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)
420p
Change
7.4  1.8%
P/E (fwd)
10.5
Yield (fwd)
4.2
Mkt Cap (£m)
1,369



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


1284 Posts on this Thread show/hide all

peterg 4th Nov '12 945 of 1284

In reply to loglorry, post #944

Hi Log,

Can't really remember, though the follwing link is to their last set of results (27th Aug 2010): http://www.investegate.co.uk/Article.aspx?id=201008270700167448R.

One key point is that, unless I'm much mistaken, the bulk of their developed reserves were in the NS, where the terms are somewhat different to those of Soco's positions in VN, and so developed reserves are not worth as much.

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loglorry 4th Nov '12 946 of 1284
1

Thanks PG I know cant compare apples with oranges but it is one large data point nonethekess.

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uncommon13 7th Nov '12 947 of 1284
3

In reply to loglorry, post #944

May be Dana's value based defence report against KNOC takeover may help you find a better answer:
http://www.dana-petroleum.com/Media-centre/Press-releases/2010/VALUE-BASED-DEFENCE---DANA-RESPONSE-TO-KNOC-OFFER/

Edit:
I can't find the reports referred to in the statement on their new website but I searched my laptop and found them. I've uploaded them to my dropbox account from where you can download them if you want to (the second pdf link is a massive 58.6MB but it goes into loads of details about the assets at the time of the takeover):

Dana Defence FINAL sterling 100908.pdf (4.2MB)
http://dl.dropbox.com/u/67161332/Dana%20Defence%20FINAL%20sterling%20100908.pdf

Dana Competent Person's Report September 2010 (58.6MB !)
http://dl.dropbox.com/u/67161332/Dana%20Competent%20Person%27s%20Report%20September%202010.pdf

 

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SW10Chap 15th Nov '12 948 of 1284
4

In reply to redhill, post #939

And before that they suggested September, then it was "the Fall", then it became November, and more recently apparently December.

Don't forget that revised timescales are as subject to delay as their original counterparts. The only way of breaking the cycle is to stop quoting time-estimates and so investors should be thankful if they hear nothing further before Valentine's Day.

....To me that implies they didn't know and were talking without having any certainty.

Yep, that'd be about right. All the technology and processing power in the world, and we still can't tame the uncertainty of nature.

More seriously (and FWLIW), I'm a little more encouraged about the possibilities of the next few months and hope that the long-awaited value can be crystalized by a sale. I just hope the TMF video isn't a contra-indicator!

SW10

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kenobi 15th Nov '12 949 of 1284
2

Of course the new year (ish), will be 6 months from the start of phase 2 and if they've proved up connectivity there or soon after, that might to some seem like the moment to offer SV for sale to interested parties. All speculation of course, I would suspect we might need 6 months production data from the point they ramped up production. which takes us to april fools day I would guess.

Truth is there's always going to be the next milestone or opportunity. The management will have to gauge when they are willing to trade in their hands because the value as seen by a buyer is close enough to the value they see.

It would be nice to see a deal done soon, but having waited all these years, I would hate to miss out on upside due to a rush to sell.

cheers K

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emptyend 15th Nov '12 950 of 1284
1

In reply to SW10Chap, post #948

Yep, that'd be about right. All the technology and processing power in the world, and we still can't tame the uncertainty of nature.

Nice to see you here again, SW10 :-)

I'd observe that this has much more to do with the uncertainty whenever a third party is involved rather than the uncertainty of nature. I think one can almost guarantee that putting a timescale on matters involving any third party (such as a consultant, as well as a drilling contractor) means you run the risk of being completely wrong in your expectation of timing.

Ultimately, however, a point may be reached where matters fall into management's own hands - and I think we'll know pretty swiftly if/when such a point is reached.

ee

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shanklin100 16th Nov '12 951 of 1284

ee

Ultimately, however, a point may be reached where matters fall into management's own hands - and I think we'll know pretty swiftly if/when such a point is reached.

Do you still have the sense that this will occur in December?

Thank you, Martin

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shanklin100 16th Nov '12 952 of 1284

In reply to shanklin100, post #951

ee

Have just seen your post on ADVFN which largely answers my question.

Best wishes, Martin

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thebuffoon 18th Nov '12 953 of 1284

Have just seen your post on ADVFN which largely answers my question.

Dec 6th or 10th or January or February?

I thought if it wasn't going to be in December then the company 'would definitely hear from me'.

The CAGR goes down and down as the years roll by...

Buffy

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emptyend 19th Nov '12 954 of 1284
5

Another article - stating the obvious re M&A.

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kenobi 19th Nov '12 955 of 1284
1

whoops ,  sorry ee,  you beat me to it,  I notice that Roger is saying the company isn't for sale,   perhaps they'll be sales soon,  either after christmas,  or as increasingly common,  before Christmas !

http://www.businessweek.com/news/2012-11-18/soco-seen-as-next-target-after-coast-energy-bid-real-m-and-a


Cagle said in a Nov. 17 phone interview. “But clearly the for-sale shingle is not out on this company.”

I don't know, I think everything is for sale, and our Roger is being a little Coy !

Cheers K

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GreenRover 19th Nov '12 956 of 1284
2

In reply to kenobi, post #955

I don't know, I think everything is for sale, and our Roger is being a little Coy !

I agree, I don't have a For Sale board on my house, but if someone comes along and offers me enough money for it then I'd sell.

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kenobi 19th Nov '12 957 of 1284

In reply to GreenRover, post #956

GR,

agreed, however, there does come a point, perhaps soon if they can proove connectivity and get a reserves update to reflect this, that the thing to do is put up a for sale board and drum up as much interest as possible. That is how phillips conoco went about selling the field next door and they got a good price, although to be fair it did take nearly 12 months to conclude the sale.

cheers K

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GreenRover 19th Nov '12 958 of 1284
1

K,
Totally agree with you, but If connectivity is proved then won't that greatly increase the the price that any offer would have to be before even being considered by the board?

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loglorry 19th Nov '12 959 of 1284

ISTM that they want to get the extension finished and the lounge painted before they call the estate agents in no doubt.

However everything is for sale it's just the price. Actually its not his to sell it belongs to the shareholders - although he certainly has a lot of influence. I doubt if a decent bid was made he'd stand in its way though.

Although its annoying to see the share price below what we think the assets are worth its probably better to have our wealth in an inflation proof asset rather than cash while the money printing presses of the world crank out more and more dollars to inflate away excessive debts.

Log

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harryr 19th Nov '12 Reported for Disruptive Behaviour


This is from the header of this thread.

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.


The thread has been read by 136,940 investors however, the share price is half the price it was 5 years ago and is unmoved over the last two years.

I have not got a clue what it will do over the next year or two..up or down.

I have posted on the "The Next Coca Cola" thread with what I think is an outstanding growh share, yet over the past few weeks it has seen just 500 reads.

The stock market often does not make sense to me.



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kenobi 19th Nov '12 961 of 1284

In reply to loglorry, post #959

log & gr,

I completely agree, we need to sort out the reserves upgrade, prove connectivity, and get the production history needed. I'm not for a second suggesting that we'd announce SV is for sale before that, nor indeed before they speak to those they consider to be interested parties. All I'm saying is that once that's all done and we've added all the value we can, (ok maybe h5 drilling will take place in parallel), why not announce it's for sale, it worked for the neighbours, they got a good price, there might be some who we don't know about that might be tempted. No harm putting a bit of pressure on those that we think might be interested.

If we cannot get the price that the management is after, then time to consider some of the other ideas that have been discussed here. Including floating a proportion of SV on an exchange somewhere as an income stream.

If there are other ventures that come up, even in vietnam, they should take place outside of SV, so they can be sold seperately at a later date if need be.

cheers K

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loglorry 19th Nov '12 962 of 1284

I agree K but there are three things I can do with Soco. Buy/Sell/Hold I'd probably buy more at current prices if I thought the connectivity thesis was strong and/or they had plans to solve the FPSO bottleneck. I doubt I'd sell any here unless something spectacular came along to re-invest in so that leaves ermmm boring old Hold.

If things do start to look like getting unstuck on various fronts I'll reconsider but for now I'll just wait and see - a relatively low risk place to park cash.

If my coastal stake about the same size now as Soco is taken out I may look to re-invest in Soco but to be honest I prefer NKO or BG at current levels.

Log

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emptyend 19th Nov '12 963 of 1284
1

In reply to loglorry, post #959

Although its annoying to see the share price below what we think the assets are worth its probably better to have our wealth in an inflation proof asset rather than cash while the money printing presses of the world crank out more and more dollars to inflate away excessive debts.

More or less the view that has led me to hold since the 2008 oil price reversal, FWIW. You never know when (to use the analogy that others have employed) there will be a knock on the door.

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loglorry 26th Nov '12 964 of 1284

I think some time ago we compared Coastal and Soco as some were proposing at the time a switch from Soco to Coastal. (sorry can't find the post). I think at the time they were pretty even on a lot of metrics. It does look like the switch was justified though. Coastal have continued to peform well and today have provided 2013 guidance where they are targeting 30,000 bpd average production net to Coastal.

http://www.investorvillage.com/smbd.asp?mb=11837&mn=19153&pt=msg&mid=12331742

I hold both - I'm sure Coastal's success doesn't mean that Soco won't have further success but so far one has to acknowledge that horse was a better bet to put your money on.

Log

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