Valuation, sentiment, and SP direction

Wednesday, Jun 17 2009 by

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.


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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)
-3.1  -1.0%
P/E (fwd)
Yield (fwd)
Mkt Cap (£m)

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1313 Posts on this Thread show/hide all

djpreston 11th May '12 474 of 1313

Of course they can. The holder would just get in touch with the company broker and a deal could be done at market price probably or maybe slightly below.

Fund Management: European Wealth
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emptyend 11th May '12 475 of 1313

In reply to Isaac, post #472

They are not very smart at all, they were previously selling Soco in Jan 2009 near the lows....

Actually they have a very much longer track record than that. I well recall them conducting a firesale when the shares were trading at about 110p.......and they sold out at about 80p - only to see the shares promptly pick up to 105p as the Chairman and others picked the stock up. The timescale from start to finish was (IIRC) about a day and a half.......!

It'll be documented in the bowels of TMF somewhere.

It could be deja vu all over again (as they say ;-0)

ee notice that after today's repurchase Pontoil will have 23.994% if they haven't traded the shares since the AR. I have a feeling there could be a few holding notifications shortly.

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Isaac 11th May '12 476 of 1313

Vietnam Energy Profile: Important Oil Supplier To Regional And Domestic Markets – Analysis


Potential companies that may be interested in buying Soco Vietnam Assets :


PetroVietnam also has formed partnerships with several other international oil companies (IOCs), NOCs, and smaller independent energy companies including the following: ExxonMobil, Chevron, BHP Billiton, Korea National Oil Corporation (KNOC), Total, India’s ONGC, Malaysia’s Petronas, Nippon Oil of Japan, Talisman, Thailand’s PTTEP, Premier Oil, SOCO International, and Neon Energy. After a competitive bid in 2011, ConocoPhillips divested its assets in Blocks 15-1 and 15-2 of the Cuu Long basin and the Nam Con Son pipeline to Perenco, a French IOC, for US$1.29 billion.


Exploration and Production

One of the most active areas for ongoing exploration and production activities in Vietnam is the offshore Cuu Long Basin. Vietnam’s oil production has decreased over the last seven years primarily as a result of declining output at the Bach Ho (White Tiger) field, which accounts for about half of the country’s crude oil production. After reaching peak output of 263,000 bbl/d in 2003, the field’s production dropped to an average 92,000 bbl/d in early 2011. It is expected that Bach Ho’s production decline rate will range from 20,000 bbl/d to 25,000 bbl/d through 2014. Vietsovpetro intends to boost oil production by using water injection to stem declines of aging fields and by investing $7 billion on exploration activities over the next five years.


That hardly reads as if PV will want to restrict TGT ramp up.......



Vietnam currently has one operating refinery, but hopes to expand capacity within the next decade in the interests of reducing import dependency for oil products and fostering economic development in the north and central regions of the country where the proposed projects are located. However, the projects have encountered several delays stemming from financial, contractual, and land clearing challenges.

Vietnam began operating its first refinery, Dung Quat, in July 2009. The 140,000 bbl/d facility cost $2.5 billion and lifts about 90 percent of its crude oil feedstock from the Bach Ho field. PetroVietnam plans to expand Dung Quat’s crude distillation capacity to 200,000 bbl/d by 2017, and the feasibility study is scheduled for completion by early 2012. Vietnam intends to expand the refinery’s processing capability to handle both sweet crude and less expensive sour crude oil from sources such as the Middle East, Russia, and Venezuela. The company signed supply deals with PDVSA of Venezeula and Gazprom of Russia for the expansion of Dung Quat. PetroVietnam, the plant operator, plans to sell up to 49 percent of Dung Quat’s equity to a foreign investor in order to finance the expansion, and reportedly, PetroVietnam signed agreements in 2012 with JX Nippon Oil of Japan and PDVSA to invest in the expansion.

PetroVietnam, in joint ventures with other companies, plans to build two new refineries and increase its total refining capacity to an estimated 330,000 bbl/d by 2015. Nghi Son is the second refinery project with a planned capacity of 200,000 bbl/d. Located in the northern region of the country, it is closer to end-users but far from the country’s main oil-producing areas. Construction at Nghi Son began in early 2012. The Nghi Son facility, scheduled to come online by 2015, has encountered several delays due to issues securing financing and land permits. Kuwait Petroleum Company, which owns a 35-percent stake, is likely to supply all the crude to the facility.

PetroVietnam’s third facility, the 240,000-bbl/d Long Son refinery, which is facing delays attracting investment, is scheduled to begin operations by 2018. Qatar Petroleum expects to take a 25 percent equity stake in the project and become the key crude supplier. Other partners in the project are Siam Cement Group, Thailand Plastics and Chemical, PetroVietnam and Petrolimex. If this third refinery comes online, Vietnam anticipates being self-sufficient in oil product demand.

In addition to PetroVietnam’s three projects, two others are under development by other companies. Petrolimex is in talks with South Korea’s Daelim Industrial to build the 200,000 bbl/d Nam Van Phong refinery. The company reported delaying the start date of the project from the original 2015 timeline. Foreign investors, Telloil of Russia and Technostar of the UK, plan to build the Vung Ro refinery by 2015. The plant’s initial capacity is 80,000 bbl/d, though the investors proposed doubling the capacity.


Oil Exports

Vietnam is currently a net exporter of crude oil but remains a net importer of oil products. According to EIA, oil demand has nearly doubled in the past decade from 175,000 bbl/d in 2000 to an estimated 320,000 bbl/d in 2010. Vietnam still needs to import about 70 percent of refined products and petrochemicals since the output from the Dung Quat refinery does not satisfy domestic demand. As more refineries are scheduled to come online, PetroVietnam anticipates meeting 50 to 60 percent of the domestic product demand by 2015. FACTS Global Energy forecasts that domestic petroleum product demand will more than double by 2030 to nearly over 830,000 bbl/d from around 375,000 bbl/d in 2011. The transportation sector, which uses gasoline, diesel, jet fuel, and fuel oil for rail, drives about 60 percent of petroleum product demand. The remaining oil product demand originates from liquefied petroleum gas (LPG) use in the residential sector and small amounts of products used in the industrial and power sectors.

Ample evidence as to why it is is in the Governments interest to ramp up TGT. What does TGT produce a lot of ? Anyone know?

It is a very sweet, low sulphur crude that refines into high value products hence the premium of $6 to Brent.

What is there a shortage of in Vietnam that they have to import? Refined products.

So why does it make any logical sense for PV to restrict TGT production when

a) Plenty of demand for products that they are importing

b) Refining capacity is expected to increase in the next few years i.e. more demand for crude

Someone needs to give Mr Market a good shake on the head....

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kenobi 13th May '12 477 of 1313

That hardly reads as if PV will want to restrict TGT ramp up.......


And yet remind me what the production level is nearly 6 months after the 55k target ?

and now many zones out of how many are in production ?

I agree with the sentiment though though,  everything I read suggests that the vietnamese should be keen to maximise production,  but here we are. 

I look forward to the opportunity to hear soco's side of this at the agm, 



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snaj 14th May '12 478 of 1313

In reply to emptyend, post #475

L&G are perhaps not at fault for 'their' actions - let's not forget that after BlackRock / BGI they are one of the largest UK index tracking institutions, and if their clients are selling out of of UK plc in crappy markets then the L&G sales of Soco may be as a consequence of said crappy markets - assuming that the bulk of their Soco shares are held in passive mandates rather than active (redemptions from active mandates can also trigger sells with the need to raise cash, so even there the picture wouldn't necessarily result from an L&G 'house' view).

Disclosure: I have no interest in L&G except as a provider of protection products (for which they're excellent), and certainly not as an investment product provider (for which they're not that great)

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emptyend 14th May '12 479 of 1313

In reply to snaj, post #478

L&G are perhaps not at fault for 'their' actions - let's not forget that after BlackRock / BGI they are one of the largest UK index tracking institutions, and if their clients are selling out of of UK plc in crappy markets then the L&G sales of Soco may be as a consequence of said crappy markets - assuming that the bulk of their Soco shares are held in passive mandates

Yes, I believe this is in fact the case this time around. On previous occasions they have had more in actively managed funds but, as you point out, both Blackrock and L&G are both huge in the tracker market - and I believe that their computers have been selling down indices not only because of market-wide pressures but also because of near-term regulatory changes affecting liquidity rules for index funds.

These factors also militate against stock-pickers and add to the general risk on/risk off trading patterns of hedge funds etc. These are huge problems that the wider market (and businesses and governments) needs to grapple with - and are not specific to SOCO International (LON:SIA). The volatility is just something that one has to put up with (and be grateful that at least this company is financially and operationally positioned to take some advantage from it, via repurchases etc)


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loglorry 14th May '12 480 of 1313

C'mon Soco let's see the company cheque book out big time today. Stuff the 25% limit get buying this is a great opportunity. Give L&G a call and take some stock from them.

Before you all say I know it doesn't work like this but fancied a bit of a ramp :-)

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sirlurkalot 14th May '12 481 of 1313

L&G have amongst the largest index-tracking businesses around, which forms a sizable fraction of their entire business. It's in the nature of index-tracking that when a SP is low, that company's mkt cap forms a low fraction of the index tracked, so the tracking institutions will be sellers. That's not a reflection on L&G or anything to do with Soco, it's a reflection on what index-tracking is - they have to buy at peaks and sell at lows, for better or worse.

As for "not very smart at all" that puts me in mind of someone around here, rather than L&G.

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loglorry 14th May '12 482 of 1313

It is worth pointing out that L&G will have to sell Soco in-line with it's weighting in an index tracker if that tracker is suffering redemptions (again we don't know if that is true). It can just as easily be that the index falls as the component parts (including Soco) fall in value and they do no selling or buying at all.

It is wrong to assume if the index falls this triggers index trackers to sell the constituents of that index which is I think what some people here are saying.

My comments above were really just in jest of course.


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swanvesta 15th May '12 484 of 1313

Can now buy up to 50%. Since they often only buy 15% I'm not sure what to make of this.

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emptyend 15th May '12 485 of 1313

In reply to swanvesta, post #484

I noticed a week ago that there was an exemption available to move up to 50%....but it seems that the company had been aware of this for a while.

See the underlying EEC directive (p4).and the related FSA rules (article 5.3)

The fact that they announced a £25mn programme in January and haven't got close to that limit is prima facie evidence re relative illiquidity, though I guess the recent weakness was helpful in demonstrating illiquidity (as a willing buyer wasn't able to buy much).


nb...the above has been edited/corrected since first posted

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Isaac 15th May '12 486 of 1313

Fwiw 20 day avg daily vol is 0.7m and avg daily vol for the last 5 trading days is 0.99m

Well done ee :-)

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loglorry 15th May '12 487 of 1313

yep well done ee - a great example of brokers without a clue! They should if they choose be able to throw some powder under the price now.

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emptyend 15th May '12 488 of 1313

Can't blame the brokers. They've been on the case for a while, I now understand.

Finally the fact that this change has been okayed will enable a willing buyer to acquire some reasonable amounts of stock (though as Kenmitch is always pointing out elsewhere, this does not mean that there is a floor under the share price). I'm not bothered at all about the short-term share price......I'm only bothered that the company manage to hoover up as much stock as they can reasonably afford - while they can.


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loglorry 15th May '12 489 of 1313

I'm not too bothered short term either (but I have a small trading pos). However, if Soco increase buy backs up to the limit and spend cash then surely this is a vote of confidence in TGT. If there really were problems with ramping up production I would expect to see a lack lustre response to share buy backs.

Obviously, the shares will fall if sellers out strip buyers so no floor certain but with a larger buyer in the market it certainly will help. It also shows that management have confidence in future cash flows replenishing cash spent.

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unwise2 15th May '12 490 of 1313

Something doesn't quite make sense to me in the latest RNS, I'm hoping someone can explain it:

The Company announced on 13 January 2012 that it was undertaking a share repurchase programme to purchase shares up to an equivalent value of £25 million through Merrill Lynch International.

From the Jan RNS:

SOCO International plc ("SOCO" or the "Company") announces that it has entered into a non-discretionary close period arrangement with Merrill Lynch International (commencing on 16th January 2012 and ending with the announcement of the Company's preliminary results for the year to 31 December 2011) to purchase ordinary shares in the Company.

The company announced results on the 14th March, so the close period agreement should no longer be in force, so why mention it and the £25 million limit in the latest RNS?

Soco has authority to buy back up to 34 million shares from the last AGM, at last count they have bought back about 4m, why restrict themselves to a total of £25 million if they can buy up shares at a heavy discount to their assessment of the underlying value? I know they don't have limitless funds but there was £100 million in cash at year end, that has probably increased due to production at TGT/CNV. 



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Isaac 15th May '12 491 of 1313

WOW! Soco bought back a Monster today.......350,000 shares!!!

SOCO announces that on 15 May 2012 it purchased 350,000 of its ordinary shares at an average price of 268.8917 pence per ordinary share.  The highest price and the lowest price paid for these shares were 272.3 pence and 258.5 pence respectively. All the purchased shares will be held as Treasury shares.


Following the above purchase, SOCO holds 4,291,579 ordinary shares as Treasury shares. The total number of ordinary shares in issue is 336,538,873 (excluding ordinary shares held as treasury shares). 


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adam 15th May '12 492 of 1313

It's still only 23% of shares traded, so under the 25%. Not complaining really because likely to get cheaper with the Grexit.

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Isaac 15th May '12 493 of 1313

Disagree Adam. Soco bought back their max quota as 20 day avg vol was 0.7m, they bought back 50% i.e. 350k.

I hope they continue till the AGM and then beyond that, ample firepower in the tank stil.

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