NO TA ON THIS THREAD PLEASE - (edit) and no pointless speculations either!
I've created this thread just to park stuff in that is only tangentially-related to SOCO's interests and doesn't relate to any of the specific assets.
On the face of it, this is so tangential as to be irrelevant - but Cairn Energy (LON:CNE) holders will be getting 160p per (old) share in their accounts on Tuesday. IMO one should watch this space......
ee
..Iran halts oil sales to France, Britain
http://uk.finance.yahoo.com/news/iran-halts-oil-sales-france-125511021.html
Should be positive for poo. A good time for Soco to sell up IMO!
I think we would all like to sell the Vietnamese assets while the price is high, but if for example we look at the Phillips conoco deal to the north of TGT, the management publicly announced that the stake was for sale, how long ago ? perhaps a year ? certainly before the last AGM, (since it was mentioned), so its not the case that the management can publicly state something is for sale, and close a deal a few weeks later.
I expect that interested parties know what SOCO's intentions are with the Vietnamese assets, and as such, they have effectively been open for offers for some time. A deal could come at any time, I would have thought it more likely after oil production is increased, tgt comes on line and we have 6 months production data for this. Happily by this time we will have at least have had time for one last attempt at TGD. Although I agree there may well be possibilities for doing a deal before this.
My point is, the management cannot put TGT on ebay. But to extend the analogy, there is a buy it now price, and as soon as someone meets it, they'll do a deal. The management need to concentrate on resolving the issues with PV so reserve estimates, and production can be bought up to predicted levels, and the share price will sort itself out, then those who want to sell for £5 can do so,
cheers K
But to extend the analogy, there is a buy it now price
But subject to eyewatering fees... :^}
Buffy
its not the case that the management can publicly state something is for sale, and close a deal a few weeks later.
I expect that interested parties know what SOCO's intentions are with the Vietnamese assets, and as such, they have effectively been open for offers for some time. A deal could come at any time.....But to extend the analogy, there is a buy it now price, and as soon as someone meets it, they'll do a deal. The management need to concentrate on resolving the issues with PV so reserve estimates, and production can be bought up to predicted levels, and the share price will sort itself out, then those who want to sell for £5 can do so.
Yup. The latter point is the focus of the upcoming results. All will be clear soon.
I wouldn't be surprised to see a PMO/EO "cash or shares" deal being done, if the buyer has tradeable equity (which, I suspect, is more likely than most people assume).
ee
Kenobi
Soco don't need an acquiror to buy Vietnam. They can forward sell their Oil and lock in the high Oil prices if they want to.
Just sell Future contracts on the strip....or sell long term contracts to refineries - India's Reliance has built quite a few refineries the last few years.
Anyhow it just feels like we are going to get a massive rise in the Oil price and 2008 was perhaps a left shoulder on the chart with a potential head forming in the current up turn. I don't know - Wild speculation but very possible as the situation in Iran won't last forever & as such a spike in the Oil price is not out of the question followed by a drop back as things settle down.
One thing I will say though it is the Oil price that has saved Soco - I don't think the management have done a good job in recent years - We are all very lucky to what appears to get us of lightly, hopefully...although I won't count my chickens just yet.
Most of the stocks out there have gone up quite a bit recently, stocks are not as cheap as they were.
Hard to convince my self to buy more Soco as I am overweight here, but it is also hard to ignore the value. Anymore top ups by me would be foolish.
Hi Isaac,
Not for the first time, I find myself a little confused as to what exactly you're suggesting that management do !
On the one hand, you suggest that Soco should lock in value by selling oil forward , given the prevailing high prices (para 1). So far, so good.
On the other, by para 3, you're acknowledging that
"the situation in Iran won't last forever & as such a spike in the Oil price is not out of the question followed by a drop back as things settle down ".
So you appear to be requiring management to evidence powers of prophecy that are, frankly, wasted on a nice-but-second tier company such as Soco.......Ed and Roger would be better employed, under this construction, heading up Exxon/BP/Shell or the oil trading desk at JP Morgan or Goldman Sachs.......oh !
Which would then leave room at the top of Soco for a new boss........
Is this a cunning plan, Baldrick ?? !! :->, ;->
At least we're agreed that the value in Soco is there, there's just the small matter of getting it more widely acknowledged.......
Good luck, whatever you decide to do !
A good time for Soco to sell up IMO!
Interesting I replied to the above saying you can't just sell the company so quickly, you must have agreed with me since you moved the goal posts and now, you say,
Just sell Future contracts on the strip....or sell long term contracts to refineries
I don't know the ins and outs of the costs of selling future production, or the risks. (should there be a production shortfall for some reason) but of course it's a market, you don't just sell forward at todays price, you need to find a buyer willing to pay the price in the future. So if it's as obvious as you think, presumably everybody is doing it ? and suppressing future prices ?
I must admit I see some merit is forward selling a proportion of the production if a good enough price can be secured. I would guess that some might argue that future prices might well be higher than the price you can secure now.
Still they could do this, and the price might still not reflect this. At the risk of being boring I humbly suggest (again, yawn) what the management need to do is get production up, prove up reserves, and deliver tgt2 on time, then the cashflow will come and the share price will follow.
I wouldn't worry about ebay listings for the assets, though I agree it worth looking into the forward selling idea.
K
Kenobi
I don't agree with you as all you need is one buyer. The point I am making is there is optonality. Soco does'nt have to wait for a buyer. They can forward sell the oil to a consumer. Brent is up from $99 in Aug 2011 to $120 in Feb 2012 i.e. 20% rise since 6 months.
Hardly stable and very difficult for businesses/consumers to plan ahead for. It would be better for certain consumers to fix their Oil exposure.
Soco are naturally long Oil, Consumers are naturally short Oil. One wants the price to go higher, the other wnts the price to go lower.
Soco could use Fixed/Float Swaps to sell their oil & thus locking in the current oil price as well as Futures. And if they are so concerned about not being able to deliver production then why not buy put options with a future date, they are not obligated to excercise the option. Should the Oil price fall back they can excercise the option to sell the Oil else let the Option expire worthless.
I don't know the ins and outs of the costs of selling future production, or the risks. (should there be a production shortfall for some reason) but of course it's a market, you don't just sell forward at todays price, you need to find a buyer willing to pay the price in the future. So if it's as obvious as you think, presumably everybody is doing it ? and suppressing future prices ?
Sorry but this is nonsense. Go and look at the forward curve, do you see volume in the back end of the curve? Someone must be trading it. No prizes for guessing....
Doubt the management will forward sell the Oil though.
Doubt the management will forward sell the Oil though.
Indeed. Why would anyone want to buy assets from a seller who has removed the upside from the assets by selling them forward to others? Such suggestions are really completely inappropriate to the circumstances and a waste of everyone's time.
Why would anyone want to buy assets from a seller who has removed the upside from the assets
I'm not saying it's something I would consider worth doing; but one would only be removing the upside from the amount contracted, and then only if one thought the oil price would be higher going forward.
The risk would be that Soco wouldn't be producing the amount it had contracted of course; although they don't have to be over ambitious. Soco could then sell some more when TGT II comes in..
The rest of the upside would still be there.
Who knows, maybe Soco would be locking in a decent price, which would be a plus for a buyer.
Look out for an RNS installing Isaac as the new CEO..
Buffy
Selling oil forward can be a two edged sword.. what if there's a production hitch?; also, if the price goes up (a lot) do you pay tax/royalties/whatever to the host state on the market price actually achieved, or on your hedged income from the sales?. Is it worth the hastle and expense to exchange the POO fall risk for the POO rise/production problem risk?. IIRC most oil/gas co's that hedge do so at the behest of an institution that has lent them money, it makes the bank feel secure, but can go horribly wrong for the producer.
Most producers don't hedge their production in the forward market because people buying their stock are looking for exposure to Oil and in particular future production. If you want Soco to hedge out all sorts of future macro effects then you are going to have to do a lot more than just hedge with oil futures. For example you need to consider the FX $/£ rate as this will be important too since Soco shares are sterling denominated. How about rig rates do we need to hedge these? Political risk? the list goes on and on.
There are some exceptions to the hedging strategy and this is usually when a company takes some reserve based lending. In this case the bank or banks lending might well require the company to hedge some production to make sure that their loans are at least partially covered by future cash flows. Soco doesn't fall into this category yet.
It sounds to me Issac you are just a bit frustrated with the share price being below what looks like its intrinsic value. I concur with you but if you look around at the E&P sector Soco isn't particularly different from many other stocks which are undervalued with respect to NAV models built using discounted cash flows. I think we just have to wait and hope as time goes by the market corrects this.
Log
Tender news:
http://af.reuters.com/article/energyOilNews/idAFL4E8DL5T720120221?pageNumber=2&virtualBrandChannel=0&sp=true
PV Oil is offering three cargoes of 300,000 barrels each of TGT for April 6-12, April 16-22 and April 25-May 1 loading. The tender closes on Feb. 24, with bids valid till a day later.
I read that as 300k, every six days? 50k a day? Shurely shome mishtake? :-)
Also, article on the oil price, discussing the global demand situation.
But my favourite bit:
"in spring 2008 sterling was around $2, whereas now it is $1.58, so in sterling terms oil is back at its peak."
Regards,
Spurticus
Selling oil forward can be a two edged sword.. what if there's a production hitch?; also, if the price goes up (a lot) do you pay tax/royalties/whatever to the host state on the market price actually achieved, or on your hedged income from the sales?. Is it worth the hastle and expense to exchange the POO fall risk for the POO rise/production problem risk?. IIRC most oil/gas co's that hedge do so at the behest of an institution that has lent them money, it makes the bank feel secure, but can go horribly wrong for the producer.
Precisely.
The demise of Burmah Castrol being a good example of that!
Re Spurticus's useful info, I imagine that the price being achieved (in spread over Brent terms) will be one of the features in the results presentation.
ee
PV Oil is offering three cargoes of 300,000 barrels each of TGT for April 6-12, April 16-22 and April 25-May 1 loading.
I read that as 300k, every six days? 50k a day? Shurely shome mishtake? :-)
I make it just over one every 10 days (sadly, but not unexpectedly)
Peter,
Yes, I realised after posting. Wishful thinking.
Perhaps they'll be flaring the other 25k :)
In any case, it's good to see that TGT production continues. (And of course, I suppose they can always offer more later, if things go well.)
Rgds.
Posted elsewhere yesterday, but for completeness, today's report here with firmer confirmation of the numbers:
http://af.reuters.com/article/energyOilNews/idAFL4E8DS4WD20120228
Vietnam's PV Oil sold 900,000 barrels of Te Giac Trang (TGT) crude to Shell for a second consecutive month, with premiums reaching a new high on tight supply and robust demand in Asia, traders said.
This brings the oil major's total purchase of regional sweet crude to seven cargoes for April, including two 250,000-barrel cargoes of Chim Sao from Vietnam; 300,000 barrels of Labuan and 600,000 barrels of Tapis from Malaysia.
Japanese utilities and Asian refiners have been competing for the limited low-sulphur crude supply in the region, exacerbated by output disruptions at Western Australian oilfields and a sudden halt in South Sudan's production.
The three 300,000-barrel cargoes were all sold to oil major Shell at premiums between $8.50 and $9.00 a barrel to dated Brent, traders said. The cargoes will load on April 6-12, 16-22 and April 25-May 1.
Not sure on Brent Futures figures, but with the premium included, that must be close to $130 or above ?
Spurticus
Hi spurticus,
Thanks for the link/detail.
Interesting to see that Shell's a repeat buyer.....
Wasn't it the Gillette razor CEO who quipped that "he liked the product so much.....he decided to buy the company" ??? ;-)
ATB
