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)
313.9p
Change
-0.8  -0.3%
P/E (fwd)
8.1
Yield (fwd)
5.3
Mkt Cap (£m)
1,045



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


1313 Posts on this Thread show/hide all

kenobi 1st Nov '12 934 of 1313
5

>> I think that is significant, given management has been so open about the assessment taking place.

well yes and no, they raised it at the AGM, and have answered questions about it since. BUT if they were being so open about it, would you not have expected a mention of it in todays IMS ???
if they wanted analysts to talk about it, I wonder if there was some way they could have reminded them that this was going on, and we're not sure when it'll be finished but maybe by year end say ??? hum, how could they have bought it to their attentions ? if only there was some kind of document they periodically release, where it could be snuck in just to get people thinking on those lines ......
ok, sorry about the sarcasm, you know what I'm saying, they obviously don't care if the analysts are talking up the stock or not, or they would have put this on the radar ? unless they think they're a possibility the outcome will disappoint so they prefer to under promise and over deliver ?

anyway, joke/sarcasm aside, I think they could have mentioned the review and expected date as part of the ims, especially as it's probably the most significant issue at the moment,

still, what do I know ? (answers on a postcard as they used to say)

K

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Asagi 1st Nov '12 935 of 1313

Fair post kenobi.

Asagi (long £SIA)

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redhill 1st Nov '12 936 of 1313

well yes and no, they raised it at the AGM, and have answered questions about it since. BUT if they were being so open about it, would you not have expected a mention of it in todays IMS ???

FWIW, I still don't think we will hear anything on the reserves update this side of the year end despite the teasing hints from the company at different times over the last few months of something sooner.

My guess is a reserves update will be mentioned as part of the Operational Update within the Preliminary 2012 results (for 2011 these were announced on 15 March 2012).

But who knows.........?

Redhill

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emptyend 1st Nov '12 937 of 1313
2

In reply to redhill, post #936

FWIW, I still don't think we will hear anything on the reserves update this side of the year end despite the teasing hints from the company at different times over the last few months of something sooner.

They'll be hearing from me if we don't!  They've been pretty clear on at least a couple of occasions that something can be expected by early December.

Kenobi:

they raised it at the AGM, and have answered questions about it since. BUT if they were being so open about it, would you not have expected a mention of it in todays IMS ???

I would, TBH......but OTOH there is virtually nothing that could be said without giving a hostage to fortune (which is something that companies generally try to avoid doing in RNSs!! ;-/)

Asagi:

It would be a brave analyst that stepped out from the rest and put a figure in print - especially if that meant suggesting anymore than, say, +15%.

Yes - I'd agree that analysts are unlikely to be brave enough to hazard a guess in print. However, I'm surprised to see virtually no references to the review, especially since the company seemed to be confident enough about the reserves outlook that they swept up the minority first!

However, kenobi has probably got the gist of matters here:

they obviously don't care if the analysts are talking up the stock or not

...why would they, given that the views of analysts will make no difference to the final outcome?

ee

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davjo 1st Nov '12 938 of 1313
1

In reply to emptyend, post #937

I still don't think we will hear anything on the reserves update this side of the year end

They'll be hearing from me if we don't! They've been pretty clear on at least a couple of occasions that something can be expected by early December.

As of 6 weeks ago, when December 1st was first mentioned, the company also said that the form of what we release (i.e. SVn as a whole or TGT and CNV individually) and the timing (i.e. on receipt or 2012 Prelims) is as yet undetermined.

I'm not aware of anything changing since then.

 

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redhill 1st Nov '12 939 of 1313

In reply to emptyend, post #937

They've been pretty clear on at least a couple of occasions that something can be expected by early December.

And before that they suggested September, then it was "the Fall", then it became November, and more recently apparently December.......To me that implies they didn't know and were talking without having any certainty.

I hope it is soon (i.e before year end) but I can see that it may not be, whatever the company's current intentions. In the absence of any other catalyst, as yet unknown, I can see the logic of waiting until the Preliminaries.

Redhill

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tournesol 2nd Nov '12 940 of 1313
5

In reply to redhill, post #939

Redhill

I think your comment is a bit off target

at the AGM they said that

1) they would need to resolve the connectivity question before they could confirm reserves

2) they would need 6 months production in order to draw reliable conclusions about connectivity

the inference is that the earliest that reserves can be restated taking into account any potential connectivity is 6 months from the start of production - which is December

I asked if that inference was reasonable and they said yes

Seems crystal clear to me

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redhill 2nd Nov '12 941 of 1313
2

In reply to tournesol, post #940

Tournesol, thank you.

I wasn't at the AGM but noted one attendee reported at the time that September was suggested. And someone on this BB reported subsequently that he'd just been told November by the company, Hence my doubts about hearing it will be December.

I want to make it clear I am not criticising Soco for how long the update may take. We'd all agree that doing it thoroughly and comprehensively is more important than doing it quickly, and as I've said before I know from experience that such projects almost invariably take longer than anyone involved reasonably anticipates at the outset.

I'm simply saying I'm not banking on any announcement in December and wouldn't be at all surprised if it's Q1/ 2013. We'll find out in due course.

Redhill

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emptyend 2nd Nov '12 942 of 1313
5

In reply to davjo, post #938

As of 6 weeks ago, when December 1st was first mentioned, the company also said that the form of what we release (i.e. SVn as a whole or TGT and CNV individually) and the timing (i.e. on receipt or 2012 Prelims) is as yet undetermined.

AIUI the bits you have in brackets are your interpretation, not what has actually been said.

IMO "timing undetermined" means exactly that - and could be earlier as well as later than the indicated completion date (as it would be in my "early bid" theory). Similarly, I take a different view of what is implied by "form"...which is a much more open-ended expression than your interpretation implies.

FWIW I last asked 5 weeks ago when "something publishable" would be ready and was told "early December". Exactly what is published and when will IMO depend on:

a) what the CPR actually says

b) where matters stand in relation to any deal being discussed

c) macro factors in the sector/market

d) expectations for other newsflow (eg H5 well timing or indications regarding a distribution)

e) whether there are any "year-end" considerations (including option matters)

My guess is that something will be published on 6th or 13th December, if not earlier in conjunction with other news. If nothing is out by then, I'd think it will be in the New Year.

What is completely clear is that the release of important news will be very carefully planned, as it is a key element in the process of monetisation. Timing (and perhaps form) will depend on when it is thought the greatest positive impact will be achieved (so it won't, I hope, emerge on Christmas Eve ;-)).

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kenobi 2nd Nov '12 943 of 1313
4

Its more important to prove connectivity than to get a report out. With that in mind, it might have been possible in 6 months, it might have taken less (sept/fall), but if there really is the prospect of a deal based on the new figures, we might have 10% or more riding on the results. So, as far as I'm concerned, do all the work you need. get the best result you can for reserves, it might be our last chance !

I'm guessing much production from different zones and pressure comparison is going on.

My one reservation is that if it is going to take longer and into drilling H5, the management have put return of funds on the agenda in some form, and I would like to see this take place. (as I'm sure we all would)

K

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loglorry 4th Nov '12 944 of 1313
1

Sorry for the OT question but can anyone remember what the Dana 2P reserves were at the time of the takeover by KNOC and roughly what % of them were developed and how much was gas?

Searching the stockopedia website for a reference doesn't come up with much. It looks like KNOC paid about $10/bbl for them but obviously this has little meaning if we don't know how much cappex was spent on them and what % was gas and which was oil etc. I'm just doing some research on takeovers and what sort of valuations they obtained.

Thanks in advance

Log

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peterg 4th Nov '12 945 of 1313

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 1313
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 1313
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 1313
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 1313
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 1313
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 1313

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 1313

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 1313

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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