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)
413.3p
Change
-8.7  -2.1%
P/E (fwd)
10.5
Yield (fwd)
4.1
Mkt Cap (£m)
1,401



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


1312 Posts on this Thread show/hide all

jseth123 7th Jun '12 613 of 1312

Hi all,

Just booked my train to London for the AGM - who else will be attending this year? I'm particularly interested in hearing what is said about TGT and relations at the HVJOC that might not have made its way into RNSes.

Best,
JS123

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loglorry 8th Jun '12 614 of 1312
1

Disappointed to see the buy back stop at around 290p. One would expect that if management think TGT is worth $20/bbl or £5+ share price they'd continue buying. Furthermore, if the company knows that production ramp up imminent surely they'd want to get in more shares now rather than later at a higher price.

I suppose there could be "another reason" to stop the buy back but it seems unlikely just now.

Having said that the stock is weaker again so we'll probably see it restart today.

Log

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fuiseog 8th Jun '12 615 of 1312
7

I couldn't give a fig about the SP.

Well, on second thoughts, if it went to new lows it would tempt me to buy even more -:) I really shouldn't do that.

What I do care about, with TGT 2 completion almost a given, is whether total output from TGT 1 & 2 is capable of achieving the 90k BOPD forecast at this time last year or whether the total stays at 55k that's being settled on recently; that the CNV wet gas apportionment and valuation are concluded, and that the overall vietnam reserves position is determined.

It's these value issues that need progression to a resolution. The price will follow, and if the prevailing short term financial context keeps the quoted SP down, any buyer using this as a metric will not be welcome in such a tightly help company. (on that side I was delighted to see Pontoil adding over the past week). I don't want to see the company "putting a floor under the SP". Their track record in manageing the money has been first class, so I'll leave them to make the judgements in that respect.

I trust their judgement on the buyback programme.

fuiseog

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jseth123 8th Jun '12 616 of 1312
2

Log,

I thought that a couple of months ago - that I wished they'd start buying back at higher levels but when the general market sell off came and the company were buying back 0.1% of the shares per day below 280p, I thought that vindicated their position. On the other hand, I do agree that if they think it's worth £5+ then this is a low valuation to stop buying at...let's hope they are setting their limit at some fraction (half?) of NAV! ;-)

Best,
JS123

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loglorry 8th Jun '12 617 of 1312

If you have a load of cash to spend and you can swap 50p's for £1's then it seems obvious you just get on and do it. You hardly want to hang around to see if the 50p's turn into 40p's and risk loosing the opportunity.

Coastal hasn't hung around much with its share buy back it has been buying like crazy along with a few director buys too. Which management team looks most confident in their companies assets?

Log

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peterg 8th Jun '12 618 of 1312
5

In reply to fuiseog, post #615

What I do care about, with TGT 2 completion almost a given, is whether total output from TGT 1 & 2 is capable of achieving the 90k BOPD forecast at this time last year or whether the total stays at 55k that's being settled on recently; that the CNV wet gas apportionment and valuation are concluded, and that the overall vietnam reserves position is determined. 

I don't have any real doubt that TGT1/2 are capable of well over 55kbopd, probably 90+. The issues for me are will PV go along with such rates of production (- almost certainly, given time) and how will they handle 90k? Can they/will they tweak the existing FPSO to handle that, or nearly that, level of production. What permanent solution wil they go for - Bach Ho tie in, 2nd FPSO? 

In practice I doubt very much that we will see 90k this year (or in Soco's hands?) Producing at those rates will involve planning, engineering and capex. However, what I do expect, and is critical in terms of SP (which may be irrelevant short term, but it would also have bearing on the longer term sale price) is to see 55k or so once TGT 2 is online. Anything less once phase 2 is fully bedded in (say 2-3 months) would be a serious worry. What I also want to see, and I'm hoping that those who are lucky enough to be able to get to the AGM may be able to elicit some hints, are signs that real planning for how to handle rates of over 55k. Put both of those two in place and the SP wouldn't be anywhere near it is now (if any logic prevails in the markets), and a sale of SV at a good price would look imminent.

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jseth123 8th Jun '12 619 of 1312
4

£1 for 50p, 60p, 70p...where do you draw the line?

Which management team looks most confident in their companies assets?

Which management team needs to be most concerned about how the market views their assets? It doesn't matter one iota what I, you or anyone else in "the market" thinks TGT is worth... other than the buyer and Soco management, who have control over any deal being accepted or not.

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jseth123 8th Jun '12 620 of 1312

For clarity, my point above is that the exit for Coastal is not so clearly defined and market price is more important for shareholders there; and also that the management control of the register is not as tight.

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loglorry 8th Jun '12 621 of 1312
3

If I only had a penny for every time an investor on a BB ranted on about how it doesn't matter what the current share price is and it is just a matter of waiting and value will eventually come to fruition!

I'm afraid it does matter. It is very hard in this market and generally for a bidder to pay much more than a 30% premium to the current price. The reason is simple because they don't want to look like they over paid. I'm sure many here will come along and try to dispute this fact but I'd like to see some evidence if that is the case. Sure Soco shares are tightly held which means that it is likely then no such bid would succeed but how does that help? It just means the asset stays as it and we stay where we are for more years to come. Not many here relish the idea of TGT not being sold as most don't want to wait 10 years for their money.

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jseth123 8th Jun '12 622 of 1312
7

There are several examples of 80+% premiums recently. I'm not going to list them because I frankly can't be bothered looking them up. Can you dispute that Soco Vietnam should be valued similarly to CoconoPhillips field next door?

Obviously things have tightened up in the last few weeks but it doesn't bother me. I think there could be some positive news flow to reduce the premium but in the mean time here's another penny: value will out. ;-)

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ExTownie 8th Jun '12 623 of 1312
12

In reply to loglorry, post #621

Not many here relish the idea of TGT not being sold as most don't want to wait 10 years for their money.- Log,

Given that at the current price, SOCO International (LON:SIA) could theoretically buy back every single share in less than 5 years, or pay dividends amounting to more than the current market cap in the same timeframe, it seems unlikely that you would have to wait 10 years to get your money. Personally, I would be quite happy if they slimmed-down and just sat there distributing their TGT earnings for years to come, although that looks unlikely.

ET

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extrader 8th Jun '12 624 of 1312

Hi all,

Only 59K bought in today, out of approx 1 million traded. ....broker asleep on the job ?

Roll on the AGM, when (perhaps) we can turn heat into light !

GLA

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kenobi 9th Jun '12 625 of 1312
2

In reply to extrader, post #624

Disappointed to see the buy back stop at around 290p. One would expect that if management think TGT is worth $20/bbl or £5+ share price they'd continue buying.

Why pay more than you need too ?
where would the price be without the pontoil and buybacks ? assuming pontoil have finished buying at these prices at least, might the price not drop back ? then you have the pontential eurozone debacle waiting to happen, spanish banks and greek elections,
there may be chances to buy back much cheaper yet, I see no point in chasing the price up at this point.

Re share price vs takeout price since there's a good chance that SV will be bought rather than soco international, and given the shares are tightly held, so a speculative bid will fail, I see little point in worrying about the Soco int share price.

If we can't get a good price for it, float it off, and anyone who wants to buy the income can,

K

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MadDutch 10th Jun '12 626 of 1312

I know it has been posted before, but I do not want to arrive in the wrong place the day before!

Please post the AGM details here and I will meet you on the day.

MD

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Isaac 10th Jun '12 627 of 1312
1

FTSE futures are rocketing, up 126 now on Fridays close. I guess that is the end of our buy back....

Brent is up 196points at $101/bbl now......Looks like we are going to have a few more bullish days.

Soco let's do a deal..... :-)

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MadDutch 11th Jun '12 628 of 1312
3

They will be in renewed misery at the ongoing Euro disaster in a few days time.

Meanwhile lets take advantage of the mini bull tomorrow.

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marben100 11th Jun '12 629 of 1312
2

In reply to MadDutch, post #626

Mike,

The AGM is at 10:00am on Wednesday, 13th June at The Lincoln Centre, 18 Lincoln's Inn Fields, WC2A 3ED. I am not planning to attend myself, as I don't currently have a holding and have a bunch of stuff to catch up on.

HTH,

Mark

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Spurticus 13th Jun '12 630 of 1312
6

A little news from yesterday.. more details likely from the AGM.

http://af.reuters.com/article/energyOilNews/idAFL3E8HC8CQ20120612

* TENDERS
- PV Oil offered two 300,000-barrel cargoes of Te Giac Trang (TGT) for Aug. 1-5 and 7-11 loading. The tender will close on June 18 with bids valid until a day later.

The spot volume comes as Vietnam is raising output at the field to above 50,000 barrels per day (bpd).

Last month, PV Oil sold 40,000 bpd of TGT to term buyers
Shell, Vitol and Unipec at a premium of $6.60 a barrel to dated Brent for July to December.

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ExTownie 13th Jun '12 631 of 1312
1

Spurticus,

Well spotted. Since these sales are two months forward, I wonder if they are including TGT phase 2 in the rise to 40k and then 50k bpd? Hopefully we'll have a better idea of production levels after the AGM.

ET

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adam 13th Jun '12 632 of 1312
2

Just back from holiday. It seems to me the buy-back authority for £25m included the period prior 16/01/2012. Otherwise it is too much of a coincidence that just £50k shy of £25m was bought back from inception in November 2011.

8,962,268 Wt. Avg. 278.3897861 £24,950,039

Anyway looking forward to some AGM updates.

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