Is there fire or just smoke?

11th Feb '09 by MrT

4 comments 1885 reads

I see that Soco is a core holding on Stockopedia. Anyone got an insight into the status of the M&A rumours that have been floating around this asset for some time? As I understand it, Sinochem Corp, China's largest chemicals trader, was suspected to be interested in the business, mainly because of Soco’s share of two offshore exploration blocks in Vietnam, which represent 63 per cent of Soco’s total proven oil reserves. Other potential suitors said to be Talisman, BP, Total and ConocoPhillips....

There was an RNS back in October to say that it had received a preliminary approach about the sale of the bulk of its portfolio of assets. Are those discussions still ongoing? There seems to have been no further news other than the interim results...

http://www.stockopedia.com/news/announcement/SIA/081010sia5764f.htm

http://www.stockopedia.com/news/announcement/SIA/081105sia4351h.htm

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Betasurfer

12th Feb '09

The share price has been jumping around a bit but nevettheless seems to have been in broad decline since July. Not much sign of a bid premium, in my view, but maybe the market likewise just isn't aware of where things stand.... Too much uncertainty around the oil price for my liking.

emptyend

7th May '09

Sorry to be replying late to this.

Re the approach for assets it is a bit of a guess when this may crystallise into a deal (either with the original party or somebody else). It is a fair assumption that the assets concerned are the Vietnamese ones but it is a matter of some debate whether someone will be prepared to pay a sufficiently high price for them (£25+ per share IMO) until at least the seismic reprocessing has been done on TGD and the HPHT area - which will not be finished for a few months yet (may get some clues on that at the 10th June AGM). Some think (wrongly in my view) that it is a certainty that no deal will happen until the next well is drilled in 2010. IMO the buyer will want to be in control before that point, otherwise they are likely to be paying considerably more.

In sum, discussions are indeed "still ongoing" but it is difficult to say at what pace (though obviously fairly slow). I am given to understand that the Yemen disposal took a year to be agreed so (assuming that the approach wasn't made until July/August last year and was kept under wraps until someone in the Far East leaked it to the Telegraph) there is probably some way to go still, even if they aren't going to wait for the geological situation to be fully clarified.....

.....that said though, it would only take a few phone calls to change that in principle, if someone should be disposed to get more aggressive.

MrT

8th May '09

Cheers for the reply. Much appreciated. Looks like one to keep any eye on in my Stockopedia portfolio but perhaps a bit uncertain for my liking to take a real world position..

No probs.

I think the view of most holders, in fact, would be that there is a high degree of certainty about the value of the company in relation to the depressed market cap (brokers generally have NAVs of more than double the current share price) but that the uncertainty mainly revolves around the timing when the bulk of that value will be recognised. Accordingly most people are content to wait - and if there should be some material news at some point then it may well be difficult to buy in at that stage. There are perhaps 150 or more shareholders actively interested in discussing SOCO elsewhere - I imagine that a number of them may move over here in the next few months so, if that happens, you'll get a much better sense for the position.

Is there fire or just smoke?

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MrT

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