Should the Soco management resign from the Board?

Wednesday, Jan 25 2012 by
40

Fwiw I think the Soco management should resign from the board as I simply don't think they have done a good job for shareholders at all over the last 4-5 years.

As a long term shareholder I feel they have had numerous opportunities to deliver operationally but have consistently failed.

Most notable failures are

-Lack of Commercial success on TGD & millions spent on various wells.

-Several wells drilled in Africa, again millions spent but no commercial success

-TGT 55,000 bopd year end target missed when it was only late Aug 2011 they talked about such target

-Selling out Baulaung only to see months later reserves upgrade & further drilling success by Salamander

I feel the management's judgement is questionable. It is difficult for the markets to have confidence in a management team that seems to be getting it wrong consistently.

I just think a management team with 30+ years of experience should be able to provide an accurate estimate as to when production targets on a big project like TGT is likely to hit 55,000 boepd. And have the ability to achieve those targets?

Why would you set a public target if you could'nt achieve it?

I mean if you can't work out when targets are likely to be hit then why should Investors have any confidence in their judgement as to which wells should be drilled?

Soco is down 13% over the past month, there are 46 E+P stocks that are up more then 10%. Soco has significantly underperformed in a what has been a bullish market the past 4 weeks. It is clear the market has 0 confidence in Soco.

http://www.digitallook.com/cgi-bin/dlmedia/heatmap??&&country_id=1&tool_url=/cgi-bin/dlmedia/heatmap&index_security_classification_id=-1&sector_security_classification_id=100148&dataplotcatergorycategory=share_performance&dataplotcatergory=price_mvt_3m&orderby_field=value1&action=tool_submit&tool_id=10&hide_extremities=undefined&remove_nas=undefined&username=Invisage&ac=208992&tc=


I don't trust the manageement team to make the right decisions for shareholders.

I would feel more comfortable if the two execs on the board resigned & the chairman indicated to the markets the company was for sale.

I think shareholders have given the management team enough chances over the past 4-5 years & feel enough is enough.





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SOCO International plc (SOCO) is a united Kingdom-based oil and gas exploration and production company. Its segments include South East Asia and Africa. It has field development, production and exploration interests in Vietnam, and exploration and appraisal interests in the Republic of Congo and Angola. In Vietnam, It’s Block 16-1 and Block 9-2 include the Te Giac Trang and Ca Ngu Vang Fields, which are located in shallow water in the Cuu Long Basin, near the Bach Ho Field. It holds working interest in Block 16-1 and Block 9-2 through its subsidiaries, SOCO Vietnam Ltd and OPECO Vietnam Limited. SOCO holds its interests in the Marine XI Block, located offshore Congo (Brazzaville) in the shallow water Lower Congo Basin, through its subsidiary, SOCO EPC. It holds working interest in the Mer Profonde Sud Block, offshore Congo (Brazzaville) through its subsidiary, SOCO Congo BEX Limited. SOCO's subsidiary, SOCO Cabinda Limited, holds participation interests in the Cabinda North Block. more »

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145 Posts on this Thread show/hide all

Isaac 8th May '12 126 of 145
1

Andrew Moss gone - Aviva rallies 5% as Interim CEO states "My first priorities are to regain the respect of our shareholders by eliminating the discount in our share price"

http://www.investegate.co.uk/Article.aspx?id=201205080705248516C

If shareholders sacked the execs and brought in a CEO solely for selling up TGT I think the price would rally significantly from it's 5 year lows.

 

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emptyend 8th May '12 127 of 145

In reply to post #65810

Cairn has returned a HUGE sum of cash to shareholders & have been quick to walk away from Greenland, compared to Soco which has taken 6-7+ years to walk away from TGD.

Cairn aren't walking away from Greenland. Look here. And they have drilled 8 expensive wells sole risk.

The bottom line is I just want a Sale so we can all move on - The offer is at 278, why does'nt management aggresively bid until the price goes back to 290? Seems silly to just wait.

I'm sure we all want a sale. And, in the interim, we'd like as many shares bought back as possible. However, the company has to operate in the real world, not in Isaac's dreamworld where real world rules and realities can be conveniently ignored.

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tiswas 8th May '12 128 of 145
6

If shareholders sacked the execs and brought in a CEO solely for selling up TGT I think the price would rally significantly from it's 5 year lows.

Then you go and undo all your good comments by being silly. What would it cost to sack the Board, what would the new CEO cost, where would he come from, how well does he know our partners, how well does he know TGT, how well does he know all the companies that have approached Soco over the years?

Are we not agreed that the current Board are most certainly trying to sell TGT?

The bottom line is I just want a Sale so we can all move on - The offer is at 278, why does'nt management aggresively bid until the price goes back to 290? Seems silly to just wait.

Because if the market tanks due to Euro worries and you can pick them up for 250p next week you would be the first to complain they overpaid!

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emptyend 8th May '12 129 of 145
3

In reply to post #65810

PMO has increased production significantly the last few years

PMO production in 2007: 35,700 boepd.  2011 production: 40,400 boepd

Clearly we have different ideas about the meaning of the word "significant".

 

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Isaac 8th May '12 130 of 145
2

Are we not agreed that the current Board are most certainly trying to sell TGT?

Are we? My understanding is we have been waiting 5 years for a sale. I have heard nothing from the management to believe a sale is "imminent"

What would it cost to sack the Board, what would the new CEO cost, where would he come from, how well does he know our partners, how well does he know TGT, how well does he know all the companies that have approached Soco over the years?

A few £100k? I think it costs us more from Brent dropping from $126 to $112 the past few weeks tbh.

I would'nt mind appointing Rui de Sousa and Dr Mike Watts as Interim CEO/CFO to solely sell the company.

Because if the market tanks due to Euro worries and you can pick them up for 250p next week you would be the first to complain they overpaid!

We have more then $110mn on the balance sheet an authority to buy back millions of shares, I can assure you that buying back shares at this juncture will not prevent us from doing so further down.

Your arguement would apply at £2, and £1.50 and £1 etc etc you would end up buying very little trying to catch the bottom.

If the value is £5-6 eventually buying at £2.78 is significantly value enhancing more so then spending millions on TGD/Africa.

 

 

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Isaac 8th May '12 131 of 145
3

In reply to post #65814

PMO production in 2007: 35,700 boepd. 2011 production: 40,400 boepd

Trading and Operations Update

19 January 2012

Simon Lockett, Chief Executive, commented:

"We are delighted to have met our year-end production target of 60,000 boepd following the successful start-up of our two major projects in Asia during the fourth quarter.

http://www.investegate.co.uk/Article.aspx?id=201201190700178231V

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loglorry 8th May '12 132 of 145
4

Because if the market tanks due to Euro worries and you can pick them up for 250p next week you would be the first to complain they overpaid!

Not really sure I agree with this. If the buy back was strong enough even in a falling market due to EZ worries the price would hold up. Closing the gap between NAV and the Share price is what management should be focussing on now and that might mean putting a deal together or buying back shares with cash flow. Any deal will take into account the current share price to some extent so a strong share price is in share holders favour.

There is obviously another reason why management don't want to bid the price over 300p and that is that they think the company isn't worth a great deal more. I'm sure that view will not be popular here but one must consider the fact that this might be the case.

Having said all that I expect we'll be back over 300p quite soon and the bumps along the road will continue until a bid emerges.

Log

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emptyend 8th May '12 133 of 145
2

In reply to post #65816

We are delighted to have met our year-end production target of 60,000 boepd

Oh well, if you want to compare year-end numbers rather than the annual report numbers then:

PMO : 2007 average 35,700, 2011 year-end 60,000.....+68%

Expected 2012 exit rate 75,000........+110%

 

SIA: 2007 average 6,316,  2011 year-end 14,700.......+133%

Expected 2012 exit rate 18,500.........+193%

 

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tiswas 8th May '12 134 of 145
5

There is obviously another reason why management don't want to bid the price over 300p and that is that they think the company isn't worth a great deal more.

Gee, I do not mind the Davjo reality checks but that is taking us to a new low in terms of expectation!

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kenobi 8th May '12 135 of 145
3

>>There is obviously another reason why management don't want to bid the price over 300p and that is that they think the company isn't worth a great deal more.

I don't think that follows at all, the company has has on the b/s , I'm not that keen on buy backs but I see the logic of using excess cash to increase eps later down the line, and give us a better return. However, cash is king, I don't want them chasing the price up, the shares have to be at a big discount for me to be in favour of buybacks.
I really have to wonder, if they spent $50-100 M on a divi, what effect would this have on share prices ? that would be a 5-10% divi. So what is the objective of the buy backs ? if it's to increase eps going forward and a final pay off fine, but if it's to allow people to get out at a better price then then a divi might well be a better way to achieve this.

Cheers K

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mangotree 8th May '12 136 of 145
2

By my calculations Soco have paid £8,211,360 to buy 2,826,013 shares. The average price is just over 290p per share.

The amount paid so far is less than 1% of the current market cap so I can’t see it having much effect on future earnings per share or anything else, and I can’t see it ever doing so unless they are prepared to buy back about 10% of the company.

I would much rather they devote their time and effort, and our money, to improving their exploration success rate. Surely the only way a company like Soco can add significant value for investors is by finding some oil.


MT

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swanvesta 8th May '12 137 of 145
2

In reply to post #65825

The only reason I'm still in this share is I'm waiting for Vietnam to be sold. I would not choose this company or its management for explo. Perhaps they know that.

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ExTownie 8th May '12 138 of 145
2

While waiting for an acceptable bid (around £4.50 - £5), it does seem a pretty sensible use of cash to me. They would theoretically be able to buy back about 50% of the stock within 2 or 3 years if the price didn't move up or they just bought during market weakness as they do currently. Of course, this is only possible in theory since it would be bound to move the price. They have to do something with the cash, so buybacks or dividends make some sense.

ET

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fuiseog 8th May '12 139 of 145
1

Bottom fishing, buying back at a price of £2.90 when the value is £4.50 - £5, sounds like a no brainer to me.

Buying back to support or increase the share price, when confirmation of value will be achieved with 55k bopd from TGT 1 and 40k bopd from TGT 2, sounds like a waste of shareholders money.

So all we need is that confirmation.............., and at some stage I'd like to hear an explanation, as opposed to a lot of conjecture, as to why TGT 1 took so long to get to planned output.

fuiseog

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emptyend 8th May '12 140 of 145
1

In reply to post #65833

at some stage I'd like to hear an explanation, as opposed to a lot of conjecture, as to why TGT 1 took so long to get to planned output.

You've had the explanation. It is in the Annual Report.

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peterg 8th May '12 141 of 145
4

In reply to post #65825

I would much rather they devote their time and effort, and our money, to improving their exploration success rate. Surely the only way a company like Soco can add significant value for investors is by finding some oil.

As far as near term drivers to the share price the oil has been found. The current issue is persuading the markets that it can be produced effectively, and persuading a buyer that it can. There's clearly no doubt that is being worked on, and since it does not involve large unplanned expenditure of cash there's plenty free for buybacks. Sure 1% is not a massive change in the number of shares, but it does effectively increase NAV by that 1%, and just as the number of shares bought so far is small so is the expenditure of cash, but it does none the less represent an increase in NAV of each of my shares, and that is something that management is there for, and given the context of this thread I would have though would be welcomed.

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Isaac 8th May '12 142 of 145
5

LOL - Just read some comments from ADVFN, loads of fun and games today. Apparently £4 is now the ceiling...... :-)

Brent went as low as $110 today but had a swift bounce back late in the day to $113.

I have read that the marginal cost of production is currently about $100/bbl& also the Saudi's want to maintain Oil above $100 to fund their spending spree in their homeland etc, given Soco is pretty much a production company and with Brent where it is I personally don't see much more downside.

Mangotree - I don't think Soco can due to restrictions but I would want Soco to buy back as much of the shares at current prices as possible & IMO management are doing a good job on this front. It is irrelvant that the sharees are now £2.63 and they bought a load back at £2.90 becuase if the eventual sale price is £4.50-5+ then it will be value enhancing.

Let's not forget Soco had $113.5/m cash on the balance sheet at the end of 2011 and have been making about $2mn per day so circa $300mn since the start of the year. They also set aside $30mn for VN exploration, I suspect this was all for TGD which is not going to happen.

So as far as I am concerned there is hardly a shortage of cash, I want Soco to be as aggressive as can be with the buy backs. I don't plan to go anywhere as the strategy has always been till the end game so from my perspective I expect these buy backs to be value enhancing.

If Soco can buy back about 10% of their shares below £2.90 between now and an eventual sale of say £5-6 then most of the value lost from drilling TGD will be recouped IMO.

So far we have spent less then £10mn on buy backs...hopefully plenty more to go.

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emptyend 9th May '12 143 of 145
2

They also set aside $30mn for VN exploration, I suspect this was all for TGD which is not going to happen.

What's the source of that number? I doubt it was all for "exploration" - and they will need to pay for finishing the five additional wells on TGT and possibly one additional on CNV.

So far we have spent less then £10mn on buy backs...hopefully plenty more to go.

There is £15mn remaining in the original (January) plan for pre-AGM purchases - and not enough time left to spend it unless we get big uplifts in share volumes over the next few days.

Otherwise I am in concurrence with your posts last night.

ee

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Isaac 9th May '12 144 of 145
8

What's the source of that number?

 

Slide 9 of the March presentation 2012 capex

 

I doubt it was all for "exploration" - and they will need to pay for finishing the five additional wells on TGT and possibly one additional on CNV.

2012=$175 ($80VN Dev, $30VN Expl; $25 NV)

 

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emptyend 9th May '12 145 of 145
1

In reply to post #65850

Thanks very much - I'd had a quick skim through this morning but obviously missed the small print.

As you indicate, due to the explicit breakdown, the wells I refer to must be covered by the development spend - so they probably don't now have a use in VN for the $30mn earmarked for VN explo.

rgds

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