Soco the next Tullow?

10th Jun '09 by Isaac

11 comments 2844 reads

That is the thought i have in my mind right now. I feel more positive after todays AGM - the presentation looks a lot more 'clean' and focused to the point. The results statement from last year focused far too much on the past, whereas now they are looking forward.

I am also pleased Soco did not release an AGM statement reiterating what has been said before. Looks like they took some of my criticism on board! I am of the impression Soco will be more 'on the ball' going forward.

The key assets of Tullow are Uganda and Ghana. The prize for Soco is Vietnam and West Africa - DRC, Congo & Cabinda.

I have always believed the West African portfolio could be as big as Vietnam but has the potential be bigger.

What is clear from the drilling programme over the next year or so is alot of work HAS been going on behind the scenes the past few months!

I have always liked the management team and have thought of them to be very capable. As already discussed they made quite a few mistakes last year, but i like their cautious nature in the current economic climate. What i find interesting is they are prepared to spend another year, two, three ? drilling TGD. This is interesting because the truth is they are very wealthy people, have decent stakes for them to cash up and retire on very good lifestyles. In the past other exploration companies have drilled wildcats and discovered Oil but did not stick around to fully exploit it. This management team are prepared to stick it out and develop it further.

Soco has historically always been an Exploration company, based on todays AGM it appears likely they could be a large producer from TGT in 2011 i.e. Soco will still hold TGT when it comes online.

This is very exciting because coupled with what is likely to be much higher Oil prices in the coming years Soco will have mature assets as far as Vietnam is concerned producing significant levels of production and quite a few holes poked in West Africa. The management may even be smart enough to sell at the top of the next inevitable Oil bubble and what could be a multiple of the current price.

Significant events :

- 2 wells (appraisal + exploration) 125m Marine…

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fuiseog

10th Jun '09

Isaac,

"Time to take a back seat"

Mirable dictu!

lowersharpnose

Looks like they took some of my criticism on board!

Don't delude yourself.

I have always liked the management team and have thought of them to be very capable.

Come on, you have been slagging them off for months. All quite unfounded too, inter alia, you seemed to be unaware that Soco were minority partners in Vietnam.

Are you going to admit that you were wrong about Soco's management?

lsn

Isaac

Mr Sharpnose,

I have been holding Soco for over 5 years and have a large proportion of my wealth in Soco. If i did'nt believe in the management this would not be the case and i would have sold long ago.

No i have'nt. They made quite a few mistakes last year. One being delaying drilling in West Africa to save a bit of money. I still think they are at fault for not being more operationally active in 2009, not neccesarily in Vietnam but they could have done more in W.A this year IMO.

People keep telling me they are minority partners etc the truth is they have a significant influnce in the JV. A 31% interest on block 16-1 is not a minority interest, it is almost a 3rd. A 25% interest on block 9-2 is also not a minority interest. Infact they reiterated a point they made in the past in todays AGM, SOCO has the largest presence of ANY E+P company in Vietnam. Please do not make it out like they are some tinpot Aminex company in Vietnam.

Soco have an 85% interest in Nganzi. I realise they intend to farm down the interest but considering a seismic was completed in 2008 we should be drilling a well this year. Instead it is another 18 months wait, why does it take 18 months to hire a rig and interpret and plan the drilling? Very slow especially when management have already said ' Initial interpretation of the processed seismic has been very encouraging as several large structures have been identified.'

What is clear is there has been more going on then i have given management credit for, but i stand by saying quite a few mistakes were made on TGD which led to huge costs and wasted time. I still believe we should have been more operationally active in 2009 and i would even say i don't think management did everything they possibly could as far as 2008 performance is concerned.

djpreston

Jeez Isaac, but you're the hard one to please. Only just stopted this thread here sorry. So now you get some idea of what etc means though you should know that of course if you'd been in touch with the management. A third control of a jv is still just a third and agreement from all partners may be required for progress. Nevermid, I see little point in returning to the old saw of your's so I'll leave it there. Let's just look forward shall we? D

A third control of a jv is still just a third and agreement from all partners may be required for progress.

Yes and as you know PetroVietnam is a significant partner of the JV. For those that don't know PetroVietnam is wholly owned by the government of Vietnam and is responsible for all oil and gas resources in the country.

Crude oil output from Vietnam, Southeast Asia’s third-biggest producer, dropped 6 percent to 8.57 million tons in the January to July period, according to a statement from the Ministry of Industry and Trade.

Production fell as output from the country’s largest oil field of Bach Ho has been declining, Do Huu Hao, a deputy minister of industry and trade, said by phone Tuesday from Hanoi.

Vietnam, Southeast Asia’s third biggest producer of crude oil after Indonesia and Malaysia, is trying to reverse a drop in supply production

http://www.monre.gov.vn/MONRENET/Default.aspx?tabid=256&ItemID=48533

So you have a commited government that wants to reverse the decline of Vietnam production, How difficult is it for Soco to persuade and influence the JV i.e. the government ? Especially when their intentions are clear.

Let's just look forward shall we?

Yes. The truth is i am more excited about the prospects in Vietnam and West Africa and the potential upside they offer in a very favourable Oil price environment. If we are lucky at the drill bit and we see significant success, years like 2008 will pale into insignificance. It is a waiting game....

kenobi

yes we keep hearing how keen they are to get production up, but whenever SOCO needs a sign off, crikey it takes ages ! nearly a year for the last development plan, and we're waiting on another now? Not to mention the gas price issue, 12 months ago we were looking for agreement, if they really wanted to push up production maybe they would price gas above a dollar ??

I'm just making the point that the government isn't one person, and it doesn't have clear objectives it follows, it's a mass of different people in different departments, pushing and pulling in different directions, and a pain in the arse to do business with, in my limited experience from watching soco

cheers K

nigelpm

11th Jun '09

It is a waiting game, I am buyer at rock bottom prices.

These certainly aren't rock bottom prices but the risk:reward looks very reasonable at these levels with oil moving back up.

Why the sudden change of heart regarding the management though?

And I'd like it if you could possibly tell me what are you indicators suggesting?

Impvesta

The management may even be smart enough to sell at the top of the next inevitable Oil bubble and what could be a multiple of the current price

Isaac, you keep banging on about this as if selling Vietnam is just like phoning your broker and selling some shares. The directors can't just think "oil is a good price today, let's ring our brokers/press a button and sell our Vietnam assets at earth shattering prices".

You have made various comments which might imply you went to the AGM. Did you? If so why didn't you introduce yourself to us? We might have saved weeks of futile discussion on bulletin boards by twenty minutes face to face chat with you. We are a friendly group to have a drink with, honest.

Regards

emptyend

You have made various comments which might imply you went to the AGM. Did you? If so why didn't you introduce yourself to us?

He didn't go. I knew all but one (UK) person there - and that certainly wasn't Isaac.

If he had gone, he wouldn't be making inaccurate statements like this: "Soco have an 85% interest in Nganzi. I realise they intend to farm down the interest".

Thats all I have to say in this thread.

These certainly aren't rock bottom prices

What a genius! :-)

As i have already said my views have not changed on what i think about 2008 in terms of performance, management remuneration & the lack of planning done in 2008 to get some decent drilling done in 2009. I've disucssed this enough now, lets move forward.

I am rather more upbeat about what is going to happen from here on, I feel alot more positive and it is clear to me management have been quite busy planning for the upcoming high impact drilling programme, we are starting to make progress again and Soco is positioning themselves to be in front of their peers ONCE AGAIN :-))

I also feel alot more comfortable, my main concern has been another nasty crash in the markets. It has happened in the past and it can happen again so soon after a the big crash like 2008. I am more comfortable because there will be alot going on at Soco, even if the market becomes stupid, Soco have enough catgalysts to keep the share price up.

Cautiously bullish, markets have just broken a key level on the S+P of 945. I still think 11-1200 is a real possiblity. But it is best to be careful after such a decent run, I'm sticking with large cap commodity plays with a few Aminex and Encore...Not putting any new money in the markets, I am a buyer of Soco at lower prices, already have enough exposure here.

Oil is a global commodity traded on a daily basis. The production can be hedged forward and sold in the open market using the futures strip to a mass of buyers. Soco's assets are attractive to a number of acquirors, not all would pay for the price Soco wants though. In a way i am happy to wait whilst the full potential is realised, atleast i won't have the dillema of thinking where to put my money next! My gut instinct tells me in the end we will all do fantastically well.

I'll let you keep guessing, it is more fun that way. :-)

29th Jun '09

Management did well to ensure a more active drilling programme starting next month. The next part is to ensure minimum delays, I expect there to be delays from the original drilling plan due to various reasons.

I hope they are more on top of things and keep delays to a minimum.

Does anyone know what the management can do to minimize delays and ensure an efficient drilling programme?

The sucess to realising the max value from Soco is obviously finding as much Oil as possible but doing so in a timely manner giving us as much optionality as possible when it comes to sell. i.e. When another 2008 Oil bubble comes we need to be in a position to sell up and not waste time fishing for tools and all that nonsense. Amazing how in 2008 we had record Oil prices and Soco management saying they have potentially found the biggest discovery in Soco's history and the stock did'nt even make a new high! Just goes to show how crap 2008 was. We don't want another crap 2008!!

Lets keep on top of it Cagle/Story!

Soco the next Tullow?

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Isaac

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