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Well in the worst case scenario TGD -2X fails and any further drilling is timed out or also fails. So the only added in value in Vietnam comes from TGT, say another 50m barrels net. What are the chances of this happening? My guess would be between 10% and 20%.
The risk upside from TGD as I see it is probably around 150m barrels net.
We still have Africa and the punter in me says that the 500m+ barrels net in Nganzi alone is probably worth about 30% of that if one assumes they understand the geology very well and risk the first well at around 30%. I don't know when the analysts will wake up to this but the risked value of Nganzi is probably worth about 5-10 times what the analysts have in for Africa as a whole.
I'll be gutted if they farmdown any of Nganzi though.
I think the billion barrels net is pretty unlikely, but if they don't farmdown Nganzi, a third of that figure is achievable with a decent rate of success with the drill bit and Soco have had at least that in the past. So if JohnnyT comes up with an expectation of another £40-60 on the share price from the current drilling plans I won't be arguing either.
The fact that management, even with their strong controlling stakes, are fairly matter of fact and playing their cards closer to their chest, is also a strong signal to me that these figures aren't pie in the sky. We'll know a bit better soon enough and it really isn't that long now;-)
repobear
I'd think the well location choice is all about the likely reservoir thickness and likely reservoir quality.
If I could just make some stuff up here...
I guess that the well may also be looking to define an OWC and also to help determine what role the fault to the right of the well trajectory is playing - it may be essential as the trap. If there isn't an OWC, then then that would open up the possibility that the fault isn't a sealing fault and so isn't essential to the trap and therefore that the yellow band beyond may also yield something. But that might be getting more than a little ahead of ourselves.
I'm guessing that the shading shown within the fan on slide 11 is an assessment (based on TGD-1X well logs etc) of where the most permeable/porous sands are (darker being better?)
I don't think the shading shows interpretations of permeability or porosity, I think it's rather a coarse presentation effect designed to simplify the usual amplitude wiggles. Maybe one of the seismic bods can correct me.
I think we could reasonably expect to see a good success (coming in as prognosed!!) leading swiftly on to a very big step out well to prove the rest of the fan.
Remember that Ed (for I think it was he) blurted out a COS of 90% for this one. And if there is no OWC here then there's a lot more work to do and a big step-out would probably be needed to try and define the margin. If that isn't a sealing fault then the potential really does look quite staggering.I'm beginning to wonder more and more if this is what the guys are driving at - and if so why they don't just wave this slide about and explain it in those terms; I think most non-techies would get it.
Anyway, we know the well is expecting to spud end-May and take 60 days so it seems to me that we'll have some news, as tradition demands, whilst ee is away on his August holidays!
SW10
Anyway, we know the well is expecting to spud end-May and take 60 days so it seems to me that we'll have some news, as tradition demands, whilst ee is away on his August holidays!
I've been away for a week or so and the break may have addled my brain, but I don't think we "know" anything of the kind!
What we "know" is what the company said in their results RNS:
A drilling rig suitable for drilling in high pressure/high temperature environments was contracted in February 2010. The well is expected to spud as soon as practicable after the end of the northwest monsoon season in Vietnam and following a site survey and sourcing of specialised wellhead equipment.
.....which I translate as being, for the want of a more appropriate word, imminent!
Accordingly, I'd be expecting the results of the 60 day well shortly before the June AGM ....and, IF I happen to go away in August this year (not very likely as I've got no plans at all), then I'd expect any well results whilst I'm away to be the follow-up big step out well on TGD and the results of 1-2 wells at Nganzi......
I will therefore be conserving the holiday cash that I would otherwise need to extract from selling SOCO shares in the hope of upgrading from a couple of weeks in Devon to a couple of months in Australia around the turn of the year...... ;-)
ee
ps...good point re the OWC on the next TGD well - but my post 80 was referring to the location of the follow-up well that I expect, rather than the one that is now imminent!
pps....yes, Ed used 90% - which I see the analysts have generally discounted to a mere 60-70% (for now ;-))
Sorry SW10 - I misremembered when I said:
my post 80 was referring to the location of the follow-up well that I expect, rather than the one that is now imminent!
...I was indeed talking about the upcoming well - though I still think the aim is max flow (& porosity/perm) coupled with proving up the seismic interpretation to derisk a big step-out.
cheers
ee
I translate as being, for the want of a more appropriate word, imminent!
Heh heh.
You're quite right: I managed to tie myself up in a knot there - I typed "end-May" for the spud, when I intended to type "end-Mar" based on this post I made on the TGD - Let's go drill a well thread.
Accordingly, I'd be expecting the results of the 60 day well shortly before the June AGM
A sixty-day well would then theoretically take us to the end of May, so the world-weary might surmise there would be no news available for a June AGM - particularly if there's any testing to be done!
Either way, I suspect it will be a much busier H2 for Soco,their analysts and BB chatterers than it has been for some time.
SW10
Change in position from Goldman Sachs. Seems a pretty odd change in recommendation given their targets and comments:
0651 GMT [Dow Jones] Goldman Sachs raises Salamander Energy (SMDR.LN) to buy from neutral, but lowers Soco International (SIA.LN) to neutral from buy. See better risk/reward in Salamander's campaign following recent underperformance which offers an attractive entry point ahead of the company's exploration program in Southeast Asia. "Although we believe that the market is currently not paying for 2011 exploration, Salamander's prospect inventory should allow a high level of materiality in its exploration activity beyond 2010 which should gradually roll into an investible time horizon." Keeps 358p target on Salamander, and raises Soco target to 2185p from 2010p, noting its West African and Vietnamese exploration program suggest circa 95% potential upside if totally successful. Salamander closed at 268p Tuesday, while Soco closed at 1780p. (ishaq.siddiqi@dowjones.com)
Seems a pretty odd change in recommendation given their targets and comments:
It does. I can't help thinking that the first bit was written at home over the bank holiday weekend and updated with the second bit once the analyst got into the office!
Perhaps the versions got mixed-up when a draft wasn't properly saved on the train?
:-)
SW10
If anyone would like to send me the latest Goldman note, I'd be interested to take a look at what they've included. I suspect that they're assuming a big farm-down in Nganzi and have little in for derisking the TGD fan but it would be interesting to see.
Since Goldman effectively operate as a closet hedge fund, I pay little attention to their recs (whether up or down). They frequently appear to be perverse and I just assume they are trying to manipulate the market to their own advantage (notwithstanding theoretical chinese walls etc).
ee
Slightly more flesh on the bones of Goldman's comments, as reported in The Daily Telegraph:
Among the second liners, a Goldman Sachs upgrade to "buy" helped Salamander Energy put on 12 to 280p. The broker also downgraded Soco International, down 66p to £17.14, to "neutral". Christophor Jost, an analyst at Goldman Sachs, said: "Soco has outperformed Salamander by 43pc since the beginning of 2010 and 12pc since February 24, 2010. Despite increasing our 12-month price target on Soco to £21.85 following the company's full-year 2009 results, we now see more upside potential in Salamander."
[my bold]
In other words, "SOCO has gone up a lot recently and Salamander hasn't, so switch from one to the other".
I'll be interested to see how that switch does this year.......and have marked the starting point as Salamander 268p and SOCO at 1780p.
I'm reminded of the people who switched from SOCO to Dana at various differentials from flat to +£5 in recent months....thats another switch that has yet to pay off (though a few who made the switch at the widest points will be slightly up in percentage terms).
I see this as a bit like "pass the parcel".....you pass the shares on and switch into something else in the expectation of making some modest profits - but then when the music stops (or starts in this analogy) you suddenly realise that you've given away some of the parcel's contents and so there is less of a prize there if you should happen to win. It isn't as easy as it looks to play several games at once ;-)
ee
I think it is fair to say Goldman have never really given Soco an accurate coverage anyway therefore I totally disregard this note.
What is clear to me is Soco are gearing themselves up to sell up later this year, I thik that is pretty clear.
You make more money when a company realises the value of its assets in the form of a sale then sitting in a stock which the market consistently underrates for long periods of time. The market naturally undervalues all E&Ps.
Soco on the other hand will realise most of the potential in one form or another later this year.
In other words, "SOCO has gone up a lot recently and Salamander hasn't, so switch from one to the other".
I'll be interested to see how that switch does this year.......and have marked the starting point as Salamander 268p and SOCO at 1780p.
Cracking timing from Goldmans......http://www.investegate.co.uk/Article.aspx?id=201004080700058516J
Salamander......L27/43 completed a frac-test on a five metre zone between 623 and 628 metres true vertical depth sub-sea. Despite the presence of gas saturation and porosity as determined from logs, the targeted sandstone interval failed to flow after the frac operation. The L27/43 partners have decided to plug and abandon the well.
......all we need to see now is some positive news from SIA to complete the picture ;-))
....Perhaps Goldman's REAL trade was to go long of SOCO at 1720p and short of Salamander at 280p, following the move they prompted yesterday? .....maybe we should track how that one does ;-)
ee
Comment
Credit Suisse assesses oil explorers
By the ShareCast team
Credit Suisse has run its slide rule over the specialist oil and gas exploration sector. After a 16% rally since February, it suggests investors buy into those supported by a core production and development story combined with a diverse exploration portfolio.
In line with that, the broker has an 'Outperform' rating on Premier Oil where a growing production base offers an attractive option on a diverse 2010 drilling campaign.
The broker also likes Heritage Oil, as success to date and lower technical risk has not yet been priced in relative to potential upside, especially ahead of the Miran East well in Kurdistan.
Credit Suisse also likes Dana's risk/reward profile ahead of two big well results expected in H1 2010, while Tullow's deep exploration portfolio can create value over the longer term.
Afren is another favourite as the company continues to offer growth potential in the broker's view.
Credit Suisse's least favourite stocks, rated 'Underperform', include Cairn Energy ahead of the results from the first well in Greenland. The broker says it simply does not think the current share price offers an attractive option for taking on the risk of a dry well.
Credit Suisse also remains cautious on the lack of diversity in Soco International's exploration portfolio.
My bold - I know this "lack of diversity" assertion has been discussed before but here it is regurgitated in Digital Looks Weekly Investor Review. On the one hand you could get rattled by this type of ill informed 'insight', but maybe it's better to just keep on quietly accumilating...
fuiseog
Credit Suisse also remains cautious on the lack of diversity in Soco International's exploration portfolio.
My bold - I know this "lack of diversity" assertion has been discussed before but here it is regurgitated in Digital Looks Weekly Investor Review. On the one hand you could get rattled by this type of ill informed 'insight', but maybe it's better to just keep on quietly accumilating...
This is an interesting point. The whole reason that SOCO has M&A appeal is because it has major asset positions that are unencumbered by dross in the portfolio. Perhaps you've missed out the part of the Credit Suisse piece which champions Dana's well-diversified portfolio.....I can only see them picking out Dana's "two big well results"! ;-)
It seems to me that there are quite a few analysts who have simply been wrong in their view of SOCO over the last 6-9 months and (though one or two have got the gist of it eg MS) most of them are continuing to try to find reasons to justify their wrong calls, even though the situation has plainly changed. Several of them (for example Citicorp and Credit Suisse, IIRC) were hoping to see SOCO struggling to keep drilling when the convertible put date arrived - and have been frustrated in that expectation by the recent £100mn equity issue........
....but they can't keep inventing reasons to be negative for ever ;-)
ee
[ps...not sure how diverse Heritage is, for example.....basically Kurdistan now, isn't it? ;-)]
I see RBS is amending some of tis targets in the sector:
0634 GMT [Dow Jones] Royal Bank of Scotland increases UK exploration and production stocks price targets following the results season and in particular, to reflect RBS's FX assumptions. Lifts BowLeven (BLVN.LN) price target to 250p from 180p, Dana Petroleum (DNX.LN) to 1430p from 1400p, and Gulfsands Petroleum (GPX.LN) to 400p from 345p, leaving all at buy. Increases SOCO International (SIA.LN) price target to 1850p from 1350p, leaving at hold. Says the UK E&P sector is up 10% year-to-date, continuing its positive '09 performance, albeit gains are more modest. Adds though the sector performance is still heavily geared towards the oil price. (andrea.tryphonides@dowjones.com)
I see from ADVFN that an analyst has raised his NAV estimate today:
04/09/2010 08:34:19 - MARKET TALK: RBS Lifts Exploration, Production Price Targets
0634 GMT [Dow Jones] Royal Bank of Scotland increases UK exploration and production stocks price targets following the results season and in particular, to reflect RBS's FX assumptions. ......... Increases SOCO International (SIA.LN) price target to 1850p from 1350p, leaving at hold.
Talk about closing the stable door after the horse has bolted! Why would ANYONE listen to an analyst who makes such a big revision to their price target (after the market price has blown his previous price target up) and without a change of rec?
ee
Now here's an odd one.
Arbuthnot have today moved from Strong Buy to Reduce. Increasing their Price Target from 1740p to 1765p.
This follows a revision t their model to reflect the placing, operational update and the results.
They highlight that the SP has risen from 1402p when they initiated coverage to 1700p now. Their core value of the producing and near term development assets is 1519p with risked explo upside at only 246p. They say that the market has already started to factor in some of the explo upside desite it not yet happening.
I find this shift bizaree in the extreme - they acknowledge the drilling programme for DRC targetting 600mm bbls and then there is TGD but what on earth gives them a risked upside of only 264p? Lost for words. Hopefully Ed can provide some amusing commenton this in the interview.
You are rather over-dignifying Arbuthnot's status, I would suggest.
Putting risked explo upside at 246p* merely tells you that they don't undertstand the company at all - and therefore one can't simply ignore them (especially as they don't have much of a clientbase ...and therefore no influence.... anyway)
* From the last note I have seen the "comparable" figure from RBC is 661p, for example
ee