Should the Soco management resign from the Board?

25th Jan '12 by Isaac

145 comments 46764 reads

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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Isaac

28th Feb '12

extrader

I care even less for what shares they hold for which they never spent a penny out of their own pocket. IMO their packages were too generous several years back hence the execs were able to pick up so many shares.

I on the other hand paid for my shares using my hard earned.

If the management are unhappy with the proposal they should consider looking for another job, it would be interesting to see if they can get the same packages.

The management deserve 0 credit for the recent strong rise in the oil price because even Isaac as CEO it would have happened so they can hardly take any credit whatsoever.

The higher oil price is probably the single biggest factor that has gone in Soco's favor in recent years, that is hardly something I would praise the management about because quite frankly I could have held an Oil ETF and made a lot more money then the Soco share price!

I would like to see management take more responsibility for the dismal performance.....pay cut and 0 bonus should do it IMO.

extrader

Hi Isaac,

If you reread our exchange, you'll see that I was taking up your comment re the BOARD. The management (ES/RC) sit ON the Board, but ultimately take direction from - and are accountable to - it.

ES/RC are the public face of Soco but, if they didn't have the Board onside, they wouldn't survive long - despite their not insignificant shareholding.

The fact that they HAVE survived, suggests that they continue to have the trust of the principal shareholders, who believe that they are doing a good job and will deliver the goods in due course.

I hope you now understand where I'm coming from - and why I commend to you the Arab saying ' as-sabr jameel'....:

PATIENCE IS A BEAUTIFUL THING.

ATB

emptyend

I care even less for what shares they hold for which they never spent a penny out of their own pocket.

Not true, however.

De Sousa has shelled out cash on a number of occasions and Maugein did previously. All the other non-execs have also bought with their own money (or, in a couple of cases, by taking shares in lieu of salaries).

The only two who haven't bought in the market are Story and Cagle - who don't need to because (IF they do their jobs well and shareholder returns exceed the peer group median) they are entitled to get shares under the LTIP. They've missed out on a couple of occasions recently, thanks to the share price underperformance - and now have over 21mn shares between them and under 2 million outstanding options which have yet to vest (and may not).

They've spent over 15 years building up this company - and their substantial shareholdings aligns them pretty well with the rest of us. I'd be certain that they have a very careful eye on optimising/crystallising value in the near future.

Incidentally, don't overdo the hyperbole:

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

Operationally they have brought two major assets onstream and drilled a large number of wells without operational issues. And they have added significantly to the actual value of the company. Granted that the share price hasn't reflected that, being up over the 5 years from about 305p to 342p...which is hardly stellar - but "disasterous" it most certainly is NOT! There are plenty of examples of proper disasters, where share prices have fallen by 80% or more....and SOCO International (LON:SIA) 's +8% performance over 5 years in fact puts it (just) in the top half of FTSE350 companies. Yes BG, Cairn and Afren are c 120% up over that time - but a £7 bid (see ps below) would see SOCO International (LON:SIA) match that....so lets just wait and see what the position is when the fat lady has finished gargling!

ps....Cove Energy (LON:COV) 's share price spent H2 last year at around 80p (range 60-100p)...share price now? 240p. I guess the market didn't see that one coming either.

davjo

They've spent over 15 years building up this company

In fact it's 22 years when you include the 7 years prior to being listed in London under the umbrella of Snyder Oil ;-)

To be clear my comments are directed at the exec directors, i.e. the guys that run the company on a daily basis. They have never bought any shares.

Two major assets onstream Vs Several well failures in Africa/TGD

I think overall negative value, so I can't agree that significant value has been added.

8% performance over 5 years? LOL. I probably should have stuck it all in a HYP, I would have outperformed SIA.

8% is below inflation over 5 years. It is hardly an acceptable performance for the level of risk & unaccepotable when considering large increase in oil price, bullish sector, m&a activity etc etc

A £7bid? Well my moans and groans are all about getting this process started, get a RNS out like Cove did and I will have all the patience in the world to sit back and wait for a deal to conclude, patience is not the issue for me.

It is the not doing anything that is hacking me off. I find it completely unacceptable that a bid was made in Oct 2008 & the management have not said ANYTHING AT ALL to the markets 4 years on.

I think shareholders should get on the phone and give them an earful, unfortunately sometimes you have to be a bit arsey to get something done.

peterg

I can't see how an exec getting a call from someone being "arsey", who clearly doesn't have a clue about the operations and risks of running and E&P, or about how to maximise value is going to get "something done" - whatever that might be?

Pete

If you look back at my posts from 2008 onwards you will see that I was correct to give management a hard time since that time as the share price has not performed. So you are entitield to argue as much as you like that I don't have a clue about the operations but I think I have been more right then most people here.

If anything the moral of this story is I should pay more attention to what I think & act accordingly.

But having said that I have always felt we should get a decent price once the company is sold which has been the prime reason for holding.

And it is the prime reason for wanting to get a sale process started.

However the irony is I would'nt be investing the proceeds soon after into something else as there is not as much value as there was 6 months ago, so I would simply sit and wait for the opportunities to come. It's just that with the Oil price high and the sector being in play I think now is a VERY GOOD time to sell up.

29th Feb '12

It's just that with the Oil price high and the sector being in play I think now is a VERY GOOD time to sell up.

I expect everyone can agree on that - including the people you keep groundlessly railing against!

It is the not doing anything that is hacking me off.

Thats the point, You have absolutely no idea! And no patience.

I have said many times that a deal is likely to come completely out of the blue - we'll just wake up one day and it will be done. Nothing has changed about the likelihood of that.

thebuffoon

I think shareholders should get on the phone and give them an earful

Well..have you?

Buffy

MadDutch

Good question.

I think the answer is no, because it is one thing to be an anonymous name on the internet, but another thing to be a real person who can receive nasty letters from lawyers.

He had the chance to introduce himself at the last AGM, but did not. I think he does not have the guts. That is why he wants us to play his silly game.

MD

kenobi

Aren't we close enough to the results now that we could wait to see what the management have to say re reserves and production and tgt 2 , and tgd, before we debate whether we should call them up and ask them to resign ?

I for one am considering what we might find out about these things, and what effect that might have on the share price going forward.

The most immediate issue must be getting tgt 1 production up, and finding out were we are re tgt2 and tgd,

I'm looking forward to it,

Cheers K,

Spurticus

"unfortunately sometimes you have to be a bit arsey"

Yes, but not in every single post, surely?

(Do you think there's ANYONE on this site, who isn't clear on your views/belief system?)

Kenobi

I am going to do just that, wait for the results in 3 weeks time.

But let's not forget Soco is suppose to be an Exploration company & the fact is they have'nt found any commercial quantities of Oil since 2007 and quite frankly that is a poor record for a FTSE 250 company IMO.

Readers may not like to hear this, but unfortunately that is a fact. There is little point in being defensive...

I hope the results prove me wrong, I really do.

But let's not forget Soco is suppose to be an Exploration company & the fact is they have'nt found any commercial quantities of Oil since 2007

Actually they are an Exploration and Production company, and they currently have more production that ever before, all of it bought on stream since 2007. They also been carrying out Exploration, the fact that they haven't conclusively found commercial quantities in a number of years is a disappointment to everyone, but it's not a unique, or even unusual experience, and it certainly doesn't mean no exploration progress has been made in that time.

Pete

For me it is not 100% clear what the management are trying to achieve with Soco. They have built up the company from many years of hard work, there are quite a few things that have gone well for them and there are other things that they have'nt done so well.

I've said in the past that it is a fantastic achievement for the level of success they have had with the company, however I don't think it is necessary for them to go out on a high which is what I think they are trying to do with TGD and tried to do with Africa.

The truth is most people don't achieve what they have achieved with Soco, therefore I think it is adequate for them to put Vietnam up for sale based on what they have on TGT/CNV to date.

Given circumstances I kinda see it as a now or 'not anytime soon' scenario as far as Vietnam is concerned. Because IMO they have most or all of what is required to achieve a decent price for Vietnam :

-6 months production data
-Bouyant Oil price
-M&A fever in the sector
-likes of Vitol & Shell prepared to pay $8+ premium over Brent - Pretty clear on the quality of TGT Crude

What is the stumbling block for not doing a deal?

I can't really see a valid one, if key commodity companies are prepared to pay such a premium for the crude then there can hardly be a lack of buyers?

The $8 premium does'nt come out of thin air either, buyers tender for the Oil. The $8 pemium is a clear indication on the quality of the crude and the level of interest there is for TGT.

I am 100% confident that if Soco released a RNS indicating their willingness to sell Vietnam then we would get loads of interest & a decent price for our assets.

I am strongly against a sale via closed doors like ee describes where we wake up one morning and a deal is agreed.

If you want the best price when you sell your house or car then surely you are going to put it on the market and take the best price? Why would you do a deal behind closed doors when you can get more money for the asset in the market?

1st Mar '12

Isaac,

If you want the best price when you sell your house or car then surely you are going to put it on the market and take the best price? Why would you do a deal behind closed doors when you can get more money for the asset in the market?

Come on, give it a rest now.

Whether they bought them or not, the directors have a lot of shares. As you well know, these greedy freeloaders (in your eyes) will want to maximise their value won't they?

Soco can't be taken out by a hostile bid; so interested parties will have to come to Soco. Unless you want the discussions live on Sky, they're going to be behind closed doors. Anyone interested knows how to find them. They are the market!

Buffy

I recommend that Isaac looks at the scrolling banner at the top of the website home page (if he has the patience) and also watches a bit more trash TV.

There cannot be an oil company on the planet at this point who is a potential buyer but who hasn't sounded SOCO out re Vietnam at this point! There is nothing to be gained from a public auction - other than hassle, cost and uncertainty. Cove Energy (LON:COV) 's situation is different, because the asset is still being scoped out (having mushroomed in estimated size over recent months) and potential buyers hadn't begun to form an orderly queue.

I am expecting the serious discussions to start very soon after the results and annual report have given everyone an update on the production potential and 2P/3P reserves, and for them not to be concluded until the decision has been taken re TGD in April.

It isn't long to wait - if nothing has happened by July then by all means feel free to return and complain then! :-)

oh talk about setting yourself up as a hostage to fortune !

highgate55

Draft advertisement for the Oil & Gas Journal, Petroleum Times etc

FOR SALE - OIL / GAS FIELD IN VIETNAM

Ageing property developer offers a recently discovered oil field in the much sought after Cu Long Basin.

Currently producing about 35,000 bbl per day with plan for imminent expansion to 55,000 bbl per day.

Close to all established amenities ( FPSO and pipelines)

Potential for expansion of existing property to ca 90,000 bbl/day and planning permission in place for development of the nearby TGD field.

Reason for sale - owners wish to retire to pursue other interests in Africa

All offers in excess of £ 2 billion will be considered.

talk about setting yourself up as a hostage to fortune

True. But if there hasn't been observable and very material public progress by that time, then I will be asking serious questions myself!

I just don't believe in "going off on one" prematurely when, AFAICS, the route to an orderly and optimum sale requires a number of events to occur - and slowly, one by one, the few remaining ones will be ticked off before the summer (most by the end of April, with the possible exception of the final gas/oil split agreed re CNV).

Fresh results, fresh reserves reports and with Phase 2 all set to go into production.....the timing will very soon be perfect.

Should the Soco management resign from the Board?

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Isaac

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