This thread is intended solely as a place to discuss analysts' notes on SOCO.
SIA is a classic example of the value that is available in the FTSE 350, if you can get a doubler or an almost doubler in the FTSE 350 then why bother with small caps?
Another more recent example is the 70% premium Autonomy was taken out at....
I am sure there are others for those that are prepared to do the research...
No new information, but the FT includes this from Credit Suisse:
Soco International added 4.9 per cent to 325¼p. Credit Suisse revisited theories that the group may be a potential takeover target now its main TGT oilfield in Vietnam has started production. While a Vietnamese acquisition may be too contentious for China, KNOC of South Korea or US-based Talisman Energy could bid for Soco once it proves production rates from TGT, the broker said.
http://www.ft.com/cms/s/0/b0caf7c8-d8ae-11e0-9089-00144feabdc0.html#axzz1XCvbyLyJ
Same story but different source....quoting JP Morgan's view.
None of which is any surprise at all.
Another story of little consequence, but it might help explain the underperformance from the last day or two:
Actually I wonder whether it IS "of little consequence".
Don't you think it is odd, ET, that the Standard choose to headline their London market report about a second-line share based only on the RBS comments, especially given that there was virtually no movement in SIA's share price today despite high volume? Someone somewhere thought it was a good idea and in some way relevant - but the facts as observable don't bear out the claim that "talk is sunk" or that "Investors hungry for a takeover can be an impatient bunch".
One might perhaps think that talk of a takeover is premature - but IMO that would be an extremely cavalier view, given the background, the clear strategy and the track record of management. .......all of which leaves me wondering "who put up whom to publish that idea?"
rgds
ee
It's an interesting point ee but nonetheless I think it's a step too far.
Why?
Someone chose to lead with that story and not, for example, why Lloyds (LON:LLOY) was up 5% today (something of far more interest to the average Standard reader, I'd suggest). These things don't happen just by chance...someone somewhere had an axe to grind in promoting that opinion rather than the many contrary views in other analysts reports.
And then there was the over-the-top headline and sub-heading.
All on a day when there was a high volume of trading.
I'm a suspicious sod on things like this, though of course it may simply look like a case of Slickers.
ee
Well that is the 2nd time in about 6 months that Soco have had headline grabbing page in the Standard.
Standard business pages are more akin to a gossip column these days. As long term shareholders we know as long the oil keeps flowing, the money will flow into SIA's bank account.
ArtN
ee - I just assumed it was a journalist needing to fill column inches with something. I imagine they wouldn't be that embarrassed if a takeover happened next week. Tomorrow's chip paper as they say... It just needs not to be the same day as the article!
ET
Maybe - OTOH the journalist concerned has only written for the Standard in the last two days and his near-identical column in The Independent today appears under a headline about banks. Feels like someone's PR at work to me....
Art is right though - the Standard goes more with gossip (witness the articles earlier in the year) - and it makes little difference in the wider scheme of things. Nevertheless, one perhaps needs to be aware more than ever of the need to be sceptical of what one reads - on either side of the value argument.
ee
According to Guardian journalist Nick Davis in his book Flat Earth News, 80% of what we read in the media has a PR origin nowadays. Journalists are overworked, underpaid and don't have the time to research and investigate, so PR enables the media to fill the gap.
Having read his book, I've noticed countless examples where stories in rival papers, while edited to adapt to the culture of the particular paper, have too much in common with those in other media to be the product of a particular journalist. And this even within the BBC!
It's a PR mans dream. And if governments employ Alistair Campbell types to ensure their political slant (right or wrong) will influence the populace, and if the Met do it, why should we not expect entities with financial agendas to do the same?
Now who'd be trying to benefit from keeping the SIA SP down? Answers on a postcard please to the FSA......
fuiseog
Small mention in Alphaville today, quoting RBS:
An analysis of historical corporate transactions in the UK E&P space suggests predators desire a combination of material, preferably operated, stakes in proven producing assets. In the past, we believe acquired E&Ps were valued at a relative discount to exploration focussed peers given an ongoing obsession with exploration as a way to drive significant share price upside. We believe that this has left the door open for predators to offer an attractive price (while retaining some upside for themselves). Hedging a couple of years of production also offers buyers some downside protection for deals.
Unfortunately, most of the companies in our coverage universe don’t easily fit into this category – the only one that realistically fulfills the criteria is SOCO, where the stake in the recently onstream TGT field offshore Vietnam (could produce c30kbopd net once fully developed) is the primary asset. Factoring in the futures strip for three years, a US$70/bbl LT oil price and a 7.5% discount rate (to try and mimic an M&A price deck) increases our core NAV closer to 400p (from 324p currently). The TGT upside case could add further value to the point where a 425-450p take-out price could be entertained (but whether that would be a knock-out bid would be debatable). This argument has not escaped the attention of the market, with SOCO frequently touted as one of the more likely M&A targets in the sector. Where we perhaps differ is that we think the industry will need at least 6-12 months of production history from TGT in order to become comfortable with reservoir performance. Against the backdrop of current markets, that’s a long time and its questionable whether M&A speculation can support share prices over that long a period.
Have to disagree with the last bit...... M&A speculation has been a support for the last three years ;-)
Also have to disagree with his view of the timeline. If the production figures indicated by the JV last week (42,800bopd) are accurate, then I'd guess that if anything the TGT reservoir is performing better than plan and expectations - and IMO that raises the chance of an early bid, because that would be yet another potential uncertainty that has been removed!
And I'd say the price idea is highly suspect, being apparently based on $70 long-term oil and including only 25-50p per share for the TGT upside case (and obv nothing for TGD). I'm still confident of £6+......
ee
I would caution that its the decline rate for the reservoir thats important and not headline production rates (impressive though they appear to be)so that will take a bit longer to get a handle on.
I dont know if the field is pressure suported (aquifer or injection) or if its solution gas drive?
FH
Yes - good point re the decline rate being important. The recent interims said:
The TGT field development and product characteristics differ considerably from the Ca Ngu Vang field (“CNV”), also offshore Vietnam, which has been producing for the past two years. CNV produces a highly volatile oil from Basement with a high gas to oil ratio (“GOR”) via the facilities at the Bach Ho oilfield. Field exploitation depends on fracture interconnectivity to efficiently deplete the reservoir. TGT by contrast has a significantly lower GOR and produces from a much shallower Clastics sandstone reservoir, with a series of sand/shale intervals. Oil is produced into a dedicated Floating Production Storage and Offloading Vessel (“FPSO”). Gas will be sold via the same Bach Ho interconnection as that which handles gas from CNV.....
Phase I development drilling continued on TGT and was concluded with the completion of the four “batch” drilled development wells, TGT-4P to -7P, and the start and completion of the eighth development well, TGT-8P. The resulting petrophysical analysis has indicated that the wells confirm the reservoir model.
I believe it is solution gas driven - certainly I'm not aware of any water injectors (unlike at CNV)......but obviously the devil will be in the detail - and the above is pretty general.
You will be aware, I expect, that management's pre-PSDM analysis was that ultimately there would be 500mn bbls recoverable from the field and only about half of that has currently been booked. That may well change by year-end but all the analysts' models are based on what has actually been booked and they are all (unsurprisingly) cautious about pricing in upside potential. A serious buyer, however, would not only have access to all the detailed field data but would also be able to make their own technical assessment about the likely decline pattern........and I'd suggest that having 6/8/10/12 months of production data won't add very much to the knowledge that will be obtainable from 3-4 months data (which will be preceded by detailed well-by-well testing).
Being right next to Bach Ho probably doesn't hurt, as Bach Ho has already produced far more than it was originally expected to (AFAICR).
ee
I dont know if the field is pressure suported (aquifer or injection) or if its solution gas drive?
From various presentations :-
H1/H2 WHP
4 x 10” Multiphase pipelines
1 x 10” WI pipeline
1 x 8” Gas-lift supply pipeline
H3/H4 WHP
1 x 16” / 20” Pipe-in-Pipe Multiphase pipeline
1 x 8” WI pipeline
1 x 6” Gas-lift supply pipeline
10 Oct. Morgan Stanley downgrades SOCO International from overweight to equal weight, target price cut from 435p to 350p.
http://www.stockmarketwire.com/article/4236969/Broker-News-Views.html
Me?
I'm staying overweight :-)
I wonder if the sale of eo. is making MS reconsider the market for takeovers or asset purchases.
I accept that its a totally different kettle of fish in that eo, couldn't get funded,
and soco have plenty of cash, the difference they could be looking at is what companies might
be willing to pay,
K
