Should the Soco management resign from the Board?

Wednesday, Jan 25 2012 by
40

Fwiw I think the Soco management should resign from the board as I simply don't think they have done a good job for shareholders at all over the last 4-5 years.

As a long term shareholder I feel they have had numerous opportunities to deliver operationally but have consistently failed.

Most notable failures are

-Lack of Commercial success on TGD & millions spent on various wells.

-Several wells drilled in Africa, again millions spent but no commercial success

-TGT 55,000 bopd year end target missed when it was only late Aug 2011 they talked about such target

-Selling out Baulaung only to see months later reserves upgrade & further drilling success by Salamander

I feel the management's judgement is questionable. It is difficult for the markets to have confidence in a management team that seems to be getting it wrong consistently.

I just think a management team with 30+ years of experience should be able to provide an accurate estimate as to when production targets on a big project like TGT is likely to hit 55,000 boepd. And have the ability to achieve those targets?

Why would you set a public target if you could'nt achieve it?

I mean if you can't work out when targets are likely to be hit then why should Investors have any confidence in their judgement as to which wells should be drilled?

Soco is down 13% over the past month, there are 46 E+P stocks that are up more then 10%. Soco has significantly underperformed in a what has been a bullish market the past 4 weeks. It is clear the market has 0 confidence in Soco.

http://www.digitallook.com/cgi-bin/dlmedia/heatmap??&&country_id=1&tool_url=/cgi-bin/dlmedia/heatmap&index_security_classification_id=-1&sector_security_classification_id=100148&dataplotcatergorycategory=share_performance&dataplotcatergory=price_mvt_3m&orderby_field=value1&action=tool_submit&tool_id=10&hide_extremities=undefined&remove_nas=undefined&username=Invisage&ac=208992&tc=


I don't trust the manageement team to make the right decisions for shareholders.

I would feel more comfortable if the two execs on the board resigned & the chairman indicated to the markets the company was for sale.

I think shareholders have given the management team enough chances over the past 4-5 years & feel enough is enough.






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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)
327.5p
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P/E (fwd)
8.1
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5.4
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1,061



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145 Posts on this Thread show/hide all

Isaac 31st Jan '12 46 of 145
6

In reply to Isaac, post #34

I continue to strongly urge readers to pick up the phone and speak to the management before the final results are published to pay a dividend :

http://www.socointernational.co.uk/contact_us


The management are employees of the company, they work for shareholders. And as a shareholder you are entitled to pick up the phone and speak to the management whenever you wish.

You are well within your rights to ask questions, make suggestions and express views as well as use your shareholding to cast votes at AGM/EGM's etc.

Please don't be put off by ANYONE on these boards or anywhere else - Perhaps they don't want you to learn more about the company & they want to have the edge over anyone else.

Your entitled to conduct your own research & do not have to be spoon fed by anyone on these boards.

I think it is time we got a share of the value that was created from TGT & March 2012 provides an excellent opportunity to return cash to shareholders.

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emptyend 31st Jan '12 47 of 145
2

In reply to Isaac, post #46

The management are employees of the company, they work for shareholders. And as a shareholder you are entitled to pick up the phone and speak to the management whenever you wish.

Of course. Just as long as you don't harass or abuse - as many people seem to. However, there is a limited amount of information that will be made available during a close period. And I really really think that phone calls telling management to consider something that is completely obvious (and which they have been told many many times before in the recent past and which they will have already have been considering very carefully for many months now) is nothing more than a waste of their time - and IMO shareholders should consider whether their own interests are best served by wasting management's time....because time is money - their own money!

That is all I'm saying. Nothing to do with wanting to stop people learning more or any of the other delusions.

ee

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davjo 31st Jan '12 48 of 145
11

In reply to Isaac, post #45

Isaac

I think the Soco management are overpaid and don't have the required skill set to run a FTSE 250 E+P company.

Are you really saying that increasing m/cap from $150m to $1500m through organic growth since listing in London is a result of failed management? I think you need to see the doctor!

 

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Isaac 31st Jan '12 49 of 145
2

davjo

I refer you to TGT - I explained very clearly how the market cap went from $150mn to $1500mn.

TGT- One trick pony and all that.

Over the last 5 years SOCO International (LON:SIA) shares are down 9%

Coastal Up 1000% in the last 5 years

Rockhopper up 700%

Gulf Keystone up 325%

Bankers up 315%

Tullow up 250%

BG up 113%

Ithaca up 100%

Nautical up 97%

Faroe up 86%

GulfSands +78%

etc etc

The companies share prices that have'nt performed in the E+P sector are the ones that have'nt performed operationally. The blame firmly lies with the management as to why no commercial volumes of Oil have been found in the past 5 years. They are fully accountable. They are responsible for the drilling.

Soco is 50% below it's peak hit in 2007. In that period we have had 15% or so inflation. Despite this lackluster performance management still took large salaries and bonuses.

Whilst shareholders have seen a reduction in the share price, management have continued to be paid large remuneration packages - Something does'nt seem right.

Performance has been poor for a FTSE 250 E+P company in a period in which Oil price has been relatively strong as well as volatile.

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emptyend 1st Feb '12 50 of 145
12

In reply to Isaac, post #49

The companies share prices that have'nt performed in the E+P sector are the ones that have'nt performed operationally.

Not true actually. The reality is that the companies that have performed "well" (which you implicitly translate as roughly a doubling in their share price whilst the general market has been going down and the oil price has fallen from its $140+ peaks) have all made some very sizeable new discoveries. It is undeniable that SOCO International (LON:SIA) haven't reported materially-large additions to reserves in the last 5 years, but 2007 reserves in Vietnam were 100.7mn bbls and the latest published 2P figure is 123.4mn bbls, after some production. So it is simply not true to say:

The blame firmly lies with the management as to why no commercial volumes of Oil have been found in the past 5 years.

Blame? - not really. The "blame" lies mainly with the odds of exploration drilling. Sure it is a disappointment that TGD hasn't yet been unlocked - and management can certainly be blamed for getting that one wrong with TGD-2X (though they were blameless for the "gloop" problems on TGD-1X, that was the initial source of the difficulties). It is also a disappointment that the first DRC campaign in Nganzi drew a blank - but then management very prudently (and against some strong advice to the contrary) did a farm-out on good terms and covered the great majority of the drilling costs.

We'll see in the coming months just how successful the TGT appraisal process has been. IMO there is a significant reserves upgrade in the wings, as a result of having established that the structure is bigger than first thought.

Whilst shareholders have seen a reduction in the share price, management have continued to be paid large remuneration packages

Yes the share price has fallen. A little. Nothing much can be done about that. OTOH the person who owns 23.9% of the company still has all his shares and still has his son on the board.......so I guess he takes a different view.

Re your list, ask yourself where Gulf Keystone Petroleum (LON:GKP) would be without Shaikan, or BG without Brazil, or Rockhopper Exploration (LON:RKH) without Sea Lion etc. The reality is that most companies have a "company maker" - and very few actually take that company-maker all the way through development to production, as SOCO International (LON:SIA) have been doing in Vietnam. IMO it is a mistake to regard that as anything other than an operational success - though the proof of the pudding will be in the eating.

ee

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kenobi 1st Feb '12 51 of 145
7

Look,  exploration is risky some you win,  some you loose, TGT we won, ditto yemen, ditto thailand,  so far nothing on tgd and africa as a whole,  thats life it's risky.   I recall ee making a similar point re EO and AEX, 

EO hit big, and AEX drew a blank, if it happened the other way around,  we'd have a different view of the management of those two company's management. 

I do however want to take you up on this point. 

TGD hasn't yet been unlocked - and management can certainly be blamed for getting that one wrong with TGD-2X (though they were blameless for the "gloop" problems on TGD-1X, that was the initial source of the difficulties).

TGD-1X failed,  and there was a gloop issue.   but it's not true to suggest that TGD-1X would have been commercial without the gloop issue.   If this were the case why didn't they drill TGD-2X  in the same place ?

I asked this at the last AGM,  why don't they drill TGD-3  in the same place,   answer because although we got oil at tgd1x,  and there was the gloop issue we don't believe the result would have been good enough to secure the TGD acarage.     So yes,  unfortunate,  but I don't believe the gloop was the only issue.   If it had been then they would have side tracked,   or re drilled the same position. 

Expo is risky,  some win,  some fail,  there's skill envolved and odds,  but it's not all down to management.  

If tgd turns into a discovery,  or we discover an area in africa,  then the management will be geniuses,  if not they'll be a bunch of bozos,    truth somewhere in between,  and well above average in the long run.   lets see if there is an upgrade to tgt and a deal in the next 12 (or slightly over) months,   and we'll take scores at the end of the game rather than at half time. 

Cheers all, 

K

 

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emptyend 1st Feb '12 52 of 145
5

In reply to kenobi, post #51

I do however want to take you up on this point. 

TGD hasn't yet been unlocked - and management can certainly be blamed for getting that one wrong with TGD-2X (though they were blameless for the "gloop" problems on TGD-1X, that was the initial source of the difficulties).

TGD-1X failed,  and there was a gloop issue.   but it's not true to suggest that TGD-1X would have been commercial without the gloop issue.

I didn't suggest that it WOULD have been commercial without the gloop but (given that they got sufficient flow to the surface to flare from only 4% of the perforated interval) I strongly suggest that they would have had a meaningful and very much more useful test result if the gloop hadn't plugged the formation - and that it would have been a technical success, even if not commercial in isolation. It may also have prevented some wrong calls re TGD-2X.

If it had been then they would have side tracked,   or re drilled the same position.

I don't think so. They had run out of time. Yes they might have drilled TGD-2X adjacent to TGD-1X ....but they wrongly thought they would get a better result (and more clearly commercial) if they stepped out. And it seems they did in fact find a thicker reservoir - but one that unfortunately lacked the gas drive seen in the first well.

Expo is risky,  some win,  some fail,  there's skill envolved and odds,  but it's not all down to management.  

If tgd turns into a discovery,  or we discover an area in africa,  then the management will be geniuses,  if not they'll be a bunch of bozos,    truth somewhere in between,  and well above average in the long run.   lets see if there is an upgrade to tgt and a deal in the next 12 (or slightly over) months,   and we'll take scores at the end of the game rather than at half time.

Thats about the size of it. The trick is to keep making incremental improvements to the assets and to keep drilling - and the odds should eventually produce some results. And it is unreasonable to look at the relative lack of success in the last 4-5 years without considering the massive success of the previous 7-8 years. When I first bought in, the market cap of SOCO International (LON:SIA) was about £17mn.......and it has come an awful long way since then!

ee

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Isaac 8th Feb '12 53 of 145
14

Can someone please tell my why the management felt it was appropriate to sub-divide the shares 4 for 1 back in June 2010?

I think it is always good to asses managment on their performance and decisions they have made in the past. A year and a half on I think it is appropriate to evalaute the purpose of the share division.

At the time I felt their logic was to improve liquidity & make the retail investor think 'psychologically' the shares are cheap & therefore encourage buyers. I think they tried to apply the same logic as Carin, as after a share division was done the Carn share price increase.

From looking at the Soco chart we can see how the share price has performed over the past 2 years :

 

2 Year chart. Click to open a chart window

 Does the management think shareholders are silly?

Does it seem logical that a lower price of a share = a better share price performance ?

Surely price * shares = market cap. And regardless of whether the shares are £20 or £3 it is the market cap that matters?

I think that was just another illogical decision by the management team. How much of shareholder funds did we give to City firms to carry out such foolishness?

I also think it is completely illogical of management not to show their cashflow projections at $100/bbl, $110/bbl & $120/bbl Brent in their recent presentations.

Why are they only showing cashflow projections for $90 oil? Or $85 Brent + TGT Prem of about $5.

Brent is close to $118!

Yet, management show a gloomy $90/bbl Oil Cashflow forecast rather then an Optimisitc forecast. If the management can't be more optimistic then is it any wonder that the markets can't get excited by  Soco?

 

Historical Data Chart

 

http://www.tradingeconomics.com/commodity/brent-crude-oil

We have not had $90/bbl brent for almost a year!

If there is going to be a reserves upgrade then why does'nt the management release a trading statement stating as suchafetrall it is reserves as @ 31st Dec 2011 (Hello?! It is Feb 2012 now!) & indicating production levels, cash flow generated in Q4. After all there is significant cash flow compared to 2010 results therefore I think it is perfectly valid to have a trading statement.

Since August 2011 the Brent price has gone from $108/bbl to almost $118/bbl

Historical Data Chart

 

Soco share price has done :

6 Month chart. Click to open a chart window

I think the share price performance is unacceptable & management need to take action  Go and educate the institutions and address their concerns....Understand exactly why they are not stepping up and buying the shares!

Significant underperformance against the FTSE over the last 6 months....

 

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Isaac 8th Feb '12 54 of 145
8

I think the share price performance is unacceptable & management need to take action  Go and educate the institutions and address their concerns....Understand exactly why they are not stepping up and buying the shares!

Maybe the management have already tried to do the above but they simply lack credibitlity and confidence of the City?

Afterall if you are going to raise £102mn of the City's money back in Jan 2010 & state....

Development/appraisal drilling in Block 16-1 Vietnam targeting production of approximately 100,000 barrels of oil per day (“BOPD”), with an initial 50,000 BOPD to come onstream mid-2011

& then as the time approaches this becomes a moving target & you deliver 9 months later it hardly inspires confidence.

Maybe the company needs a breath of fresh air with a new management team for the City to take a look with a fresh pair of eyes rather then the current management team influencing their view.

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davjo 8th Feb '12 55 of 145
4

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zzzzzzzzzzzzzz click zzzzzzzzzzzzzzzzz
zzzzzzzzzzzzzz click zzzzzzzzzzzzzzzzz
zzzzzzzzzzzzzz click zzzzzzzzzzzzzzzzz

!!

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Spurticus 8th Feb '12 56 of 145
8

In reply to Isaac, post #53

Does the management think shareholders are silly?

Depends if they read this thread.

Why are they only showing cashflow projections for $90 oil? Or $85 Brent + TGT Prem of about $5.

http://www.telegraph.co.uk/finance/oilprices/9057905/Oil-price-could-fall-to-70-in-2012-amid-volatility-Shell-warns.html

Mr Voser said Shell used "conservative ranges" in its assumptions about oil prices to assess risk when planning projects, to ensure they break even – even if prices fall. "We plan inside a $50-$90 range for oil," he said.

Discussing the $50-$90 planning range, Simon Henry, Shell's chief financial officer, told analysts: "I'm not sure we see it right at the bottom of that one over the next 12 months, but we could certainly see it in the middle of that range," he said.

 

I think it is perfectly valid to have a trading statement.

That's a relief to us all.

Perhaps the "2011 preliminary results", due around 4 weeks from now? Try and hold your breath till then.

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Isaac 8th Feb '12 57 of 145
3

David, Let's not encourage management to sleep on the job...

Spurticus,

OPEC: $100 oil acceptable to producers, consumers

LONDON (MarketWatch) -- OPEC's secretary general was quoted Saturday as saying $100 a barrel is now an acceptable price for producers and consumers and doesn't hurt the economy, days after the cartel's kingpin, Saudi Arabia, said it also favored current price levels.

But in an interview with Austria newspaper Kurier, Abdalla Salem el-Badri also warned against blocking the Strait of Hormuz, a key Middle-Eastern oil route which OPEC member Iran has threatened to close.

El-Badri, secretary general of the Organization of Petroleum Exporting Countries, was quoted as saying that "$100 a barrel doesn't hurt the world economy at all."

"This level is acceptable to both sides, for the producer as well as for the consumer countries," he said.

http://www.marketwatch.com/story/opec-100-oil-acceptable-to-producers-consumers-2012-01-22

Opec view is backed by draws in Crude in 2H 2011 i.e. when Brent traded between $104-110/bbl...

I applaud management if they plan based on a lower Oil price as I think that is prudent, but I think it is illogical not to show the cash flow in a $100-120 Oil environment which is what the market is currently trading at. It makes it very clear to outsiders the cash flow Soco is capable of generating.

You tell me, what adds more value a 4 for 1 share division or a cash flow projection between $100-120/bbl? I guess the answer to that lies in what kind of Investor you are.

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Isaac 8th Feb '12 58 of 145

Perhaps the "2011 preliminary results", due around 4 weeks from now? Try and hold your breath till then.

You see this is where I think the managements logic is flawed. The markets are bouyant & and have a feel good factor about them.

That may not be the case in March 2012 & good news will get wahed away in the "bad market" hence why it makes a lot of sense to release any good news now.

It makes a lot of sense to release a trading statement ahead of the results IMO.

 

 

 

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Spurticus 8th Feb '12 59 of 145
4

In reply to Isaac, post #57

You tell me, what adds more value a 4 for 1 share division or a cash flow projection between $100-120/bbl? I guess the answer to that lies in what kind of Investor you are.

Ah - a tricky question.

Q. What adds value?

a) 4 for 1 share division

b) cash flow projection between $100-120/bbl

c) pointless posts

d) none of the above

e) all of the above

What do you think?

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thebuffoon 9th Feb '12 60 of 145
11

You tell me, what adds more value a 4 for 1 share division or a cash flow projection between $100-120/bbl?

Neither Isaac.

Getting assets at a 'cheap price' does; as does finding hydrocarbons.

Getting huge amounts out of the ground doesn't do any harm either.

If Soco were in anyway vulnerable to a lowball bid succeeding, then you'd have a point.

They're not, so you don't. :^}

Buffy

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Isaac 9th Feb '12 61 of 145
17

I think I should be the CEO of Soco.

I would chuck loads of cash at TGT Phase 2 & get it online ASAP. Forget August + Delays.

Brent is $118/bbl -

"Hopes of a new bail-out package for Greece, the weaker US dollar and the ongoing supply risks due to Iran, Sudan and Nigeria are giving buoyancy to oil prices,

http://uk.finance.yahoo.com/news/oil-prices-rise-greek-deal-210910996.html

£3.10 share price is still cheap. Our friend ee pointed out Soco will be trading on as 2012 PE of 3 based on top end of earnings. Hardly expensive.

I would be AGGRESSIVELY Buying back shares.

I would return cash to shareholders.

I would Sell TGT in the current Bull market.

This is the best opportunity to sell Oil.

 

Vote for Isaac.

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thebuffoon 10th Feb '12 62 of 145
4

I think I should be the CEO of Soco.

Well finally you've let the rest of the world know. :^}

Some would say you'd get a lot of votes if you promised not to post again.  :^}

Not me;  I think there's an entertainment factor that shouldn't be underestimated.

Hmmm I wonder if you would have poached the (was it Conoco?) 'world class' geo basement team in the first place?

Buffy

 

 

 

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emptyend 10th Feb '12 63 of 145
4

In reply to Isaac, post #61

Our friend ee pointed out Soco will be trading on as 2012 PE of 3 based on top end of earnings. Hardly expensive.

Not sure which analyst has the 161 cents EPS number though. That forecast is likely to come down IMO unless there is a very bullish report on the timeline for raising TGT to plateau. I'd be pleasantly surprised if the 2012 outcome is much better than the 147 cents that RBC forecast. .....though one factor in the forecasts for 2012 may well be an increase in the price deck that analysts are using, given that Brent seems to be settling above $115.

I'm amused that Isaac appears to think that they are doing none of that already (though I do agree with him about the buybacks, where I would also have been more aggressive).

ee

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Isaac 28th Feb '12 64 of 145
12

Readers,

With the shares at £3.40 I guess I was right over the past months when I said management should be looking to aggresively buy back shares, unfortunately their efforts were poor IMO and they bought back very limited amounts.

So why did'nt our management team see as much value as the rest of us did? A question for the AGM.

Last friday Brent hit an ALL TIME high in EUR/STERLING. Oil has had a very good run the last few months, can it last? I don't know. But there comes a time when one says that price is acceptable, let's not be too greedy etc etc.

I've already expressed my views that management should look to sell up.

I think they have a lot to learn from Cove, back in December Cove put themselves up for sale : http://www.investegate.co.uk/Article.aspx?id=201112130845258500T

In Feb 2012 Shell knocked on their door with an offer, PTTEP followed with a higher offer & now ONGC and GAIL are considering making a joint bid at a higher price, 245p

This is the performance of Cove over the last few months :

.

2 Year chart. Click to open a chart window


They hardly look like 'Desperate' Sellers. Cove's share price has doubled and more accurately reflects NAV.

The management of Soco need to wake up, as I feel they are still sleeping. The assets are worth what the highest buyer is prepared to pay for them.

I think the management are due another phone call, the underperformance in the share price cannot continue.

Readers should contact management to express their concerns via : http://www.socointernational.com/contact_us_other_inquiries 

If the managemnt can't achieve the 55,000 bopd by Q1 then I think they should resign from the board, as this has already been delayed.

If you are serious about selling up then release a RNS and let the companies into the data room & let them bid.

If the current execs left I just feel there is a much greater chance of a bid, the board has too much influence & quite frankly I don't like it. Without their influence I suspect we would have had a bid a while back and most probably would have avoided all the disasters of TGD.

I fully hold the current execs responsible and accountable for the disasterous performance both operationally and share price over the last 5 years.

They seriously need to show restraint when they are offered any bonus for the last financial year IMO.

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extrader 28th Feb '12 65 of 145
5

Hi Isaac,

......".the board has too much influence"........

They also have too many shares.

Suggest you revisit the old prayer,

" Lord, give me Strength to change the things I can change;
The Serenity to accept the things I can't change;
And the Wisdom to know the difference ".

ATB

And, for the avoidance of doubt, I'm happy that the Board's stake in Soco means that their interest in optimizing  the eventual outcome is nicely aligned with my own interests.

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