The SOCO AGM thread is concerned with our expectations.
I think it would help to start another thread here now to record what was actually said, both during and after the AGM, and what the implications are.
SOCO AGM 10 June 2009
You will find the AGM presentation on the website here: http://www.socointernational.co.uk/?id=74&entityType=Document
Good idea.
I'll probably be en route to and fro tomorrow at the relevant times, so I'll leave it to others to have first crack and see if there is anything left to report on.
ee
I will be many, many miles away and looking forward to seeing the reports as they come in.
I'll also be happy to try and stick an oar in if I get to see a copy of the presentation...
SW10
Some extracts from the presentation: |
Summary from slide 22
- Strongest balance sheet in SOCO’s history, poised for significant growth in production, cash flow and profitability
- Vietnam exploration results confirm world class reserves with SOCO largest presence of any independent E&P company
CNV on production
TGT under development with first oil targeted mid 2011
TGD well success indicates high potential HPHT appraisal area- Commence high impact drilling programme in West African portfolio
Hal's "qick fisk" of AGM presentation with interims and his thoughts on MF - link here
This was an interesting meeting with a far smaller turnout that usual. This may have been in part due to the tube strike but could well also be a function of the flat SP and lack of imminent news. A number of major participants were late and the meeting itself started late to allow others to make their way to the AGM. |
In reply to Kissxofxdeath (post #7)
wow thanks KOD for that comprehensive write up,
I feel like I was there !
disappointing to hear that it's unlikely vietnamn will be sold in the short term, but I think we all knew that now anyway,
good news that rigs are more affordable, and oil prices are rising, I hope they can book all the kit they need before rig rates take off again.
disappointing that we're still talking about how great TGD is going to be, for the third year running now, but lets hope it comes good in a big way in the end,
Cheers K
I see no-one has yet mentioned the appointment of a new non-Exec director, Antonio Monteiro
http://www.investegate.co.uk/Article.aspx?id=200906101635187038T
Mr Monteiro, aged 65, graduated with a law degree from Universidade Lisboa in 1967. He then joined the Portuguese Ministry of Foreign Affairs where he had a distinguished 42 year career, including being Foreign Minister (2004-2005).
His various ambassadorial duties have included posts in the Democratic Republic of Congo and Angola, culminating with his appointment as Portugal's ambassador to France (2006-2009). Ambassador Monteiro also served as the permanent representative of Portugal to the United Nations (1997-2001). His United Nations diplomatic roles have embraced some very complex and sensitive responsibilities including being President of the Security Council (April 1997/June 1998) and High Representative of the Security Council for elections in Côte d'Ivoire.
Ambassador Monteiro is currently a member of the Board of the Angolan Bank BPA (Banco Privado do Atlântico) ...
Any thoughts / comments? The UN stuff isn't that important, I suspect, but the former postings in DRC and Angola as well as being an ex-Foreign Minister should have helped him build up some useful relationships. It certainly complements the new focus on West African exploration, and wouldn't do any harm, either, were Soco - or Son of Soco - to be interested in future in Mozambique.
Man Siarad
KOD: I was chatting afterwards with some others and we worked out that the SP is still below its highs of 2005 when the Ashes were last on so it just goes to show how slow this business can be sometimes.
actually 2006, not 2005 (click on graph at top of thread to see0
lsn: With respect to the 1 Appraisal well HPHT area VN 2Q/3Q10 (100+mmbbls) , I assume that will target only the upper band only and not go down through to the HPHT region which caused all the problems last year.
correct - they are only revisiting the 'easy' area.
Some additional colour on KoD's excellent notes, some of these repeat KoD's points where I wrote down verbatim what Ed said.:
- I agree Ed raced through the presentation. Partly this may have been because of time shortage - the meeting started 25 mins late and they had a board meeting schduled afterwards - but there was plenty of time for questions and the directors hung around for a decent length of time chatting afterwards.
- the presentation was shorter than before. The summary pages for the different areas were missing, also no production profile - I think the directors felt they had been given a hard time this year for spelling out their hopes so enthusiastically last year - this time the hopes came through but only orally.
ES: [TGD next well] is closest thing to certainty I have seen
ES - looking at slide 12 - 100mb target for next TGD well - they expect the porosity to improve further up the fan, if that happens then
let your imagination follow
Asked about the potential sizes involved, he later said 10-15 times and added this was just the oil above the volcanics, not the condensate below. Roger was looking as though he rather Ed hadn't spelt this out.
TGD is being revistited in Q2 or 3 next year. They will be booking a rig for 18 - 24 months to do TGD explo and TGT development drilling. Ideally would like to do TGD first then onto TGT. After TGD well they will want to recorrelate the results with the seisimc - this will take time and the drilling of the next TGD well will crucially depend on TGT drilling and the monsoon weather when rig can't be moved.
Slide 14 - this was the first time ED had seen the slide. The pink bits are ridges sticking out of the black basins.
[nb For people not familiar with the area (yet! we are all going to know this a lot better over the next year!) the costline is the thin pale blue line snaking along the Zila ridge.]
They are very excited by the seismic that has been shot in Nganzi. Confident will drill in 2010 - potential Mboundi size!
ES - usually these kind of things don't work but we will see!
After the meeting when asked more about this he said that they may consider not farming it out - they currently have 100%! I didnt speak to RC afterwards but apparently he said his geologists were suggesting this. It will cost $30m for 2 Nganzi wells (nb KoD thought he said 30m each). On shore, main complication is getting the rig there - no roads and a large river that will have to be bridged in the way - monsoon timing will affect this.
He ended by saying
[Vietnam] we are going to be there a long time .... [West Africa] time for the dream to become a reality
db
In reply to doverbeach (post #11)
After the meeting when asked more about this he said that they may consider not farming it out - they currently have 100%! I didnt speak to RC afterwards but apparently he said his geologists were suggesting this. It will cost $30m for 2 Nganzi wells (nb KoD thought he said 30m each). On shore, main complication is getting the rig there - no roads and a large river that will have to be bridged in the way - monsoon timing will affect this.
Just on this point, I have had this (twice now) first hand. The technical folks (for the first time in Roger's 30 years experience) are suggesting drilling without farming down. The mob costs for Nganzi are big - partly because of the need for roads and bridges - and the rains start in November....hence no drilling before about Q2 (as any roads built before the rains are likely to get washed out). They don't need to decide whether or not to farm down until Sept/Oct and, though I'd think they could easily do so (if there are deals to be done with other interested parties - and there certainly seems to be some interest in various assets), I would also not be surprised to see them drill it alone (especially if the convertible stays trading at 98 or so, because very few would be put back in such a scenario and there would be much more cash freely available). Costwise I confirm the $30mn for both wells (with about $20mn being mob costs IIRC) as the rig will need to come in from the Congo Brazzaville to the north across Cabinda.
In reply to ManSiarad (post #9) :
I see no-one has yet mentioned the appointment of a new non-Exec director, Antonio Monteiro....Any thoughts / comments? The UN stuff isn't that important, I suspect, but the former postings in DRC and Angola as well as being an ex-Foreign Minister should have helped him build up some useful relationships
News of this emerged only after the meeting, but I had a long conversation on the topic at the AGM. Monteiro is EXTREMELY well-connected at the highest levels in both DRC and Angola/Cabinda. There are certainly deals to be done in the near future in this area and there are also some reasonably well-founded hopes of further DRC acreage - about which decisions are likely to be made in the next few weeks. Those who I mentioned this to will know a bit more but I'm not going into details here - we'll either see in due course......or we won't! ;-)
No wonder KoD hadn't finished his write-up in the pub!! ;0 I'll have to return to that later (gotta go out now) when I've printed off the presentation etc.
ee
In reply to Kissxofxdeath (post #7)
OK - a few comments now on KoD's dissertation..... ;-)
This was an interesting meeting with a far smaller turnout that usual. This may have been in part due to the tube strike but could well also be a function of the flat SP and lack of imminent news. A number of major participants were late and the meeting itself started late to allow others to make their way to the AGM.
Half last year's numbers, no doubt partly due to transport issues (Mr & Mrs MadDutch....and obviously Isaac and JonnyT ;-)) but also recall that last year's AGM was held in the middle of testing for TGD - which was plainly a significant event. No such immediate events were expected this year - and I'd suggest that the lower attendance, the lower trading volumes and the broker observations all point in the same direction - viz....no-one is expecting very much news. BUT!!!!! ........the question is - are they right? IMO things will be rather more interesting that the general market appears to think (for reasons buried below etc)
The main excitement for me was the “fan” which is in prospect in the event of success when they redrill the shallow TGD play once they get a rig in 2Q10. They have already drilled it three times so they are pretty confident it will be successful and if it is then it opens up a number of other prospects all along that basin. I was saying to emptyend that it reminds me of the presentation some years ago when the prospect of the “string of pearls” in 16-1 was first mentioned. There is the same sense of enormous potential in the event of success.
The point that non-attendees will miss in this area is that (in contrast to the situation last year where everyone was focused on what they viewed as a "billion barrel well") they have deliberately decided to downplay the scale of potential upside - hence the reluctance to spell out the total scope of the structure (albeit that they still haven't finished the reprocessing of the seismic - and won't until September!). Hence my question covered here:
Emptyend - HPHT reprocessing and fan channel – emerged after AGM last year – what are volumetric potential if the whole play
10-15 times 100m potential – just TGD structure – we didn’t manage expectations on this play – we are not drilling down to the deep – it is major gas condensate field – we had three bores through it – degrade in quality of reservoir – improved as it went down the crest – seismic interpretation and channel that comes down plenty of pressure for porosity and perm – if that happens then buzzard field analogy geologically – improvement going into the fan channel - this will test that characteristic and derisk the remainder of the channel – much higher probability- just the oil bit above the volcanic not the gas condensate –
Just to clarify this point completely.....it looks as if the total size of the fan (which relates ONLY to the upper oligocene on TGD only.....not E South, not the Deep E gas play.....not the other bits of the HPHT area!) could potentially hold 1.0-1.5bn bbls of recoverable oil (well, fluids, anyway). The first well will poke the section they have poked already.....which is around 100mn bbls recoverable....and, as KoD notes, IF it comes up to expectations then we could be looking at another Buzzard play. Whilst they are very confident (indeed!....ie virtually certain!) that the bit they have logged previously will flow, the derisking of the rest will obviously depend somewhat on the detailed technical assessment. The gas plays below are not a priority for now.
Ed Story also made it pretty clear in conversation with me after the AGM that monetising Vietnam is a distant possibility. He said that given the potential in the fan, there is far far too big a gap between the value which an acquirer would place on the play and the value management have of it.
Yup. It is now clear that the fan interpretation that emerged after the last AGM is the major reason for monetisation in VN being put firmly on hold (though of course one can never be completely certain!). Management very clearly think there is massive upside potential in the HPHT appraisal area and clearly have expectations that are WAAAAAY ahead of what they expect anyone to be prepared to pay at present - so they'll be intending to prove it up. In retrospect it seems I misread management excitement over this towards the end of last year as excitement over imminent monetisation. I have the impression that JonnyT's "wild" thoughts of a £50 share price may not turn out to be quite as wild after all!
The idea was mooted of splitting off the parts of Vietnam that are fully developed or will be soon, but apparently Vietnam has to be sold en masse or not at all. Although didn’t I read somewhere that Soco split 16-1 and 9-2 into two companies? I’ll have to check that.
No you didn't KoD - it is indeed "all or none". Though of course OPECO remains a separate stake if they ever wanted to monetise just a 2% stake in 16-1.
In addition, a lot of those reserves are moving inexorably towards production, I think I heard Roger mention 50,000bopd in 2011 which when you take into account the extra money they will be getting as they get their capex back as well as their working interest puts them on a pretty interesting forward PER. Just back of an envelope and disregarding the capex, 50,000 at $60, net 30% to Soco is roughly $1m a day – tax 50%, is still $180m a year which is 15p a share putting them on a forward PER of about 9x.
Yes indeed. Phase 1 production should be at 50,000 boepd sometime in 2011.....and (per my question) they have $300mn of accrued costs that they will be able to recoup on 16-1 - which will lead to massive entitlements in the early production stages of TGT......and will mean that there will be ample funding for African explo, even if they still have VN at that point (which they may well not).
Re Nganzi, I've covered that in my preceding post. I think if they don't sole risk it then they'll end up with some pretty attractive acreage in return. Although the two structures there are formally only leads at this point, they are "really exciting" - with the larger one being up to 400mn bbls I was later told. Note the basin map, incidentally, in respect of Nganzi.
Re TGT sign-off, it is apparently the Thai government or perhaps PTTEP who are dragging their feet at this point with a final sign-off. PV, SOCO and the VN Government are all champing at the bit!
Re the Marine XI upside, after the meeting I got to the bottom of the differences between my recent understanding (that there was 250-300mn of upside from the two wells) and the figure published in the presentation (125mn upside). The well on S1 is in the order of 100mn bbls recoverable (though last year it was suggested to me that it was more like 200-300mn, though I guess GG might have been talking OOIP) and the incremental 25mn is for the Viodo appraisal. Apparently there has been considerable debate about exactly how big a step-out they should go for with the Viodo appraisal well and they have ultimately decided to go for a conservative 1km step-out due to the fact that the bigger step-out (which they might have done and which may have had a much bigger upside) would also be much riskier due to variations within the carbonate reservoir and, if that failed, there was a risk that development of Viodo could be held back. So they've gone for the incremental route. As Ed put it, there are "tons of infrastructure" in the block and "not a lot of mystery time in terms of development" if either of both of the wells succeed. The S1 well will be drilled first and will be only 1200m (so a couple of weeks) whilst the Viodo appraisal will be 2800m - and give the first modern logs for the field.
Talking to RdS he regards Africa as "the next Vietnam" and a 5-7 year project. Apparently all the execs remain "up for it" (including Ed, allegedly - to my surprise). He clearly has very high hopes for further "action" in DRC in particular - a point that was well borne out by the subsequent news on the new Director.....and there are some reasons to think that important decisions are now only weeks away, judging from upcoming meetings etc. I also picked up elsewhere that Heritage may have blotted their copybook somewhat with the Congolese and it is clear that RdS and SOCO believe that SOCO is very well-regarded by the DRC, as they've actually got on and done the work they said they would in Nganzi (and involved the local populace and provided infrastructure). Apparently the locally-hired (and SOCO-trained) seismic workers on Nganzi did a very good job indeed!
In sum, whilst drilling news may be thin on the ground until late August at least, I'm expecting quite a bit of action on the corporate front behind the scenes. As a result I think that the Interims presentation in September may well make the most interesting reading of any presentation in the last year - and I think the share price will be rather higher by that point as it is obvious from recent trading that volumes are limited and IMO it will be difficult for institutions to rebuild their holdings near current levels...especially over summer.
ee
ps capex budget for 2009 is $80mn......and it is still $80mn in 2010 - though total spend will be much higher as PV will by then be a paying partner on 16-1.
Good post ee.
Just to clarify this point completely.....it looks as if the total size of the fan (which relates ONLY to the upper oligocene on TGD only.....not E South, not the Deep E gas play.....not the other bits of the HPHT area!) could potentially hold 1.0-1.5bn bbls of recoverable oil (well, fluids, anyway). The first well will poke the section they have poked already
So we are in agreement then Soco possibliy the next Tullow? :-)))
That is the conclusion i draw from the AGM.
Management very clearly think there is massive upside potential in the HPHT appraisal area and clearly have expectations that are WAAAAAY ahead of what they expect anyone to be prepared to pay at present - so they'll be intending to prove it up. In retrospect it seems I misread management excitement over this towards the end of last year as excitement over imminent monetisation. I have the impression that JonnyT's "wild" thoughts of a £50 share price may not turn out to be quite as wild after all!
£50 does'nt seem outrageous. Soco is still valued at less then a £billion. Plenty of scope to be a multiple of that with West Africa.
Talking to RdS he regards Africa as "the next Vietnam" and a 5-7 year project.
Echoes.....I have always believed the West African portfolio could be as big as Vietnam but has the potential be bigger.
My only experience of geology comes from digging a 3 foot hole in my back garden to put up a clothes line so I'm struggling to get my head around the TGD structure. I dont remember reaching any oligocene or anything like that ;-)
Would really appreciate if someone could clarify the following:
1. My understanding from the above posts is that the TGD fan structure (the entire structure is in the upper oligocene?) is split into several sections and the first section to be drilled is 100mn bbls recoverable? (Looking at page 12 of the presentation, it looks as though the fan is not split into different sections?)
2. How similar are the other sections (i.e. the ones that hopefully contain 1bn+ bbls) to the 100mn bbl one? Presumably if they are all part of the same structure then the first well should go a long way towards derisking the other sections? They should be much easier to drill once they have the experience from the first well?
3. If the first well goes well (so to speak) how soon are they likely to drill the other sections?
4. Is there a basement section too? Vague recollection of previous posts on TMF talking about that.
My clothes line was blown over after a week so any comments on the above or links to a "Geology for Dummies" website would help more than just my portfolio (which has also been blown over).
Thanks.
Hi corkboy,
I'll have a crack:
1. My understanding from the above posts is that the TGD fan structure (the entire structure is in the upper oligocene?) is split into several sections and the first section to be drilled is 100mn bbls recoverable? (Looking at page 12 of the presentation, it looks as though the fan is not split into different sections?)
There are at least three faults in the structure, indicated by the "backslash"-type lines. The bit to be drilled is the bit to the far left of the structure shown on slide 12, which is the bit that was previously drilled and tested in early July last year (DST2) and which recovered oil to the surface. This section, above the volcanics, had 50m of net pay [another 40m of net pay had been covered by DST1 and there was a further 30m of net pay below DST1 that wasn't tested at all] .....so the expectation is, very clearly, that drilling this well into the 50m of net pay above the volcanics is going to give around 100mn bbls recoverable oil/condensate just within that fault block - and then there are thought to be two other fault blocks and a big fan left to be tested.....which would be substantially derisked by the first well (coupled with the currently-ongoing seismic reinterpretation). If the same interpretation holds this autumn (after the reprocessing is finished) and the next well comes in and confirms a flowing reservoir, then we could be looking at a large "Buzzard field"........though perhaps 2-3 times the size of Buzzard.
2. How similar are the other sections (i.e. the ones that hopefully contain 1bn+ bbls) to the 100mn bbl one? Presumably if they are all part of the same structure then the first well should go a long way towards derisking the other sections? They should be much easier to drill once they have the experience from the first well?
Very similar - hence your conclusions are correct (if premature at this point, for the reasons stated above). Quoting Ed at the AGM: "If the first well comes in it will severely derisk the rest of the channel"
3. If the first well goes well (so to speak) how soon are they likely to drill the other sections?
Good question. They will have a rig available on a 18-24 month contract, but it will also be drilling TGT development wells. I'd think they would be very keen to get at least one more slot very quickly to test the biggest part of the fan (assuming the interpretation doesn't change)....and then go back later to test the two fault blocks in between. I'd be surprised if a successful well in Q2 next year doesn't immediately lead on to a further well, because there could be sizing implications for the second phase of the TGT development and they would need to sort that out at least 2 years ahead of start-up .....note from p12 that the fan is thought to extend 20km to the north - you can see TGT-4X marked on that section so I'd guess that the northern edge of the fan extends under the southern fault block in the TGT field (ie around 75% of the distance from TGD-1X to TGT-4X)
4. Is there a basement section too? Vague recollection of previous posts on TMF talking about that.
To be clear:
Putting all of this together, there is potentially over 1bn bbls of oil/condensate in the uppermost fan layer.......AND......another 1bn+ boe of gas and condensate in the oligocene below the volcanics (represented by the 70mn of net pay in TGD-1 (DST1))....AND...perhaps another layer of up to 1bn boe of stuff in the basement. All these volumetrics are real guesses at this point though - but may become VERY much clearer when the seismic reinterpetation is finally finished in September. And it is almost certainly true to say that SOCO will sell out before the deeper gas sections are properly explored (because they are really the province of majors with in-house technical teams and they won't be drilled again for at least 4-5 years IMO - and may be an LNG opportunity in due course)
rgds
ee
In reply to emptyend (post #16)
I'd be surprised if a successful well in Q2 next year doesn't immediately lead on to a further well, because there could be sizing implications for the second phase of the TGT development and they would need to sort that out at least 2 years ahead of start-up
I guess it depends on what you mean by 'immediately'. From talking to Ed it will take some time to 'recalibrate' the seismic with the results of the first well and the monsoon will be turning up in November. I got the impression they wouldn't risk drilling delays on a seond TGD well meaning that they couldn't move the rig to TGT before the monsoon, so a second well would be likely to be after the monsoon ie Feb. But these calculations depend massively on when they get the rig for the first well.
db
In reply to doverbeach (post #17)
I guess it depends on what you mean by 'immediately'. From talking to Ed it will take some time to 'recalibrate' the seismic with the results of the first well and the monsoon will be turning up in November. I got the impression they wouldn't risk drilling delays on a seond TGD well meaning that they couldn't move the rig to TGT before the monsoon, so a second well would be likely to be after the monsoon ie Feb. But these calculations depend massively on when they get the rig for the first well.
All unknowns really at this point. I suspect things will be very much clearer by September. They will obviously want to avoid moving the rig during the monsoon (whether it is on TGT or TGD) so it would make sense to have it on the wells that take the longest to drill, since they'll have it for 18 months or more anyway. IF they look at the finalised new interpretation in September and STILL think the fan could be massive (and mostly unfaulted in the deepest parts) they would surely prioritise it - I can't see the data from the new well adding enough new info to massively change the seismic reinterpretation of the structure, because it is so close to the last one.
We'll see....it'll be fun guessing anyway. I've set up a new thread for continuing discussion of the HPHT area as the situation evolves.
rgds
ee
