SOCO - how much would be enough for a bid to be accepted? A makeshift poll.

Thursday, Aug 25 2011 by

I'd be interested to know how much you folks think a bid would need to come in at for it to be accepted/recommended by management.

We don't yet have a poll facility here on Stockopedia, so I'm trying a quick and dirty workaround. I'll post several alternative answers to the question above. If you wish to vote just give a thumbs up to whichever answer most closely reflects your opinion.

edit

clarification - question is how much would be needed for an immediate bid for the whole company to succeed?


Disclaimer:  

The author may hold shares in this company. All opinions are his own. You should check any statements that appear factual and seek independent professional advice before making any investment decision.


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SOCO International plc (SOCO) is an oil and gas exploration and production company. The Company's segments include South East Asia and Africa. It has field development and production interests in Vietnam, and exploration and appraisal interests in the Republic of Congo (Brazzaville) and Angola. In Vietnam, SOCO'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. SOCO 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. SOCO 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 »

LSE Price
107.4p
Change
-4.1%
Mkt Cap (£m)
356.5
P/E (fwd)
35.3
Yield (fwd)
4.7



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20 Posts on this Thread show/hide all

tournesol 25th Aug '11 1 of 20
5

£5 per share

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tournesol 25th Aug '11 2 of 20
34

£6 per share

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tournesol 25th Aug '11 3 of 20
30

£7 per share

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tournesol 25th Aug '11 4 of 20
1

something else

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tournesol 25th Aug '11 5 of 20

My own view is that a bid of £6, would probably be successful, despite it being quite modest in comparison with the potential longer term.

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extrader 25th Aug '11 6 of 20
1

Hi rg,

To be clear : are you asking 'whole co' or Soco VN ? And - depending on how long TGT's been running - if NOT 'whole co' , how much cash in each ?.......;-)

If you mean VN only, perhaps a value of GBP 1* should be assigned (based on present knowledge) to SoS ?

* or some other 'consensus' value.

Sorry to be throwing sand in the cogs !

ATB

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nigelpm 25th Aug '11 7 of 20
2

For me it would depend on numerous factors.

1) What flow rate we ultimately get from TGT
2) Whether there's any further explo success.
3) Oil price

Assuming 55k boepd and no further success I'd accept £6 right now (and how I voted above) but this would move with the oil price as well.

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tournesol 25th Aug '11 8 of 20

My thought was along the lines of, if a bid were made tomorrow, for the whole company, how much would it need to be to get management agreement.

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extrader 25th Aug '11 9 of 20
2

Hi rg,

Thanks for the clarification of terms.

I'd reckon GBP 6 for VN and GBP 1 for SoS would

(a) leave something for the next man;
(b) eliminate a number of risk factors as highlighted by nigelpm + time risk (dealt with by you); and
(c) give me (ie management) lots of liquidity at a period of great opportunity (Africa, Libya, beaten-down oilco's etc) if I'm feeling optimistic/great macro environment challenge if I'm feeling pessimistic.

I could well imagine that there might not be unanimity of views on the Board (it seems improbable that the aspirations of the entrepreneurial Pontoil family would be wholly congruent with those the (passive?) Maugein heirs, for instance) . The great thing about cash is that it's fungible - and an early sale would allow the major (and minor !) shareholders to pursue their individual goals and objectives as they deemed fit......

ATB

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nigelpm 25th Aug '11 10 of 20
1

I'd definitely take £6 tomorrow as it stands. Maybe even slightly less given the other bargains about.

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emptyend 26th Aug '11 11 of 20

In reply to extrader, post #9

Once again we are thinking along similar lines - though I'd hope to get the option of shares in SoS.

Re the Maugein heirs, when I last heard they were being advised by RdS on their stake.

As you say - cash is fungible...and can be applied in an infinite number of ways, with no shortage of present opportunity.

ee

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loglorry 26th Aug '11 12 of 20
1

Ummmm £6-£7/shr from the Socophants - I guess that means realistically we should expect more like £5 which is fine.

Didn't Cagle go on record saying Soco wasn't for sale? If so then a bid would have to be hostile but given the director control this looks unlikely to succeed. Maybe he just meant not for sale at these prices :-)

Log

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kenobi 26th Aug '11 13 of 20
7

Everything is for sale for the right price, especially SOCO,

Probably he's saying we'll get a better price once we have some production data,  and reserves have been reviewed and their is progress on phase 2 ,  maybe even production data on that,  and of course  another shot at tgd. 

In the meantime,  we have a good cashflow that should bolster the share price.  We don't need to sell out at any price. 

Looking back I recal at an agm,  ed saying that having production history helped in the sale of yemen,  likewise Thailand was for sale with a production history,   I'm guessing we're going to need 6 months of production data for tgt,  we'll have to see about  TGD, 


K

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tournesol 26th Aug '11 14 of 20

In reply to loglorry, post #12

Log

have you got a link to that quotation from Cagle? I'd be interested to see the context......

T

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loglorry 26th Aug '11 15 of 20

Soz Tournesol - I saw it on Advfn and they referrenced the Times interview but said it was behind a paywall so I didn't check it out. Could have been total nonsense and probably quoted out of context. Most likely he said "not for sale at these prices" sort of thing.

Log

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mangotree 26th Aug '11 16 of 20
5

have you got a link to that quotation from Cagle? I'd be interested to see the context......

I don’t know about an actual quote to say the company is not for sale, but you might want to re-read this interview from April 2010 and the comments that followed from it.

http://www.stockopedia.com/content/meet-the-management-interview-with-roger-cagle-of-soco-international-plc-39617/

Well remember our business model is about one of [unclear] the portfolio, if you will, so we have never altered the data, we have never solicited bids on anything but at any point in time if someone says ‘are you talking to someone?’, the answer is yes because that’s our business model but let’s be realistic, in the next six months we’re going to derisk 90% of our portfolio so its highly unlikely that someone…even though someone might pay you full value for what you’ve got in booked TP reserves, you’re not going to get much value for stuff that’s in the resource category. So in the next six months, if we’re going to derisk 90% of that then no matter what happens you’re going to be narrowing the range between the bid and the ask. So if someone would be willing to come in right now and pay you for all the upside, would you listen? Absolutely but is someone going to do that? Not likely.

Generally I’d say that the company (or any particular asset) is always for sale! But only at the right price and at the right time.


MT

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extrader 26th Aug '11 17 of 20
5

Hi rg et al,

From TMF a few days ago, courtesy of bhoddisatva :

" Digitallook news summary email today includes following paragraph - not being a Times subscriber I can't verify it as it's behind a pay-wall:

Roger Cagle, the deputy chief executive of Soco International, insists that his assets in offshore Vietnam are not for sale — yet, notes the Tempus team at the Times. The Te Giac Trang oil well started producing only on Monday, at 16,000 barrels a day; production will ramp up to 55,000 bpd by the end of the year. Soco might then consider offers, but until there is that degree of certainty, don’t bother. Alternatively, Mr Cagle can truck on as he is, which would mean the return of some of that extra cash to investors from Soco, which does not pay a dividend. The shares, up 9p to 294.5p, are within pennies of where they were in the autumn, after they collapsed on a disappointing drilling update, which does not suggest much appreciation of the progress made in Vietnam since. As ever with oil explorers, highly speculative, warns the Times. "

The concluding sentence rather lowers my opinion of the value of any comment from the Times......

ATB

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tournesol 26th Aug '11 18 of 20
3

Log,

I'll see your Cagle and raise you a Storey...

In an interview carried by the FT March 23rd 2011......
"...Mr Story said: “As a listed company we are always for sale but we have never solicited anyone or maintained a data room for that purpose.”      (my bold)

full text is here

T

 

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emptyend 26th Aug '11 19 of 20
2

In reply to loglorry, post #15

Could have been total nonsense and probably quoted out of context. Most likely he said "not for sale at these prices" sort of thing.

All it indicates is that there is no rush to sell - and no pressure to do so. If someone is willing to pay what they think it is worth, then a deal could be done in short order.....but, as ever, some may prefer to wait to see production histories, reserves confirmations etc etc.

All that would mean is a slightly longer wait..... and more competition for any buyer when they try to do a deal - but we can all wait....and it won't make any difference to the exit price. I'm slightly surprised that buyers haven't been a bit more proactive in trying to steal a march on their competitors - but I guess that (as in 2008) the macro backdrop hasn't helped.

ee

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kenobi 27th Aug '11 20 of 20
2


this all makes perfect sense,

Cagle, in http://www.stockopedia.com/content/meet-the-management-interview-with-roger-cagle-of-soco-international-plc-39617/

says not for sale yet, within months we'll have derisked things, then it'll be time to do deals.
But as it turned out TGD, our 90% COS, turned out to be inconclusive, and the african portfollio,
similarly produced oil shows but no commercial finds, so the expected result, that we'd definitively
derisk the prospects hasn't happened. Of course now the TGT field is producing, that makes a difference,
but it seemed to me that the management want another shot at TGD, and some more expo in africa is worthwhile,
then there is still a lot to play for ,

I appreciate they're not as young as they were, but as Ed Story is fond of saying, if you're having fun


K

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