-) 

ee

Have you considered emailing that note to Soco?

Just that they don't seem to want to buy back and cancel shares at this silly price. With such a large cash pile on the balance sheet and huge cash flow it leaves me baffled.

It is the single most obvious way to add value to the company without drilling risky wells in the bongo bongo land yet we don't seem to want to buy back shares at the current price!

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peterg 15th Nov '11 742 of 1272
4

In reply to Isaac, post #741

Have you considered emailing that note to Soco?

If you really believe they're not capable of working out the likely cashflow for themselves, what on earth are you doing holding shares in the company?

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Isaac 15th Nov '11 743 of 1272
5

peterg

Let's make no mistake, we have a very capable and shrewd management team.

What baffles me is why they don't buy back and cancel shares at the current prices?

If Readers on these boards & Analysts can work out the NAV with the average price target being £4.70 then surely the management can run the numbers as well and work out the share price is at a significant discount to the underlying value then they should be buying back shares with such a huge growing cash pile?

What would you do Peter if you was in their boat?

I find it disturbing that they keep talking about acquisitions in SE Asia when their share price is trading at a significant discount to NAV!

Acquisitions more often then not tend to be expensive and destroy shareholder value so I don't support this strategy at all.

Please note, acquiring companies and thus being a director of a much larger company should not equate to larger remuneration pots, I repeat SHOULD NOT.

Soco's strategy is to Recognise Opportunity, Capture potential & Realise the value. So I appreciate we are working on realising the value of TGT and this is work in progress but if you buy back shares at a price cheaper then the underlying asset is worth then surely the value per bbl of TGT per Share increases so why would you not carry out such a strategy when the end goal is to realise the value?

Surely this seems very logical?

I think management need to be very clear what they intend to do with the cash as in their strategy I can't see anything about building a large cash pile on the balance sheet from TGT production.

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tournesol 15th Nov '11 744 of 1272
4

Isaac

just suppose that the Euro implodes and there is a melt down in the global economy with oil demand collapsing and oil prices going into free fall. what would you expect to happen to share prices?

just because Soco's SP is below its NAV does not mean that it cannot fall much further. Maybe that's what is in management's thoughts......

buying shares now requires the buyer to take a view that the SP has bottomed and is unlikely to fall further. I do not see it as management's job to make calls like that. Maybe that's what is in management's thoughts......

In the doomsday scenario, a large cash pile would allow Soco to acquire assets/companies very cheaply - even more cheaply than today. Maybe that's what is in management's thoughts......

Fact is that barracking from the sidelines does not help anyone - including yourself. All it does is fritter away energy.

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tournesol 15th Nov '11 745 of 1272
7

Incidentally, I liked Encore's buy back strategy some time ago. They found themselves in a position where net cash per share was greater than the share price. They realised that in that case using cash to buy shares back resulted in an immediate increase in cash per share. So they instituted a strategy of buying back whenever cash/share > SP. That generated an immediate and unarguable benefit. Buy backs simply because management think the SP is over-sold are less reliable as a means of improving shareholder value.

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emptyend 15th Nov '11 746 of 1272
9

In reply to ExTownie, post #740

Do we have a figure for the recoverable costs which give rise to the increased share of production - In other words after how much revenue does the 60% share of TGT revert to 30 percent

Yes. From the last AR. They transferred $313+mn of accrued expenditure and will likely have spent more by now, drilling etc this year. The actual recovery process will surely be more complex than your comment suggests(not least because a chunk of the recovery is from the minority shareholder!) but, on the face of it, it would seem that cost recovery is likely to continue until at least Q3 2012.

As for Isaac's comments, the company are well aware of my opinions. I try to offer my opinions well in advance - and then leave management to get on with their jobs. There are a million possible reasons why they don't pursue a course of action that some outside may think desirable - and it is fruitless to speculate why. For all we know they may have been unexpectedly plunged into a close period .....;-)......but, as tournesolf notes for example, there is plenty of euro turmoil to consider. They are in possession of the full facts and we are not......so why waste time wondering?

ee

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ExTownie 15th Nov '11 747 of 1272

In reply to emptyend, post #746

Thanks ee

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peterg 15th Nov '11 748 of 1272
4

In reply to Isaac, post #743

What would you do Peter if you was in their boat?

Were I in their boat then buybacks is something that might well be worth consideration. However, the overriding consideration is that I am not in their boat! Management have access to a range of data and information that I (and you) can only guess at. I believe that they are much better able than I to run an O&P company, which is why I hold Soco stock, and pay them handsomly to manage the company, rather than investing my cash in Pete's Petroleum (one slighty used oil well) Ltd. It appears from your posts that you feel better able to manage Soco than the current management, in which case I'd suggest you look seriously at the possiblity of setting up your own E&P!

 

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Isaac 15th Nov '11 749 of 1272

Thanks Pete,

It's not really a case of me being able to run an E+P better then Soco management, as you say it is easy to criticise from the sidelines, but I think all criticism should be well recieved and should be seen as a gift. If I was running a business I would welcome what pointers my critics made rather then what positives I recieved as in effect they are helping me by telling me how I can run my business better to maximise returns.

Ofcourse the critics are not always right, but that does'nt mean they should stop criticising.

As you say I don't have the information that Soco have to hand so clearly they are in a better position then I am to decide on what course the company should take.

If I were the management and I was 67, I don't think I would want to embark on a new full cycle e+p programme which is kinda what they are trying to do in Africa and based on the results to date I would probably scrap Africa apart from Block V which I think is the only prospective acreage left in Soco's Africa portfolio.

I would aggresively buy back shares at the current price, I would then look to ramp up TGT production and in the interim I would look to farm down TGD - once that is done I would look to do a deal for the whole company but leave some upside exposure to TGD/Block V, perhaps selling the assets to a company which allow Soco shareholders to take cash and shares in the acquiror.

That is what I would do.

Right now my gut instinct tells me a deal probably won't be done for another year as Soco would want to maximise value from TGT and I think for them to be able to do that they would need production date from Phase 2 of TGT and production start up does'nt occur until August 2012 and then you need 6 months production data etc

This also makes me think it is very possible that we will have another stab at TGD, if they start drilling in March and it takes 3-4 or 5 months to complete it will be in time for TGT Phase 2 production. I just hope they intend to farm down their 65% interest as that well could become very expensive....

Basically this time next year we will have an even better idea of TGD, Phase 2 would have come online, we would have interpreted Block V Seismic data & would have decent production data from Phase 1 as well as a large cash pile. We should also have a much better idea of CNV Gas, Gas Liquids and Oil as the separator is expected to be installed in Q1 2012.

I just think this time next year we will be in a much better position to do a deal then we will be in say Feb/March 2012 as more of the unknowns would be clear, I also expect Oil prices to be higher then current levels.

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ArtNouveau 15th Nov '11 750 of 1272
2

If TGD came off then I think a lot of us would be retiring!

We can dream. ;)

ArtN

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extrader 15th Nov '11 751 of 1272

Hi Isaac,

I tend to concur with your suggested timeline set out in 749, tho' I'd personally prefer to get paid out earlier.....

Who knows ? Perhaps that IS Soco management's cunning plan.......in which case we can all wait quietly (and patiently ?) for them to implement - non ?

Anything that happens earlier than late 2012/early 2013 woul then be a bonus !

GLA

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emptyend 16th Nov '11 752 of 1272
13

In reply to Isaac, post #749

If I were the management and I was 67, I don't think I would want to embark on a new full cycle e+p programme which is kinda what they are trying to do in Africa

This is the nub of your problem. There isn't the slightest chance that the exec management will be doing that. It is ALL about trying to add value to the company.

I would aggresively buy back shares at the current price, I would then look to ramp up TGT production and in the interim I would look to farm down TGD - once that is done I would look to do a deal for the whole company but leave some upside exposure to TGD/Block V, perhaps selling the assets to a company which allow Soco shareholders to take cash and shares in the acquiror.

That is what I would do.

So would I... in every detail. And I have told them that, months ago. However, it is one thing to have a clear idea where one is trying to go - and it is quite another to actually get there. It is like using a taxi.......you tell the driver where you want to go, and you leave him to get you there........you DON'T keep telling him every 5 minutes that he is going the wrong way - he has "the knowledge" and you do not! So you leave the driver to it. And if, due to unforeseen circumstances such as road repairs, gas leaks or the coronation of the Queen of Sheba, it should turn out that you can't get precisely to where you would like to be, then it is the job of the driver/management to get you as close as possible.

That is exactly what they are trying to do - even if it might look at times that they are not going the quickest route to get there. That is life - and nothing anyone on bulletin boards can say will make the slightest difference.

ee

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