2013 interims

22nd Jul '13 by emptyend

142 comments 55911 reads

Thanks to Alphaville's reporting of Merrill's research piece today, we now have a date for the publication of the interims - which is 29th August.

Merrill also indicate their expectation that the planned distribution will be announced at the same time - and, frankly (after today's update), I can't see much likelihood of them wanting to publish the details of that any earlier ....and they've already told the AGM they won't leave it any later......

.....so I'm starting this thread for people to post details of matters they expect to be covered in the interims.

We will know by then the test results from TGT-10X and we should know whether Lideka East has anything worth testing. We may also have by then the gas sales agreements for TGT and CNV - and we should have the results of the volume implications of the splitting tests done on the wet gas from CNV. And I would think that we'll have the results of the latest round of FPSO testing, aimed at raising TGT capacity to 70-75k bopd.

What we won't know until Interims day is the extent of the cash position and the plans for the distribution. Alphaville today quote Merrill as saying:

we continue to believe the quantum of the dividend to be announced
with 1H13 Results on 29th Aug-’13 could surprise the market to the upside.

....as do I. .......So the question is "how much?"

My starting point is that they had $350mn cash at the end of May (per the AGM presentation). By the time that the end of August comes around, I'd guess that may have grown to c. $430mn (depending on timings of tax payments, drilling costs etc).....which would be about 85p per share.

I could see them paying out over 50p per share though, if they wanted to indicate they would maintain the payment at the same level in 2014, prudently they may want to pay 10-15% less than that.

Whatever the case, by the time we get to the start of September we could be looking at a much more positive scenario than has recently been the case - and IMO the market will start paying some keen attention ahead of the reserves reassessment which might emerge during Q4, given that they expect to complete the revised reservoir modelling by the end of September.

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extrader

24th Aug '13

Hi all,

Today's Weekend FT magazine reports that the "12th annual Anantara King's Cup elephant polo tournament takes place between August 28 and September 1 in the Thai city of Hua Hin...."

Guess that it'll be left to RC to field analyst/press queries post IMS !

ATB

Cuthbert C

28th Aug '13

Anyone else considering a little top-up today?

Hi tournesol,

Did mine a few weeks back - wanted to do so before the pre-results rise (which has failed to materialise until about an hour ago.)...!

If the news is basically good but ill-received by an underwhelmed/distracted Mr Market, I've got some more spare change to play with.

Mind you, I'm a firm believer in delayed gratification - so long as the eventual gratification is commensurate to the delay.....

ATB

flyinghorse

Can special distributions be selective--ie to share holders of a certain term, or do they have to be to all shareholders as of an ex dividend date?

fuiseog

AFIAW each shares entitlement is equal, even the single share owned by WWF -:)

emptyend

Sadly fuiseog is correct on this.

It is a nice thought that loyalty would be rewarded but basically anyone can buy now and get whatever is distributed.

Of course the price might be a bit different once the facts are known and the guesswork can stop....

MadDutch

I made a nice little top up yesterday.

MD

Mancman

29th Aug '13

40p per share. EE was spot on.

Don't overlook the successful test of the Oligocene C at TGT-10X either.....puts the aggregate well test from all three zones potentially on course for around 20,000boepd in my view. And decent pay to be tested at Lideka East too......!

Accounting profits were a bit down on my guesses, partly due to lower revenue (tbh I hadn't really factored in the Q1 to Q2 move in Brent).....but so far it looks good - and should be taken well, I'd think.

Can we put an approximate number on the current annualised cash flow?

Not really Mike. Firstly it is "free cash flow" (basically cash flow minus investments) and secondly it is going to be very dependent on production levels. You'll recall from the AGM the claim that a platform could be on H5 in about 9 months.....and that must be a timeframe close to starting now.

Post-tax free cash flow in H1 was $123mn, after capex of $31mn and repayment of $48mn for the convertible. That suggests something over $400mn pa, before capex - so perhaps $280mn (net of capex) at current production rates and with Brent at c.$105.....

....but if Brent is $10 higher (as now), that would increase free cash flow by about 13.6% (because the price effect would apply to the pre-capex numbers).

Best guess I can come up with, assuming no step change in production, is a free cash flow of about $300mn pa - so paying out about $150mn next year (around 30p per share).

rgds

loglorry

ee that's close to what I had guestimated (mine a bit lower) but if one pays 400p today and strip out the 40p then that 30p/year comes out at over 8% dividend yield covered (by definition) 2x by free cash flow. I'm pretty sure everyone can live with that sort of level of return until assets are sold and there is probably upside in reserve numbers given early 10-X testing to results.

I'm sure analysts will see it that way too and it will appeal to funds a lot more now it is producing a cash flow stream.

This is why I bought back in at the open at 405p. I'll probably only hold until this re-rates though.

Log

adam

So what happens to the other half of free cash flow that is not (by definition) spent on Capex or distributed?

Yup - I agree the logic of all of that in terms of supporting your purchase at the open. As I suggested on the other board (more politely), this is the sort of scenario when TA range-traders should be getting their rear ends handed to them.....

......at c.£4 it is a no-brainer. And when analysts write their notes after this morning, it is difficult to see how they can say otherwise. As ES said:

The successful execution of the Company's strategy has positioned SOCO to be able to make cash returns to shareholders whilst retaining its gearing to exploration growth where an individual well result can have a significant impact. We think this makes the Company truly unique.

....name any other company with material drilling upside potential and a 7%+ yield.

Prudent contingency reserve against production setbacks or explo cost over-run. The surplus will just roll up until (as now) being partly distributed or increasing company value in a sale.

nigelpm

Or used for sensible acquisitions?

Presentation now on the website

That would make it capex, Nigel....and therefore not part of the free cash flow.

Obviously it gives them flexibility to be opportunistic though.

It would but I was referring to the difference between maintenance capex (ongoing costs) and expansionary (investments) - the maintenance part being rolled up in the existing 50%. I tend to consider the two very separately.

Anyway, a techie point and just shows what cash is being thrown off here.

Slide 9 makes it completely clear that (as most of us thought at the time of the AGM) Ed had misspoken or was smoking something, re the timeline for getting a platform on H5 (though, charitably, perhaps he was talking about another drilling rig). First oil from H5 would be c. August 2015.

2013 interims

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Emptyend

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