Incidental stuff

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21st May '09 by emptyend

1294 comments 413271 reads

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.

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Emptyend

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1294 comments

emptyend

4th Oct '13

You'll have noticed that some of the data providers are continuing to show SOCO International (LON:SIA) as 0% yield. I have been pursuing a number of these (including Stockopedia - are you there, Dave?) and am starting to get a bit of success, with a major data provider today agreeing to correct their treatment of the 40p payment after initially claiming their rules dictated they should ignore it as is wasn't an "ordinary dividend". This was my response to that comment:

But the response from your data people is completely illogical, as shareholders have an option to take EITHER a dividend or a capital gain. This is functionally a “dividend PLUS”….it is even more attractive for shareholders as a whole than just getting a simple conventional ordinary dividend. It makes no sense whatsoever to ignore it.

Furthermore, it isn’t a one-off. The company have clearly indicated that they will pay 50% of free cash flow in future years – which is likely to give rise to further substantial dividends.

If your database simply ignores such dividend payments (even when they are very substantial, as this is – being a yield of around 10%) then frankly I think it completely destroys the integrity of the data and makes it unreliable (and worthless from my perspective).

I’d be interested in further comments and would request that this comment is escalated to whomever it is who makes your rules – because if ignoring 10% annual dividends is what the “rules” demand then there is no doubt whatsoever that the rules are wrong!

...and their response was:

as company does state they intend to make payments of such kind on regular basis, we have decided after double checking with our Product Group to include cash return in the calculation and flag it as including a special payment (cash return). Further changes to the calculation (when company announce next cash return) will be reflected accordingly going forward.

I would suggest that other shareholders might like to bang on at any data providers or newspapers who are continuing to get this wrong and ignore economic reality. Since ignoring a 10% yield so devalues any database failing to reflect the 40p in their yield numbers, IMO this is tantamount to grossly misleading the market on a FTSE350 stock - and completely discredits the reliability of any database that continues to get this wrong.The more people who point this out, the merrier!

I have a number of "further enquiries" pending...... ;-)

GreenRover

5th Oct '13

hi ee, I totally agree with you re dividend showing as yield, but would much prefer it not to be shown by the data providers until after I receive my dividend into my ISA on the 14th as I wish to reinvest the dividend into SIA and so would like the price to stay low until I get it re invested. It is a very substantial amount (six figure number of shares) So please don't push it till then :-)

GreenRover

5th Oct '13

ps. obviously I intend to reinvest the dividend into more SOCO shares.

emptyend

15th Nov '13

I've noted in another thread that Berkshire Hathaway have just spent $4bn on buying some Exxon Mobil shares.......

....the thought occurs to me that they could also spend $4bn on buying some strong international cashflow ;-)

nigelpm

18th Nov '13

Highly unlikely. Not really the "moat" that they look for.

emptyend

18th Nov '13

...hence my emoticon. Nevertheless, not unhelpful to the broader sector.....

No IMS yet, I note...

nigelpm

18th Nov '13

Indeed, imagine it's just last minute running around to get it prepared. No date has been set AFAIA

rhomboid1

18th Nov '13

According to today's Telegraph Soco's IMS is due on Thursday.

Not sure where they source this info tho'

emptyend

18th Nov '13

A new income investor declares their stake.....Standard Life Equity Income Trust say:

We also initiated a new position in oil producer SOCO International, which confirmed further discoveries in its core areas of operation, Vietnam and offshore Congo. Unusually for such a company, the production profile and cashflows are very strong, allowing it to announce an enhanced dividend policy.

...with the added attraction that not everyone has yet noticed, thanks to database lag......

kenobi

18th Nov '13

Yes the share price action recently does suggest a buyer establishing a position but not wishing to bid the share price up (beyond 400), to me, It does look pretty sound to me from an income point of view, with potential takeover thrown in for free,

K

emptyend

3rd Jan '14

This is nothing to so with SOCO International (LON:SIA) but Next's trading statement today is very interesting in its well-articulated discussion of the "problem" that faces both Next and SOCO:
We are now faced with a question as to what to do with the accumulated surplus cash (we already generate more cash than can be invested productively in the on-going development of the business). We have three main options; (a) retain cash for future buybacks, (b) increase the ordinary dividend, or (c) distribute surplus cash by way of a special dividend. Given that interest rates are so low, it makes little sense for the Company to accumulate cash and a substantial increase in the ordinary dividend would hinder the Company's ability to buy back shares if the share price were to rapidly fall at some point in the future.
Consequently, we have decided to pay a special dividend of 50p per share.

.....and they go on to discuss the relationship between buyback price and dividend payouts.
http://www.investegate.co.uk/next-plc--nxt-/rns/trading-statement/201401030700068209W/

emptyend

22nd Jan '14

I've mentioned ENI before as a possible buyer.

I'm interested to see that they have been unusually active in the eurobond market in the last two months or so, raising nearly $3bn equivalent in two deals in November and today. Nice spread of long maturities too, with 8, 12 and 15 years....should help give them some firepower ;-)

emptyend

23rd Jan '14

Diary date - 13th Feb is ENI's strategy presentation and Q4 results

Note also that ENI is operator of the Litchendjili field where SOCO International (LON:SIA) plan a well in Q2/3.

MadDutch

23rd Jan '14

I am very impressed by the managerial competence of Next's directors.

As for Soco, my views are known. I want it to be on a 5% dividend yield to equal Shell. That means a share price about £8. In addition, a progressive dividend policy so Soco is recognised as a dividend growth company.

I think it was a mistake to call our cash payment a return of capital; If we had called it a sustainable dividend with an alternative capital return, I think the price would be £8 today, with an aprox. 5% yield, like Royal Dutch Shell.

That will concentrate the minds of wannabe bidders, who will know that anything but a very attractive offer for Soco will be a waste of time.

emptyend

23rd Jan '14

Hello Mike

As for Soco, my views are known. I want it to be on a 5% dividend yield to equal Shell. That means a share price about £8.

I suspect that will only happen when an exit is being arranged.

In addition, a progressive dividend policy so Soco is recognised as a dividend growth company.I think it was a mistake to call our cash payment a return of capital; If we had called it a sustainable dividend with an alternative capital return, I think the price would be £8 today, with an aprox. 5% yield, like Royal Dutch Shell.

I'm pretty sure you are right that the share price would have been higher if the dividend had been paid conventionally. But that isn't quite the point. Your suggestion would, however, likely be impossible. You cannot have a normal, pure "ordinary dividend" and simultaneously offer an alternative of a return of capital.

SOCO International (LON:SIA) is far from alone in choosing the route it did. Next's "Special Dividend" is one variant that doesn't qualify as an "ordinary dividend" and Melrose Industries (LON:MRO) is another company that has recently announced a B/C share scheme. The point is that it isn't a simple decision - and IMO there were pretty clearly some shareholders (probably with Board representation) who preferred the capital option to the income one, for reasons that aren't clear to the rest of us - but which are almost certainly completely clear to and understood by SOCO International (LON:SIA) management. So I certainly don't think it was a "mistake"!

However, there may well be a point (soon) when priorities change - and I certainly don't see the 2013 approach as being set in stone. In particular, I think that they may well be able to look at dividend growth from say 2014-16 as production gets ramped up further - and I'd guess that (if they haven't already) sometime in that process they will sell out (so your dividend aspirations will end up being mostly academic).

I'd also note that a progressive dividend policy is not possible over the medium term with a single depleting asset.

That will concentrate the minds of wannabe bidders, who will know that anything but a very attractive offer for Soco will be a waste of time.

I'm certain that any who have enquired will already know that!

MadDutch

23rd Jan '14

Thanks for your useful guidance, Keith.
After the 2012 AGM, RdS came over to me and told me that the directors were very interested in the dividend / capital return matter which I had requested. It is nice to have the Chairman's attention.
I agree with Ed, when he said we have a unique business. An enormous cash producer with an oil exploration upside. If Soco can find a new TGT once in 10 years, and develop it as well as it has the original TGT; we will have a fabulous cash cow that will help the next generations of our families.
I am thinking through what I will say at the next AGM. I want to say something useful; and an £8 share price may be very useful to us all, even to the ones who do not want a dividend.

Is the "You cannot have a normal, pure "ordinary dividend" and simultaneously offer an alternative of a return of capital" actual law, or just the way things are done? I do not understand why we can have them one way, but not the other. If it is convention, we could, or even should, be able to change it.

Mike

emptyend

27th Jan '14

Hi Mike,

If Soco can find a new TGT once in 10 years, and develop it as well as it has the original TGT; we will have a fabulous cash cow that will help the next generations of our families.

Indeed that is true. However, I wouldn't put a vast amount of money on that being the outcome. One of the most valuable assets of a good poker player is knowing when to fold his hand and cash out - and that is that stage I think that SOCO International (LON:SIA) 's management is now at. And I would also note that I have worked with dozens of people over the years who, having got lucky or otherwise succeeded in activity A, then assume that they will become equally successful at activity B....or activity C. So....bankers became "property developers"...or art dealers.....or restaurateurs etc. But one of the very most impressive things about the way SOCO International (LON:SIA) management has gone about their business in recent years has been their extremely strong capital discipline and their sticking rigidly to the three phase business strategy that has been espoused now for many years on the inside cover of the annual report. So, for example, they farmed down Nganzi on very good terms before they suffered drilling disappointment in 2010 - others would most certainly have drilled without laying off as much risk, especially given the strong pre-drill technical assessments.

I am thinking through what I will say at the next AGM. I want to say something useful; and an £8 share price may be very useful to us all, even to the ones who do not want a dividend.

Hope it isn't wasted effort..... ;-) [Actually I hope it is ;-)]

I'll go with the £8 share price though - maybe sometime later this year?

Is the "You cannot have a normal, pure "ordinary dividend" and simultaneously offer an alternative of a return of capital" actual law, or just the way things are done? I do not understand why we can have them one way, but not the other. If it is convention, we could, or even should, be able to change it.

It is a statement of fact. You can't have a pure (high) dividend policy if you are simultaneously doling out capital returns. The database bean-counters don't look at the substance, they look at what things are called.

cheers

rhomboid1

28th Jan '14

I see from Alphaville that Nomura has Soco as one of its' top 12 European M&A picks ...fwiw

emptyend

28th Jan '14

I see from Alphaville that Nomura has Soco as one of its' top 12 European M&A picks ...fwiw

I think that is rather an inflated view of the research they seem to have put in to arrive at their list - AFAICS it seems to consist of some grad going through Bloomberg and Reuters reports (and the MailOnline FFS!!) to see who has been gossiped about recently. In SOCO International (LON:SIA) 's case they reference a 19th November report on Bloomberg.

Hey ho. Lets see what the real news is in five weeks time....

rhomboid1

28th Jan '14

Evening EE

You're right the Nomura piece was a bit of fluff, incidentally I believe Soco overtook Cairn in market cap today which struck me as kinda interesting, the relative outperformance v peer group is striking over the last year or so.

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Emptyend

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