SOCO 2013 Preliminary results 5th March 2014

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6th Feb '14 by flyinghorse

59 comments 38517 reads

I see a date of March 5th 2014 was issued yesterday for the 2013 results.

I note last year that a operations update was given in Feb 2013,and that gave the date of the 2012 results for march 2013.

Does anyone know if we will be treated to a operations update prior to March 5th 2014?

FH

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Flyinghorse

Premium Member

59 comments

fuiseog

6th Mar '14

It's the post Wapping consequence, you pay peanuts, you get monkeys.

Or was that gorillas? Perhaps something to bring up with our fellow shareholder/shareholders representative Anthony Story at the next agm -:)

emptyend

9th Mar '14

I've just been re-reading the results RNS - and quite a few analyst flash notes on the initial RNS. Only two analysts (Numis and UBS) note what to me is the elephant in the room with the results - namely exactly what will the production plans be going forward?

Clearly these are part and parcel of the plans for developing H5, on which decisions are to be expected in a matter of 2-3 weeks (per results). The clues are there, IMO.....the reference to "total production via Bach Ho" in the presentation - and the reference to "current plans" for FPSO testing in the RNS.

I wouldn't be too surprised if they plan to bypass the FPSO bottleneck, bite the capex bullet, and switch everything across Bach Ho. It would be interesting to see what the implications would be for production plans then - and, indeed, reserves (on which they continue to "hide their light under a bushel" or so!....and IMO that will continue until later in the year).

I expect an April RNS to clarify some of this.

Incidentally, one of the analysts suggests c $100mn capex to connect to Bach Ho.

flyinghorse

9th Mar '14

Along the same lines (Offtake/bottlenecks /future production),slide 8 is interesting. States 4% of STOIIP has been produced,and comment H5 supports high case STOIIP >1Bn bbls

I tried to work out what the 4% is using the data available.

TGT came on line 22nd Aug 2011,and had produced 100 cargoes and 30mmbbls buy 25 August 2013 (hlhvjoc website)
Thats roughly 300,000bbls/cargo and 4 cargoes a month. So by end of 2013 that 31.25mmbbls produced (incidentally about a 41,000bopd average) and if thats 4% of STOIIP then STOIIP would be 781.25mmbbls. They state H5 would take this over 1Bn.

If recovery factor is in the region of 40%,thats 400mmbbls to produce,and via the FPSO ,being generous at say an average of 50,000bbls/day,every day is 18.25mmbbls/yr or 22 further years of production,with more drilling to come and no indication of the water volumes to handle for 400mmbbls of crude to produce.

This to me supports a secondary /alternate off take solution like Bach Ho.

It may also be one of the reasons as to a reluctance by RPS to include these as reserves as the STOIIP is now so big it might not be recovered in the license lifetime or is contingent on an improved /alternate export route to impact the NAV.

FH

kyu66

9th Mar '14

FH,

I did the same calcs (although had production to date at 33.8mm and hence STOIIP of 844 - but same ballpark) - the 4% had such prominence in the presentation I would like to have known what the accompanying description was for that slide. Surely someone in the analyst audience would question the prominence.

I also came to the same conclusion re production, based on slide 11, that significant additional reserves couldn't be produced even if the current FPSO capacity could be upped to the 70kbopd as indicated in the slide and H5 capacity was 25kboepd.

An earlier company quote of "a nice problem to have" springs to mind, but it is still a problem - let's hope the solution can be found and brought on stream without too much (more!) of a delay - the clock is ticking wrt to licence expiry.

Having said all that, my cashflow projections with H5 online in 2016 and current production still support a value for VN of 450p+ per share (with my best guesses of future capex to get some idea of free cash flow and using NPV10). The accuracy of this figure obviously depends on the future oil price and forward capex.

I do wonder if at the moment there are too many unknowns going forward for the analysts (and potential industry buyers) to be able put forward a rock solid investment case. As EE says, it looks like a full picture of reserves and production plans will not be available until after further drilling later in the year, but with maybe some hints along the way.

At the moment all eyes are on production, but let's not forget there is some explo on the horizon which may provide additional value.

This time next year Rodney.. (..I hope we are still not discussing VN production and reserves)

kyu66

flyinghorse

9th Mar '14

I tried to understand slide 11 (note stated as "mid case") ,but without the "key" its impossible to work out what scenarios they show without speculation. Theres an odd very flat plateau on 2 of the lines ,but then the other profiles are very spikey for a field in its prime. I also assume all profiles are for current export route.
It would be good to know what was said & asked at the analyst presentation-but then we would expect that to carry through in their analysis. I wonder if canacord were there?

The "actual production" data looks to be from mid 2013 so7 months old, so suspect this is a pre H5 view,and if so one could argue a FPSO ,debottlenecked would work. If you were looking at a tie in to a line then it would likley have top fly on a P90/50 case,unless the P90-P10 range was very narrow.

The main attraction for me for a Bach Ho tie in would be much reduced opex with the FPSO gone and hence higher netback per bbl.

FH

ExTownie

9th Mar '14

FH - wouldn't it strike you as rather odd for the production estimates to exclude H5 in a presentation so many months after the well test results? H5 makes a material difference so I would have assumed that would be part of their thinking by this stage. SOCO, along with most (all?) resource companies, are not known for understatement.

Does anyone have an idea how long it would take to construct the tie-in to Bach Ho, if that is the route they decide to take? I imagine something like 6 months, but that is little more than a guess. The $100m figure fits in with a conversation I had with the company 1-2 years ago, when they estimated $60-100m.

ET

MadDutch

9th Mar '14

ee, some thoughts on your post 41.

What will happen to Talisman's "pimple in the bum of TGT?" Their production goes with ours into their FSPO, which may be underutilised if we stop using their ship when we start sending our oil to Bach Ho, or will they have to lay a new pipe to join our pipeline system? Frankly, serves them right for the inconveniences they have caused us, nicking our oil and causing delay. Their behaviour looked like sharp practice to me, it would be appropriate if their pimple became uneconomic.

Re our TGT gas, is there the kit on Bach Ho to separate our condensate? Or will it be too small to bother with? I understant there is much less gas from TGT than CNV.

MD

flyinghorse

9th Mar '14

Not really.
I did say "suspect"-I have no evidence and could be wrong.
However:
H5 result is Oct 2013. The real data in the profiles shown in slide 11 are from before this,and if H5 was included I would expect bigger overall numbers.
Also the cumulative production in slide 11 ,though I have not calculated it looks on the lowside for a case including H5.

Re the Bach Ho numbers (c $100mm capex) were they on a net or gross basis-I assume the latter,so SOCO share not to large? There would be a tariff.

FH

ExTownie

9th Mar '14

I understand that $60-100m was the total cost, so while I imagine that SOCO may have to pay the whole cost at the start, being the keenest party, their share of the cost would ultimately be 30.5% of that.

ET

emptyend

10th Mar '14

It may also be one of the reasons as to a reluctance by RPS to include these as reserves as the STOIIP is now so big it might not be recovered in the license lifetime or is contingent on an improved /alternate export route to impact the NAV.

Yes, FH....that is kind of the sub-text that I inferred also. Now back and catching up again.

I tried to understand slide 11 (note stated as "mid case") ,but without the "key" its impossible to work out what scenarios they show without speculation. Theres an odd very flat plateau on 2 of the lines ,but then the other profiles are very spikey for a field in its prime. I also assume all profiles are for current export route.

I think that is another good point. Everything in these documents will reflect the status quo as approved and agreed at present.....but that doesn't mean to say that will be!

And, furthermore:

The "actual production" data looks to be from mid 2013 so7 months old, so suspect this is a pre H5 view,and if so one could argue a FPSO ,debottlenecked would work. If you were looking at a tie in to a line then it would likley have top fly on a P90/50 case,unless the P90-P10 range was very narrow.

The main attraction for me for a Bach Ho tie in would be much reduced opex with the FPSO gone and hence higher netback per bbl.

Again I agree completely!

Re the cost of hook-up to BH, the analyst was unspecific as to whether the cost was net or gross. Whilst I guess that $100mn would cover the gross for just hooking up H5, there may well be bigger plans?

Good stuff, FH....thanks!

extrader

10th Mar '14

Hi all,

Just a reminder (from the last IMS) that RPS are not charged with commenting on reserves.....a misapprehension I (and I suspect others) have been labouring under for some time :

...For clarity, RPS was not retained to produce a report on Reserves or Resources but to provide an interim update of STOIIP and gas initially in place (GIIP) and recovery factors, incorporating information from the first phase of the field-wide static and reservoir simulation models prepared by SOCO (ie ERC)

Soco will be appointing someone (DeGolyer ?) to do a reserves report as soon as practicable

Hence my earlier question : is a reserves report 'practicable' in 6 months.......or 2 years ?

ATB

flyinghorse

10th Mar '14

They also say:
"The notional in-place volumetric estimates are supported by an independent assessment by RPS, the reservoir engineering group retained by SOCO."

STOIIP & Recovery factor are the backbone of reserves calculations,or technical reserves (ie not run through an economic model with the relevant tax regimes & licence cut offs and work programmes to generate an NPV view).

RPS do reserves reports (CPR) so I would imagine they would be tasked with doing that if they are retained. Shifting to D&M or some other auitor would seem fool hardy.

The main tools are inplace for any buyer to make their own assesment of reserves (reservoir model,Stoiip,recovery factor work)should they be interested.

So to my mind I dont know if I specifically need the reserves report we all thought we had been promissed-its there but just not written up!

emptyend

10th Mar '14

STOIIP & Recovery factor are the backbone of reserves calculations,or technical reserves (ie not run through an economic model with the relevant tax regimes & licence cut offs and work programmes to generate an NPV view).

RPS do reserves reports (CPR) so I would imagine they would be tasked with doing that if they are retained. Shifting to D&M or some other auitor would seem fool hardy.

My understanding is that the fieldwide reservoir model is and always has been (since sometime mid-2013) something built by EPC Equipoise - not by RPS (contrary to the impression of those of us who attended the AGM). AIUI the only independent models have been theirs. RPS were basically looking at models developed by others (SOCO and EPC Equipoise, I think).......hence the comment in the RNS that RPS were asked to make an "interim update of STOIIP and gas initially in place (GIIP) and recovery factors, incorporating information from the first phase of the field-wide static and reservoir simulation models prepared by SOCO"

As you also say:

The main tools are inplace for any buyer to make their own assesment of reserves (reservoir model,Stoiip,recovery factor work)should they be interested.

....but of course there are the issues to which you referred earlier in relation to production rates and additional wells which would both militate against an assessment based on current data being accurate (though it would be rather more accurate than RPS's initial effort).

I see the whole picture as something that will see a series of steps forward being made over the next 18 months or so.....first the production plans, then the development drilling outcomes, then integrating that into the model and finally updating that model for production experience in 2015 when the new wells come onstream. I suspect that the final outcome will be well beyond most current expectations (including mine) and (if they wait that long) will provide very healthy exit terms for investors. The direction of travel should become quite clear over the next 6 months though and , I would guess, prompt an M&A intervention at some point this year.

emptyend

3rd Apr '14

New CFO appointed.

Another experienced M&A person.....

Certainly addressing the management freshment issue

AnonymousUser858

3rd Apr '14

The new CFO is an end game specialist. her appointment surely underlines the fact that what Soco want now is expertise in selling assets to larger O&G cos.

emptyend

3rd Apr '14

I notice that she has been the central person on some pretty chunky deals.

I also note (having found her maiden name) that she is almost certainly a Russian speaker - and a well-known "face".......which may be handy in some respects for Vietnam.

I'd think it is a good career move for her. And she certainly should tick a lot of boxes for SOCO International (LON:SIA).

ps...as for the timing - it is perfect. She arrives immediately after the 2013 year is put to bed, but a few weeks before the AGM

emptyend

3rd Apr '14

short biographical piece here

A 37-year-old managing director at Bank of America Merrill Lynch who had been tipped as a rising star in investment banking circles has become the latest banker to move to an in-house corporate role.

The comment about people moving out of investment banking is certainly accurate. I'm aware of several leaving - though private equity is perhaps a more common destination.

OpeningBat

8th Apr '14

Well the AGM is set for Friday 13th June (http://www.investegate.co.uk/soco-international--sia-/rns/annual-report---accounts-and-notice-of-meeting/201404041250211034E/), so for those of you coming by train you will have to deal with the London exodus on Friday afternoon/evening so don't leave it to the last minute to book your tickets. The Bulgari hotel is a hundred yards or so from Knightsbridge tube station.

Early indications are that The Star Tavern in Belgrave Mews West (http://www.star-tavern-belgravia.co.uk/) is the best place for a post-AGM discussion. It opens at 11:00 and gets decent reviews (http://www.beerintheevening.com/pubs/s/21/2195/Star_Tavern/Belgravia). A reasonable alternative would be The Grenadier (http://www.taylor-walker.co.uk/pub/grenadier-belgrave-square/c0800/) but this only opens at 12:00. I shall do some "in depth research" on the various alternatives and report my findings (if I can remember).

OB

emptyend

9th Apr '14

Its well off my usual patch, but there are a long list of candidate establishments here

I'd guess an 11.30 opening would be needed - if not earlier. Can't see this one being very lengthy.

For those who recall the Yemen exit rationale this one seems well-named - and with the right sort of quiz machine too..... ;-))

Have fun with the research, OB :-)

emptyend

1st May '14

Back on the topic of possible bonds, we now have a couple of relevant pricing markers:

[Today] Genel Energy plc ('Genel' or 'the Company') is pleased to announce that it has priced an issue of $500 million senior unsecured bonds ('the Bonds') due 2019 at 7.50%. The size of the offering has been increased from the $400 million indicated at launch on 25 April 2014 to $500 million...

(8/4] Tullow Oil plc ("Tullow" or the "Company") is pleased to announce that it has completed its offering of $650 million aggregate principal amount of 6.250% senior notes due 2022 (the "Notes"). Interest will be payable semi-annually.

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SOCO 2013 Preliminary results 5th March 2014

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Flyinghorse

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