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 »

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1284 Posts on this Thread show/hide all

kenobi 9th Jun '12 625 of 1284

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,


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MadDutch 10th Jun '12 626 of 1284

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.


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Isaac 10th Jun '12 627 of 1284

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 1284

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 1284

In reply to MadDutch, post #626


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.



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Spurticus 13th Jun '12 630 of 1284

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

- 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 1284


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.


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adam 13th Jun '12 632 of 1284

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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Tan 13th Jun '12 633 of 1284

General sentiment poll of the 11 Foolpedias in the pub after AGM

Asked the usual question of will you buy sell or hold? Got a general "will hold " response then realised that 4 of the 11 were already overweight in Soco and 6 had a full single share allocation in their portfolio on whatever criteria they used to spread risk.

So most will just hold, one may sell due to lack of dividends or distribution, Only two will buy more if general market tanks.
So asked question would you buy more now if you currently had half a share allocation and 7 of 11 said yes.

My gut feel is that we will still be having an AGM next year. about half thought same.

some bits from AGM

US$180m cash in bank on this Monday

13,294 boepd entitlement production,
16,000 going forward from Sept when start doing 55,000 black oil
then tweak the FPSO to find limit, maybe start changing some of the water capacity over to Oil as the water pressure from sides is doing the job without need for injection.
Could we do 65,000 on FPSO....yes.

Then drill wells as we need them

we have 20 years in field (so not being timed out while under recovering)

HI to H4 does not justify another FPSO which was included when 90000 was mentioned last year so need to get good result on H5 to get agreement to spend $500m on second.

h5 has technical and information collection issues that we will cover before we decide to drill.

TGD - roughly a $80m lump of costs are not recoverable against TGT , a second smaller but not defined amount can be offset recovered against TGT.

Soco is now the second largest oil producer in VN, after Russians.

Issues with ramp up were due to technical views of partner used to the "bad" issues of water in a basement situation and getting them used to the "good " issues of water as a side driver in this type. Partner now understands and is fully on board with ramping up to capacity of the FPSO. This meeting of the minds process took a year.

We are woefully undervalued when compared to North Americans and ....

Enjoy and maybe see you next time EGM ,AGM or whatever


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nigelpm 13th Jun '12 634 of 1284

hmm.. to top up yet again or not.... very very tempting

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loglorry 13th Jun '12 635 of 1284

Good news if PV are really now onside as we are now told. A bid won't have happened while there was a dispute on production ramp up so vital that is resolved. Not sure if we can take their word for it though so the proof of the pudding will be where production is in September.


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ExTownie 13th Jun '12 636 of 1284

Log - i guess this talk of increased cooperation with PV fits in with the post by Spurticus (630) above which shows that they are already raising production to 40k and then 50k, so we should see more evidence of it well before September with any luck.


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kenobi 13th Jun '12 637 of 1284

Yes I agree definitely good news if PV are now definitely on side,

of more interest is talk of looking at reserves, a date of september was suggested, as a possible reserves update, I got the impression they were getting it assessed.
Talk of good recovery rates and perhaps using 50% is appropriate, but also of getting a P3 assessment of what else might be there.

The big thing that was new to me was the H5 prospect which looked typically big and to the south of the other blobs. I don't know on what basis this is talked about , but when asked when they were going to drill it, more siesmic is required first, so I think best consider that icing on the cake if it comes off. My notes say that H5 was initially planned for 2016, but that now it could be next year, I guess this could be the decider on whether to up production capacity. The issue isn't if they can get more than 70k out, it's justifying the costs of the extra capacity.

Last year the figures we were told were 55k by end of 2011 and 90k by sept this year on start up of phase 2,
now the numbers seem to be 55k on startup growing to 65 maybe 70 depending on what the fpso can handle. not much talk of tying into bach ho, although if H5 is a big strike that's still on the table as an option.

Our dear friend MD asked about divis, (I was about to as a follow up but I think they'd heard enough from me), It sounded distinctly vague, last year, it sounded definite, that there would be a divi this year if the money wasn't needed for other investment, when questioned they referred back to a slid that talked about distribution to share holders, point 2.3. So maybe something there.

If we take them at their word, then we've been through a rough patch with PV where we had to educate them to this being a very stable production unit, not like the basement wells that might water out. And now everyone is onside to up production.
Good news on TGT is that although water injection had been planned from 2013 it now looks like it won't be needed until later.

I got the impression that it will be tough to go beyond the 65-70k of the fpso, will the partners want to spend $500m on another fpso ? or pay for a 15km pipe to bach ho, and pay to use that ?
Mr Story mentioned that the Thais are loathed to spend money increasing production once an asset is producing.

So what of future prospects, well apparently we are nearly pregenant on several counts, as in deals nearly done, but a deal nearly done is worth nothing until it's done. Story mentioned about how he knew the head of the thai oil company, he had known his father, and got the company involved in vietnam where they had made a lot of money, I suggested that perhaps there might be opportunities there, and he said yes but there were issues to work around. So there might be some possibility of something in Thailand in the future, but nothing definite. Roger Cagle interupted at one point and suggested there might be 4 significant deals in the tubes, but they might well have said the same last year. The fact is if they come off we get a crack at it, if not, well that's life.

On to Africa, it hasn't worked out, but they're going to try different plays, pre rather than post salt, or vice versa, again, sounds like wild cat drilling, nice to have as potential upside relatively modest cost.

Block 5, in the DRC was mentioned, they plan to do the aero survey to target where to do siesmic. Sounds like perhaps focused on the lake to start with, they mentioned seismic on the ground very expensive to do, no doubt there is a boat capable on the uganda side of the lake that can be rented at modest cost. In so far as drilling, perhaps drilling from the coast under the lake. again to keep costs down. If there were a big find there then there is always the option to use a floating platform, to appease environmentalists, so it is virtually invisible, though I guess this carries more risks in the case of a leak. Interestingly Mr Story made the point that the protected mountain gorrillas are not in the block they are infact 30-35km from the block and up a mountain. My limited understanding of the situation was that they were in the block but nothing was planned near there, perhaps part has been relinquished, or more likely my understanding was wrong.
I believe there are still issues here, it is a national park, and a world heritage site, though of course it does depend how much oil is found. I guess there is infrastructure in uganda for export of the oil which might be usable limiting the disruption in this area.

Very little talk of selling Vietnam this year, thought the valuation gap is closing, and some others said that Roger cagle had said that with phase2 coming on line and production hitting 70k, the gap would shrink, I think we have to consider H5 speculative upside at the moment. The phrase "it's just a plumbing job" was not used, which has been code for it's for sale in the past. However as ever they did say that when someone elses valuation matches theirs it's for sale. With a reserves update due in September I would suggest the likelihood is that that is the earliest date, more likely 2013. As long as the share price starts to respond I don't mind waiting.

Another point that was made was that the company were looking at increasing their stakes in some of their blocks,
I guessed they meant in africa where I guess it wouldn't cost much, and would increase rewards on a success, with the cashflow from tgt, I guess there will be less pressure to farm down going forward.

On that note, Ed Story, did say something, now I might be taking this completely out of context, but he did say something about the company not being valued correctly in this geographical area. I know we've discussed here floating SOCO vietnam on an exchange, perhaps in Singapore ? I did wonder if this was what he was alluding to.
I did ask about the share buy back, and if they'd considered a tender offer, Story said yes, they'd discussed it but didn't sound like they were seriously considering it. Sounded to me like, there's a potential crisis in europe, if the valuation falls, we'll be ready with a big bazooka buying back shares.

Sounded very much steady as she goes, things are happening, they want the share price higher too, perhaps not keen on divis, not sure. Perhaps there will be an option of more shares or cash ? using the treasury shares to do this (just shooting from the hip). The real good news is that it seems everyone is on the bus to increasing production, hopefully this will get rid of any doubts people might have had that it was a geological issue rather than a partner issue.

I'm not planning on selling, I might top up marginally, like the company I plan to keep some powder dry just in case the eurozone problems get worse. I don't know if I've missed anything, I hope I haven't misrepresented anything, this is how I saw/read it, I'm interested in hearing other views.

sorry it's a bit rambling, I had a couple of pints after the meeting, and I'm only just back,

hope it helps,


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kenobi 13th Jun '12 638 of 1284

one other thing, it seemed to be mentioned that production was currently40k I seem to recall this but it is not in my notes, can anyone confirm this?


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rhomboid1 13th Jun '12 639 of 1284

In reply to kenobi, post #638

Hi Kenobi

Thanks for your report from the AGM , I couldn't be there and am grateful for the 'colour' you provide to the presentation on the website


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fuiseog 13th Jun '12 640 of 1284

Here’s my notes for what they're worth. What’s in inverted commas is what was said , or as best as my scribbles could record it.


ES “Current politics? – never better, after a more difficult period (past year). The delay that we’ve had in the past few months has clearly been critical and exceptional.

Our Vietnam partners have had a change of mentality from planned economy thinking. It’s the most satisfying thing I’ve ever done, convincing the President/CEO of Petrovietnam that his technical people were not performing. The chief bod was ‘sent to Siberia’. They were afraid to set high targets, fears they’ll have to do more next year, while there is no reward for success.”

RC “We’re there now, as opposed to the tortuous position of the past year- we’re educating. It’s from weeks to several months now (outing the value/)”

On the share buyback:

RC “We’re not trying to prop up the price, we’re buying back for the value”.

Capture Value:

ES “Capture value? Yes, when someone sees it as we see it, and there are many ways to do it.”
“Woefully undervalued comparatively.”
“When someone else believes what you believe, no need to keep it.”

On returning cash to shareholders (in response to query from Mad Dutch):

ES “We’re as keenly interested as you are, we’re all in the same boat, and the business is maturing nicely”
RDeS “All the Board are extremely interested in this”.


ES “Viets were only used to dealing with basement fields, where appearance of water is a negative. Whereas in TGT, water at the edge is positive: water coming from the flanks means there is no need to drill water injector wells”

“Our Vietnam partners (after politics above!) are eager to test the limits of >55k bopd, and what plumbing is needed.”

“Recovery factors are going to be higher than any other oilfield at 50%. Philips Conoco sold depleted reserves for $20 a barrel (suggesting TGT worth even more?), there was no mystery left and this suited Perenco”.

“FPSO capacity can be exceeded now, but this can get to 75k bopd in September.” A move of some water handling capacity to oil is possible (not clear when).”

“in October productive capacity (I took that to mean capacity that TGT 1 & 2 can deliver) should be well above 90k bopd”

“Will drill another 3/4 wells starting in July, one will be an appraisal well. July 12 is a particularly auspicious day.” (LOL, not if you’ve lived in N Ireland!)

“H5 (the southernmost prospect in TGT) is a key well to add reserves but there is work to be done before drilling it (to determine the COS). There could be another case (if H5 works) for an additional fpso, or for a connection to Bach Ho.” When asked for the COS on H5 (I waited for him to say 90%), but he urged caution until further investigation is done: clearly drilling is not ‘imminent’, but well before originally planned 2016 with the improved partnership outlook.

Revaluation likely in the autumn.

Of those of us in the Seven Stars, for all AFAICS of whom SIA is their biggest holding, there will be no sellers, but I’m not confident I got a consensus here. Concern over the fallout of the Euro crisis is casting a black cloud over further purchases of everything, not just SIA. I forgot to ask Hallucigenia what the prospects for French wine are if the Euro collapses. Cash is king!


ES said that he was reluctant to let it go but “another large company agreed with the decision to walk away from TGD.”

RC said “about $80 of TGD spending is not recoverable but something less, can’t give a figure (off the top of his head), is.”


No timescale given for reporting on gas seperation exercise and valuation implications but it must be soon.

ES “Another well could add between 3-5k boepd.”


Lideki East post salt objective to drill year end or early next year.

Ngazi block drill end 2012.

Block V –electromagnetic survey in progress to supplement previous seismic. Gorilla habitat 37Km distant from seismic area and in volcanic geology. Who would drill for oil in volcanics? Very likely to drill from the land under the lake but there is no drilling capacity available from local sources, Tullow has them all, and it would most likely have to come from India, causing quite a delay.

New Opportunities

ES “We’ve aligned our interest with a state oil company but (regarding progress), how close is close?”

He said there could be 4 deals being pursued. When Vietnam was proposed as an option for one of them he answered with what I thought was a knowing look. I got the very strong impression that all prospective deals are very tentative.

ES “Our interest is in green field prospects; we like to find something new and lay off risk, not buy into existing, but farm-ins have to be a consideration.”

I won't be selling, my boots are full so I can't buy more.

I'm sure someone will put me right if I've got it wrong somewhere.


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jseth123 13th Jun '12 641 of 1284

"“FPSO capacity can be exceeded now, but this can get to 75k bopd in September..”"

FWIW, I don't think this is right. FPSO capacity can't be exceeded at the movement because productive capacity is currently equal to production - <40kbopd. The >from September they can begin to think about testing the FPSO above 55k to see what it can do (up to 70/75 possibly - although he was quite confident about 65k).

They did sound to dismiss a 2nd FPSO and a tie in to Bach Ho (only considering these if H5 is a game changer I think) which IMO, in a nutshell, means that production from TGT will be capped at the FPSO processing rate. Roger Cagle said we'd then have a field that produced at plateau for a very long time and Ed Story brushed off my question that we might not be able to produce all the reserves if limited to 55kbopd ("We have 25 years, we'll manage" - paraphrased).

Overall feelings - TGT H5 is the new excuse for the valuation gap (formerly TGD). After being told last year that relations with VN were "fantastic" and then told this year that they were bad last year but "never better" this year, I'm becoming a little cynical. I'm holding on because $20*123m is a good figure but I think it's about time I started to consider the benefits of holding Soco relative to other O+G cos. Is doubling in 4 years really worth holding on for...?

Nice to meet many of you again today. There will be an AGM next year IMO...not sure if I'll be there! ;-)

Quote of the day - "We've never taken a penny out of this company"...I'll crack the jokes Ed!

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Isaac 13th Jun '12 642 of 1284

I'm holding on because $20*123m is a good figure but I think it's about time I started to consider the benefits of holding Soco relative to other O+G cos. Is doubling in 4 years really worth holding on for...?


I am not selling anything, the end game is inevitable. Patience.

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ExTownie 13th Jun '12 643 of 1284

After being told last year that relations with VN were "fantastic" and then told this year that they were bad last year but "never better" this year, I'm becoming a little cynical. - jseth123

To be fair to SOCO, at the previous AGM in June 2011, relations with PV may well have been very good. TGT first oil was produced 2 months after the last AGM, on 22nd August, and the differences in their approach to production may well not have become apparent before oil started flowing.


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jseth123 13th Jun '12 644 of 1284

Fair play ET, could have been the case, I'd got the impression it was a bit longer in duration but no real reason to think that.

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