Valuation, sentiment, and SP direction

Wednesday, Jun 17 2009 by
17

Detailed discussion of Soco's assets should take place on other threads, but this thread is to discuss the latest valuations both by ourselves and analysts, sentiment (ie will the shares go nowhere because there's not much upcoming news) and likely moves in the share price in the next six months.  How should the shares be valued?  How reasonable is it that any drilling without a firm commitment further than several months away is ignored by the market?

I haven't seen many recent analysts' reports on Soco, but I have one from Cazenove with a core NAV of 1370p and no doubt considerable explo NAV on top of that.  I imagine that's approximately concensus, but maybe with crude rising again these concensus NAV figures will start to rise.  Has anyone any other recent broker estimates?

My view, as stated elsewhere, remains that in the absence of much to get the market excited the shares will wander aimlessly for the rest of 2009.  I've previously guessed that if crude were $65 at Christmas 09, then Soco's SP would be somewhere near £13 then, and I'm still very happy with that guess.  What does anyone else think?

Of course unexpected bids and other events may overtake this, but these sort of events may happen to any company, and perhaps Soco (where management seem unlikely to accept bids since they believe there is considerable value not recognised by the market) is one of the less likely companies to be affected by the unexpected.  The key new news for Soco might be (a) a bid (IMO unlikely), (b) some sort of presentation by management of the drilling data they claim to have that demonstrates a significant strike has been made at E, currently ignored by the mkt, or (c) possibly hitting oil off the Congo.

 

Moderation note: posts will only be deleted from this thread by the site admins or by agreement from at least three of sirlurkalot, emptyend, djpreston and doverbeach.  If three of this list agree to delete a post, the names of those three and the reason for deletion will be noted in a post on this thread so everything's completely transparent.


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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)
308.7p
Change
23.2  8.1%
P/E (fwd)
11.3
Yield (fwd)
5.3
Mkt Cap (£m)
947.7



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


1316 Posts on this Thread show/hide all

emptyend 22nd Dec '11 357 of 1316
3

In reply to extrader, post #355

Sounds like further slippage on TGT to me : we're now only 'on target' for a plan in Q1 2012, that should lead to 'achieving' at some future point the 55,000 bpd that - I thought , perhaps erroneously - was originally envisaged for end 2011......

Yes 55k was originally slated for the end of 2011, prior to finding that the oligocene wasn't performing as they'd hoped (remember that this is perhaps 3,000bopd and 5% or so of reserves - so nothing much relative to the Miocene!). However, I see no evidence of any further slippage - just a confirmation that the plan is "on target" to be presented in Q1 .....as indicated in the 1/11 RNS.

And remember that any oil not produced now is reserves that will be available to any purchaser - so, in theory, the loss is limited to the neglible "time value of money" represented by getting the cash in when a deal is done in due course, versus getting the cash in now from production. What are the interest rates for a few months' money???

ee

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jseth123 22nd Dec '11 358 of 1316
1

I guess the question is: if it's so simple just to perforate the Miocene, why can't they just hurry up and do it? Never keen to put words in people's mouths put have some posters (ee? - apologies if I'm wrong) suggested that it's perhaps to do with the structure of decision making in the JOC? The Vietnamese maybe more focused on extracting all possible data from upper zones before perforating Miocene and ramping up production? Has anyone spoken to the company about this?

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extrader 22nd Dec '11 359 of 1316
1

Hi ee,

Points taken ! I guess my concern is that , until 'production issues' (perceived or real) are transparently resolved, a prospective purchaser is less likely to commit.

Back to the olive harvest for me !

ATB

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emptyend 22nd Dec '11 360 of 1316
2

In reply to jseth123, post #358

I guess the question is: if it's so simple just to perforate the Miocene, why can't they just hurry up and do it?

Simple answer : they need to get production information from the oligocene first. If they perf the Miocene in the same well (which they will, eventually) then that will put an end to their ability to get info on the oligocene.

Never keen to put words in people's mouths put have some posters (ee? - apologies if I'm wrong) suggested that it's perhaps to do with the structure of decision making in the JOC? The Vietnamese maybe more focused on extracting all possible data from upper zones before perforating Miocene and ramping up production? Has anyone spoken to the company about this?

Its my belief (based on nothing much more than guesswork) that SOCO would have pressed on anyway and perfed the Miocene. It is quite possible that PV have a longer time horizon and therefore would want maximum info on the assets, as they expect to be producing from them for decades  My supposition is that PV got their way on a limited delay for the perfing - not unreasonably, in the circs.

BTW - you mean lower.

re ET's point about a purchaser, I'd say that rather depends on who the purchaser would be........  ;-)

ee

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MadDutch 23rd Dec '11 361 of 1316
5

On Wednesday, the FT published a useful article about rising oil prices caused in part by falling inventories.

http://www.ft.com/cms/s/0/2aeb5d90-2bf2-11e1-b194-00144feabdc0.html?ftcamp=rss&ftcamp=crm/email/20111222/nbe/UKMorningHeadlines/product#axzz1hIrmMPZT

It says, among other examples, that stocks in Europe are at an 11 year low due to the problems in Libya. The International Energy Agency in Paris believes that consumption has exceeded supply for the last 2 years.

IMHO, this cannot but help Soco sell its Vietnam producing oilfields, at a good price.

The FT has a useful discounted subscription offer at present, and for some reason that I do not understand, I find it easier to read on my laptop, than on paper; it is normally the other way round.

MD

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flyinghorse 30th Dec '11 362 of 1316
13

Re TGT,and discussion on the TMF regarding company responses,a few things strike me as odd.

RNS are usually not rushed out with careful thought going into the wording. Also why quote a spot rate if you happen to have the recent average? Most likley as the average is lower than the spot rate. The average may include lows due to testing & dont forget FPSO outages (ie efficiency). I suspect the spot rate quoted reflects a reasonable view of the Oligocene production thats currently open.

I also note that the secondary recovery is yet to be commissioned. I dont know if this is water injection,or gas lift but perhaps this is also required to be operational prior to opening up the Miocene? The FPSO will be a busy place with many people on board,possibly POB (persons on board) restrictions so getting through a work program can take time.

I have been involved in quite a few "startups" and very rarely do things go super smoothly to start with. There are complicated monitoring & shutdown systems etc,gas detection (for leaks) ,siting of instruments both in the vessels ,and managing the offload system all to be shaken down,and the crews running the show trained,and data to be gathered. Sudden shutdowns can come out of the blue,and operating systems require each is investigated ,and eliminated prior to startups.


I hold a lot of SOCO and am reasonably happy as its early days yet.

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emptyend 30th Dec '11 363 of 1316
6

In reply to flyinghorse, post #362

Just to comment on a few of these points:

RNS are usually not rushed out with careful thought going into the wording.

Completely correct. However, at least one of the main people who would usually be involved was away - and it is clear that they needed to get the information out quickly before people disappeared on the Thursday (otherwise they would have been accused of trying to slide it out in the last half-session before Christmas).

Also why quote a spot rate if you happen to have the recent average? Most likley as the average is lower than the spot rate. The average may include lows due to testing & dont forget FPSO outages (ie efficiency). I suspect the spot rate quoted reflects a reasonable view of the Oligocene production thats currently open.

Quite possibly correct - though, as I know from experience elsewhere, it is utterly meaningless if one produces averages for periods that including lengthy downtimes. It is perfectly reasonable, during testing of the various facilities and the flow capacity of each of the wells, to have long periods of downtime - and they may well have concluded that giving a spot number (which quite possibly included some downtime) was less misleading than including an average for the few weeks previously which may have contained a great deal more downtime.  Only time will tell whether 55k bopd remains a reasonable expectation for the plateau production....though every indication I have seen from the company still says that it is.

I also note that the secondary recovery is yet to be commissioned. I dont know if this is water injection,or gas lift but perhaps this is also required to be operational prior to opening up the Miocene? The FPSO will be a busy place with many people on board,possibly POB (persons on board) restrictions so getting through a work program can take time.

I'm not sure either what this comment relates to. Perhaps secondary recovery data from the Oligocene is needed before they can make a final determination of oligocene capacity - in which case they won't want to open the Miocene beforehand (and the secondary recovery data will be an input into the reservoir management plan)

I have been involved in quite a few "startups" and very rarely do things go super smoothly to start with. There are complicated monitoring & shutdown systems etc,gas detection (for leaks) ,siting of instruments both in the vessels ,and managing the offload system all to be shaken down,and the crews running the show trained,and data to be gathered. Sudden shutdowns can come out of the blue,and operating systems require each is investigated ,and eliminated prior to startups.

Yup - super-smooth startups are indeed rare. Everything is spec'd and built for the expected characteristics and volumes of the materials being handled, so any deviations from expectations may lead to a need for new equipment, systems or procedures...all of which take time to design (and agree).

I'm very relaxed about it though. The flows achieved under test from the explo wells give plenty of room for tweaking the optimal set-up, IMO.

ee

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flyinghorse 31st Dec '11 364 of 1316
6

One other thought came to mind.
The 2011 TGT production target was reached 21 days early-2011 goals in the bag.
This would then be a good time to gather the required data/make adjustments etc-not be doing this in 2012 where you would want to hit the ground running to achieve 55kbopd in Q1 2012 (I also note thats real barrels and not stated as boepd)

FH

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emptyend 10th Jan '12 365 of 1316
7

New corporate presentation here, given yesterday

Got to go out now so can't discuss - but there is a very very interesting slide on TGD as well as a complete and detailed drilling schedule which suggests they have only a couple of H4 TGT wells left to complete over the next month.

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Spurticus 10th Jan '12 366 of 1316
5

In reply to emptyend, post #365

Link didn't work for me, but this works ok:
http://www.socointernational.co.uk/presentations

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MadDutch 10th Jan '12 367 of 1316
1

In reply to emptyend, post #365

Thanks ee and Spurticus.

I am delighted to see that TGD is back on our agenda again, and the map looks very encouraging, especially that we have not drilled the most promising parts of the fan yet.

I am looking forward to your return to your screen, ee!

MD

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peterg 10th Jan '12 368 of 1316
3

In reply to emptyend, post #365

Thanks EE,

Slide 13 looks very interesting - they clearly seem to be building up a much more detailed model of the structure. If it's correct then it suggests that none of the drilling has gone near the most promising bits, and they are promising!

Also liked slide 10. Good to see a bit of graphic depiction of where the perforations have been. I'm presuming phase 2 has yet to happen, and will, hopefully, form part of a ramp up to full production over the next few months.

Peter

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MadDutch 11th Jan '12 369 of 1316
5

In reply to peterg, post #368

Hello Peter,

I especially liked the +400 meters for the inner fan, and the fact that the best part of the fan is closer to the path of the sediment, the mouths of the canyons, than the previous drilling.

I have some practical experience of sedimentation, my family firm made several million 1950s and 1960s pre inflation pounds sterling, using it to separate different micron sizes of diamond powders, mainly for the Swiss watch jewel industry. Some of us will remember 18 jewel (synthetic ruby) Swiss watches. Close to the place where fast moving water becomes slow moving, is the place where the largest particles settle out first; and the biggest have the largest spaces between them, ie the most likely place to allow oil to move freely.

I never understood why the Soco drilling was done a long way, many kilometers, from the source of the sediment.The further it travels, the finer the remaining particles which can stay suspended in the water. No wonder the original drill holes were tight.

MD.

PS. Maybe I should have asked Soco about this. I just assumed they knew more about their business than me, and still do. Maybe we could ask why they chose to drill where they did, and learn from them.

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Spurticus 11th Jan '12 370 of 1316
6

ee, thanks for spotting the presentation.

Soco don't seem to be presenting on the 14th, only one-to-one's. Would be great to hear a recorded commentary with the slides (I'm thinking of past presentations from the likes of Sterling).

Some thoughts:

p6...  2P reserves ...unchanged 2009 vs. 2010....... update seems likely / overdue

p11.. 2012 VN drilling schedule.. previous slides had an H4-15P, but no longer planned (though I doubt this is significant)

p12/13 TGD.. ... looks encouraging to me.. my money's on them having another final go at this one

p20. explo schedule ... nothing until Q3 (TGD)

p21 revenue profile chart .. no mention of production rate assumption for Phase I, I assume it's 55k... add in Phase II and 120/bbl

p23... "Considerable amount of near term newsflow"... presumably updates on the above by March? Assuming no further explo for at least 6 months, then this is TGT plumbing/reserves/corp.stuff..

Spurticus

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peterg 11th Jan '12 371 of 1316
5

In reply to Spurticus, post #370

Hi Spurticus

p23... "Considerable amount of near term newsflow"... presumably updates on the above by March? Assuming no further explo for at least 6 months, then this is TGT plumbing/reserves/corp.stuff..

I think there may also be significant updates on plans for Congo and TGD in due course, reprocessing of data on both is ongoing (I assume). There's also seismic planned for Nganzi in Q1. And possible news of new ventures in SE Asia and elsewhere in Asia

Plus of course there's that imminent offer RNS just waiting to appear:-)

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kenobi 11th Jan '12 372 of 1316
8

I'm interested in the plan to get production up to the target 55k per day and beyond as discussed at the agm.
this is now penciled in for Q1 2012, I don't know what the issue is exactly between the partners about perforating the other zones and getting production up, but this has to be a priority. Its all very well them telling us they hit their production targets for 2012 10 days early or whatever, but the target I'm interested in is this 55k per day, which is what the market has been lead to expect. phase 2 is only 6 months away, and I would be disappointed if this additional capacity is not bought on line before then.

At least some explanation of what further info they are expecting to get from producing just the first zones would help. Its great that soco have managed to buy back so much stock cheaply, but as discussed it's hardly that material, and I'd like to see some progress in getting tgt1 fully on line.

I hope this doesn't sound unreasonable, if there are good reasons for not doing this, then that's another issue, which the market should be told about. But the real measure of performance is matching the market expectations (set by soco, nothing else), not hitting some internal production target that I at least know nothing about,

Good to see lots going on in the future, the big one is of course TGD, I would be happy to see perhaps a 2 well drill program there, on a couple of the most promising spots before the licence expires, so we're not in the position of having to negotiate further extensions. With TGD it's always seemed to be a last min dash to get the drill done on time. Hopefully things will be better this time.

here's hoping that 2012 will be a great year for SOCO, don't care if they get taken over, just hope they make progress and the shareprice begins to reflect the value we believe is there.

cheers K

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emptyend 11th Jan '12 373 of 1316
13

Now back - and Virgin have also stopped pretending there was no problem with internet service and instead have actually fixed the problems that prevented me posting earlier!

Some comments on the presentation:

  • Note they quote current TGT production as 35k - further evidence of it moving around at present
  • Entitlements are c+50% to WI during cost recovery, which is less than I've been assuming. Nevertheless, c.40% of total cashflow would still be generating $1.6-1.7mn per day at present - and cost recovery may still be in progress into 2013, bearing in mind the quantum of costs to be recovered
  • Confirmation that TGT production should be running at 95,000 bopd from mid-2012, so production cashflow should be running at c $4mn per day for the second half of the year.
  • Interesting to see the table of substantial shareholders - makes the point quite effectively IMO
  • It looks as if they are pretty optimistic that TGD is worth drilling. There would seem to be plenty of OOIP - but moving it will be key! I wonder whether they might get two shots at TGD, with one spudding in July and another (contingently) in October before the licence expires
  • Three explo wells and two appraisals now scheduled in Cabinda North (which has previously been talked up as being highly prospective acreage)
  • Still talking about "near term news flow" - though I note that the amount of this has now been (justifiably IMO) upgraded to "considerable" from "significant" ;-)  I am looking for reserves upgrades at TGT, CNV gas reserve upgrades and price confirmation, TGD drilling plans confirmed (together with scoping the upside), much more detail on the Cabinda potential - and on other projects, as Peter has noted!
  • I also note the rather inviting Q2 gap between the publication of financial results and the commencement of phase 2 production at TGT coupled with the start of explo drilling in three areas........ ;-)

The prelims are pencilled in for 14th March, so I'm also wondering if they may break with past practice and make a pre-close statement.

ee

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K Atkins 11th Jan '12 374 of 1316
5

A lot of good quality analysis and common sense.

emptyend is first class.

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Spurticus 11th Jan '12 375 of 1316
8

Re: TGT Reserves

I tried to compare the new "TGT-H1 cross-section" slide vs. older slides from earlier presentations (containing PSTM-2006 / PSDM-2009 cross-sections).

I'm unsure if the new slide is just the 2009 slide drawn to a different scale, but it does appear to have some differences.

Bad - The '2009' Lower section beneath "2p" looks a lot thinner, it seems that almost everything below '2U' is gone?

Good 1) -The current slide's "West from 2X"  (both Upper and Lower) section looks to extend quite a fair distance beyond the 2009 pic (which was just an extract)

Good 2) - ISTR current 2P reserves are based on the 2006 slide?

http://www.stockopedia.com/content/so-whats-soco-vietnam-worth-excluding-tgd-49397/?comment=157#157

Would be good to get an update some time soon :)

p.s. TGD, I might email SOCO and politely suggest they drill in the middle of the BIG YELLOW BLOB .. just as a suggestion of course

 

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emptyend 11th Jan '12 376 of 1316
4

In reply to Spurticus, post #375

I'm not sure that you can compare the cross -sections at all....one reason being that the latest "cross section" isn't actually a straight line but is adjusted to go through all the well-control points

Good 2) - ISTR current 2P reserves are based on the 2006 slide?

http://www.stockopedia.com/content/so-whats-soco-vietnam-worth-excluding-tgd-49397/?comment=157#157

Glad to see that others aren't forgetting that....or that post!

Earlier today I had cause to look back at Slide 8 from the 2010 Interims presentation....and it is striking how big some of the differences are with the 2009 PSDM seismic (eg on the H3 fault block). Of course the outer extremities of the areal extent of the field haven't been drilled and won't be any time soon - but it would be interesting to know how much of those light green bits around the edge could be drained by the wells that have been drilled since the last estimate of 2P was made back in 2008 (no additional 2P reserves have been booked in VN since the end of 2008...since when 8 development wells have been drilled and (largely) brought onstream and a further 5 are in progress).

p.s. TGD, I might email SOCO and politely suggest they drill in the middle of the BIG YELLOW BLOB .. just as a suggestion of course

Yup - it'll be a big step-out to the north. I like the idea that there could be 400m+ of gross pay, compared to the 50m ish of net fan pay in TGD-1X for a well they now think was drilled on the distal margin. I also like the idea of the size of the fan structure......has anyone else played with a ballpark estimate for the area shown as potentially having over 400m thickness??? ;-)

ee

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