Voting AGAINST Soco Remuneration and AGM Questions

Thursday, May 24 2012 by
4

Fwiw my view is unchanged. I am still annoyed that Soco directors have been awarded a 100% bonus for failure. They did not achieve the 55,000 boepd target that was set as such I don't think they deserve  a 100% bonus.

The only real positive I can see from Soco in recent times is buying back shares in the recent market weakness. But let's not forget we are discussing 2011 performance.

Bringing TGT online as far as I am concerned is MEETING EXPECTATIONS, WHY should directors that do their job be paid a 100% bonus for doing what was setout in their job description for the year?

I think Michael Johns Chairman of the Rem Committee should resign - I don't approve of his appointment in 2011, I have the view that he has done a poor job in setting Soco Remuneration.

I have more shares then Michael Johns, this individual holds under £30k of shares yet has the power to significantly influence the remuneration of a FTSE 250 board - I think the system is BROKEN and there should be a minimum shareholding for a director who is representing the interest of the MAJORITY shareholders?

How can it possibly be correct that someone who owns less then £30k of shares in an almost £1bn company influence the remuneration of the exec directors ?


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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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1,025



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16 Posts on this Thread show/hide all

Isaac 24th May '12 1 of 16
5

Shareholders of FPM made the directors withdraw the excesses :

"Since the publication of the Notice of Annual General Meeting in April 2012, the Company has been in further dialogue with its larger shareholders. Following those discussions, the Company intends to make a number of changes to the proposed Faroe Petroleum Exceptional Performance Incentive Plan ("EPIP") and consequently Resolution 7 has been withdrawn.

 

http://www.investegate.co.uk/article.aspx?id=201205241100110305E&fe=1&utm_source=FE%20Investegate%20Alerts&utm_medium=Email&utm_content=Announcement%20Alert%20Mail&utm_campaign=Faroe

Collectively as Shareholders I think we can make Soco do the same....

Please vote against Soco remuneration, only a few weeks left before the AGM.

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emptyend 25th May '12 2 of 16
10

In reply to Isaac, post #1

Collectively as Shareholders I think we can make Soco do the same....

Please vote against Soco remuneration, only a few weeks left before the AGM.

What do you mean "the same"? There is nothing "the same" as the Faroe Petroleum (LON:FPM) resolution.

If you wish to foment a vote against the remuneration report in general, then what EXACTLY is the objective? What is the message supposed to be? Is voting against the remuneration report in the company's best interests? And is it in your best interests as shareholders to vote against, given the particular situation that applies in SOCO's case and in the context of the company's stated strategy? Isn't the best way of addressing the particular issue simply to ask detailed questions at the AGM, so as to leave management in no doubt about the precise areas of concern?

I haven't read that anyone has any objection to any part of the remuneration report except for the fact that 100% bonuses were paid to two execs last year. As I've said, AFAICS, substantial bonuses WERE justified during 2011, due to various milestones having been hit. But I would be very interested to hear how 100% bonuses were justified, though I'd have no difficulty accepting the idea that bonuses at the 70-80% level would have been justified.... and the difference is £150k or so between the two levels in aggregate.

Worth asking questions about, for sure, especially if one believed that such a pattern might continue indefinitely into the future. But in the context of the bigger M&A picture this looks very much to me like risking "spoiling the ship for a ha'porth of tar" (roughly one twentyth of a penny per share).

There are very much more important matters for shareholders to focus on and ask questions about - so DON'T allow the AGM to get swallowed up by this excessive attention on what, at best, is a complete side-issue in relation to all of the other matters that shareholders should be focusing on (in the interests of their own wealth) eg plans for TGT production, monetisation of assets etc

The other point, of course, is that the gesture will be futile, given that Pontoil and the rest will all have signed off on it.

Pay envy is all well and good - but engage the brain first.

ee

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kenobi 25th May '12 3 of 16
7


We must not loose track of the fact that tgt p1 was on time and on budget (including an fpso). We know there is some issue with the opening up of new zones in tgt1 which has meant that it has run under capacity. It seems to be an issue with PV wanting to go slowly and collecting more data. This explanation becomes less credible with each passing day, how much data could they want ? Is it that they want to produce slower from tgt in the hope of maximising recovery rates ? If it means significantly higher recovery rates that might well be in socos interest. For me this is the most important issue. It appears that now we're comitting to 55k including phase 2 , I have seen no indication of what the eventual plateau might be, perhaps it will be 55k ? or maybe only marginally more ?

The other issue to consider (not re last years bonus obviously), is that it appears that all is going according to plan with phase 2, and that this might start production upto a month earlier than planned. This would be nice, but I'll settle for on time and on budget to be honest. Plus we have the issue of a reserves upgrade, what is the thinking on that ?

The other big issue for me is the M&A and buy back issues. Whats the plan for monetising tgt ? what is the buyback plan ? are they planning a tender offer ? are they planning to announce that tgt is for sale like phillips connoco did next door ? how much data do management think they'll need to get a good price for tgt ? are there plans to drill further wells in tgt ? or drill deeper in the hope that a tdg structure extends below tgt ?

And then I'm interested to see what the response to the Mad Dutch issue is ( can I have a divi please ?)
As ee says, it's not unreasonable to ask questions about renumeration, perhaps as a shot across the bows for future reference, but my primary concern at the moment is having got tgt on line how are we going to get the best value from it. The market clearly doesn't rate the asset, what are the options they are considering ?

And then of course what is there thinking on Africa ? and any deals in the pipeline ?

I'm looking forward to it,

cheers K

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MadDutch 25th May '12 4 of 16
5

This idea is the most stupid I have seen in a long time.

Ed, Roger and the others have created an asset which we expect will be worth around two billion sterling in the near future, and when that happens will have enriched beyond the dreams of most of us. Yet the proposal here is that we nitpick over bonuses that are less of a thousandth of the wealth they have created since 1999; and we do not even know whether the problems of the last year are within their ability to influence, Soco is a minority partner and therefore able to be out voted. If I was on the board, I would not take kindly to being criticised for that. 

An enormous amount of time has been invested by friends here and it has made good relationships between the board and investors. Frankly, any support for this proposition will make us look like a pack of small dogs snapping at the directors heels, and trying to bite the hand that is about to feed us. 

We know they appreciate our support; who apart from Isaac is willing to throw that away? For example, consider Son of Soco; good personal relationships plus directors who like us and want to keep us with them, could encourage us with an attractive deal. But that is unlikely to happen if we have succeeded in upsetting them.


MadDutch.

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Isaac 25th May '12 5 of 16
1

In reply to emptyend, post #2

but engage the brain first.

I think you should suggest this to the management - Do you not think it was short sighted of them to take a 100% bonus given the circumstances and a Sale of Soco is likely? I.e. Did they not consider there would be a shareholder backlash from them taking a 100% bonus and the 100% bonus compared to their shareholdings was probably not worth taking the risk over?

So if you want to blame someone then look at the management.

What do you mean "the same"? There is nothing "the same" as the Faroe Petroleum (LON:FPM) resolution.

By 'same' I am not referring to the resolution, I refer to the principle i.e. with Shareholders refusing to back the remuneration the management may give back what they took.

If you wish to foment a vote against the remuneration report in general, then what EXACTLY is the objective?

The objective is for them to think twice the next time they decide to accept a large bonus & they can ask themselves whether they actually deserve it.

The remuneration pots of UK PLC is excessive, we as shareholders have a responsiblity to ourselves and society to trim the 'fat' back into shape as quite frankly the current levels of remuneration are unacceptable.

I appreciate the end game for Soco is now closer then ever before, but the truth is we need a buyer. And for all I know we could be hear this time next year having a moan that the directors have taken an excessive sum of money yet again.

The assets are worth x and regardless of how we vote the value will be worth x.

The truth is I don't want to spend my time or management's time discussing why they have excessive pay, I expect the management to exercise common sense and take rewards as appropriate.

I am still waiting for you to tell readers as to why you think an 80% bonus is acceptable and what other companies within the sector has made such a payout for similar performance.

 

 

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Isaac 25th May '12 6 of 16

In reply to MadDutch, post #4

MD

I promise you it is a much easier conversation to have with management which is full of praise.

Do you think I want to sit here on a Friday evening moaning about their excess? No.

Accounting 101 states a cost should be accounted for in the period in which it occurs. So please let's not discuss what value they created since 1999 as quite frankly they were remuneratred accordingly for their performance in those respective years.

I don't see a point where anyone signed a contract with the management to state they can take a large sum of money for their performance of the last 13 years, they have share options etc to reward them for that.

And there is little point in falling in love with a share/management/company as they won't love you back so it matters very little about Son of Soco especially when considering their age! I strongly doubt the management will be around for Son of Soco.

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emptyend 25th May '12 7 of 16
4

In reply to Isaac, post #5

I am still waiting for you to tell readers as to why you think an 80% bonus is acceptable and what other companies within the sector has made such a payout for similar performance.

What do you mean "still"?  Damned cheek. I commented 6 weeks ago - probably forgotten by someone obsessed with his own rants and with the attention span of a gnat.

See p61 of the AR for the official explanation:

Goals are set annually for
each portion of the Company’s portfolio aimed at
achieving the specific challenges the Company faces
in meeting its strategic objectives. The monitored
measures for particular projects may include
specified timetables for seismic, drilling and
construction programmes, drilling success ratios,
discovery targets, reserve levels and production

targets. Portfolio objectives are set regarding
progress towards potential non-core asset
divestitures and new ventures. Corporate strategic
goals, safety and environmental measures and
financial measures against budgeted levels are
additionally established as deemed appropriate.

As I said, I can't see how 100% is justified, but wouldn't argue with a lesser number - there are enough things being measured that the lack of explo drilling success (nb. the appraisals were fine) and the peak production targets probably wouldn't have more than a 20-30% impact.

It is also worth noting that shareholders were told in the 2010 Annual Report what the bonus criteria would be for 2011(p56):

The specific targets
set against these measures are considered to be
commercially sensitive and are therefore not set
out herein. However, we can broadly indicate that
performance measures in 2011 will include goals
associated with the Vietnam development project,
which is of major significance to the Company.
Goals targeting appropriate stewardship of the
Company’s resources in the current economic
environment will continue to be emphasised.
Additionally, objectives over safety and
environmental measures will remain a priority in
consideration of expanded operations in Africa,
and in particular the security and environmental
matters relevant to activities in eastern Democratic
Republic of Congo (Kinshasa) (DRC).

....and on that basis, I can see only the production shortfall at TGT constituting a "miss".

ee

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emptyend 1st Jun '12 8 of 16
1

One question for the AGM (or before, if anyone knows the exact answer or can work it out from the links below) - exactly why is it that index funds have been lightening up recently?

I posted the following on ADVFN earlier and copy it here for ease of reference:

I am aware that some passive index funds have been lightening up due to:
a) new rules for passive funds coming in in June and
b) soft markets generally
....hence volumes have generally been a little higher on down days.
See the L&G announcement of three weeks ago. At some point that will dry up.

For those interested in trying to work out why there is an impact from the rule change on passive funds, the answer is probably somewhere in here:
http://www.ftse.com/Indices/UK_Indices/Downloads/FTSE_UK_Index_Series_Index_Rules.pdf
.....probably in relation to the size of the free float, I'd guess.

..ps...the issue re free floats is discussed here:
http://www.indexuniverse.eu/europe/publications/journal-of-indexes/articles/8271-the-role-of-free-float-in-indices.html?start=2&Itemid=200
....I'd imagine that there is a smallish but clear impact on SIA, given the free float figures indicated in recent presentations.

 

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Isaac 12th Jun '12 9 of 16
3

The AGM is tommorow, it will be interesting to see the votes.

However, I think as shareholders we should focus on stressing to the management that we would like a Sale to happen sooner rather then later.

 

The reality is with Soco's asset position they are more exposed to the Oil price then ever. Do I think a collapse is imminent in the Oil price? Nah. Is it possible though? Ofcourse.

I think all the ingredients for a deal are in place but the biggest threat to ruining our party is a collapse in Oil price IMO. Therefore I can't stress enough how much I would like to see Soco do a deal in the near future.

ee has said July is the month a deal is likely, I hope so.

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tiswas 13th Jun '12 10 of 16
8

In reply to Isaac, post #9

Come on then Isaac how did it go?

Did you look the remuneration committee in the eye and say, "go ahead make my day punks"?

Or was it all a bit tame?

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kenobi 13th Jun '12 11 of 16

Voting at the AGM is a formailty, afterwards they show the proxy votes and the smallest was 180M, a clear majority, they don't even count, it's a show of hands, perhaps if all the hands went up against they would take note, but short of that what's the point ?

A polite word might be worth more than a token vote against renumeration,

K

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Isaac 13th Jun '12 12 of 16
3

In reply to tiswas, post #10

Did you look the remuneration committee in the eye and say, "go ahead make my day punks"?

Or was it all a bit tame?

 

Thanks, I like your sense of humour. It is better that we all laugh that things are going to plan then cry that we have lost a chunk of money, eh? :-)

I don't think any of the 4 deals being discussed will materialise, what is the point? Ed is 68, the gap in valuation will disappear in a month or two when pahse 2 comes online, a reserve upgrade is likely in the next 3 months a deal looks inevitable.

I can wait for the management who for the time being need to portray the outside world deals are being discussed, wells are being planned for drilling etc etc rather then give the impression the Soco world has stopped pending a deal.........

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emptyend 14th Jun '12 13 of 16
1

Seems a reasonable summary of the tone - which is exactly what I'd expect at this point.

Did anyone actually ask Mr Johns to explain the full bonus award, or were the critics too busy sucking up or hiding (again)?

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Judge Dredd 14th Jun '12 14 of 16
2

No-one said anything about directors' pay, bonuses, etc.

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kenobi 14th Jun '12 15 of 16

I don't think any of the 4 deals being discussed will materialise

you may well be right, in fact they were talking about much the same last year as I recall, deals in the pipeline, nothing we can talk about etc, etc,

It does depend if you think there will be a whole company sale or a vietnam sale I would say. I don't know who would lead a son of soco, thats probably the biggest risk in that as a strategy, a replacement management team.

K

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emptyend 14th Jun '12 16 of 16
1

In reply to Judge Dredd, post #14

Thanks - thought as much!

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