TGD - Let's go drill a well...
The previous experience on TGD was, well, quite an experience.
After all the excitement about the placing, I found myself slightly surprised by the 90% COS figure that sems to have been blurted out: the guys have given themselves a one-in-ten chance of not only looking a bit embarrassed, but also of having the share-price trashed to well below NAV for some time afterwards.
However, it's all been said and done and in the interim I have been amusing myself by considering the well design. (Yep, some of us do get our kicks that way - no pun intended.) Incidentally, the phrase "over-engineered" has been quoted a couple of times and I think it's been misplaced - it's the well that's going to be over-engineered, not the rig!
Background
TGD-1X
We know that in July 2007, pressures of 12,000 were reported when TGD-1X reached 4625m (along-hole depth, I don't believe we know what the True Vertical Depth was.) The well was suspended and in announcing plans for TGD-1X-ST1 in Oct 07 Soco said that they had assembled the proper high pressure drilling equipment which included a 15,000psi BOP.
TGD-1X encountered hydrocarbons in two Oligocene clastic sequences, which were separated by a volcanic layer. Well logs over the upper sequence showed about 30 metres of net pay and they were unble to log the lower section, though at the time they suggested that seismic interpretations show another 300m of sediments above the basement.
As far as I can work out, the section below the volcanics is overpressured; that is to say, instead of the pressure-depth graph being a nice straight line, there is not only a change in gradient just below the volcanics, but quite possibly a step out as well.
TGD-1X-ST1
Holy moley.
Here's a quote from Ed in Oct 2007:
"We are particularly excited to return to the TGD structure. Success in the
deeper objective section of this structure could totally transform this company
and represent a significant milestone in the history of oil exploration in
Vietnam. Accordingly, we are quite anxious to resume our evaluation now that we
have assembled the proper high pressure drilling equipment.
We were all pretty excited too. How did it go?
I'm sure you don't need much reminding. Here's one reaction from June 2008:
Certainly a lot should have been learned from this dismal experience to bring any future well back within more realistic timelines. SW10's Law is affected by a number of factors, but it seems to me that there has been a surprising amount of human error on this well, mostly arising from contractors as far as I can see. They must have been spitting blood at Soco Towers: the frustration must just be immense. I'm sure it would be an attractive - if unrealistic - option to change out the contractors and maybe even the rig.
Alright, it was me.
All the SNAFUs aside, ST-1 had limited shows whilst drilling the Oligocene, due to the higher mud weights needed to keep the pressure regime in check. Nevertheless, logging showed that the well encountered approximately 120 metres of good oil and gas shows in a combined gross interval of 570 metres. Permeability and porosity were preserved and Soco said they compared favourably with pre-drill estimates. In other words, they saw what they expected to see on the logs.
However, the rodeo ride to get this well drilled meant that it's integrity was poor and so the planned extension into the basement was abandoned.
Two drill stem tests ("DSTs") were planned in the high pressure/high temperature Oligocene interval. The first DST was over an approximate gross interval of 210 metres in the higher pressured zone below the volcanics layer separating the two over-pressured sections. The second DST was in the upper Oligocene interval above the volcanics layer over an approximate gross interval of 120 metres.
DST1: It's painful just to think about it. As Soco had it; downhole damage sustained during drilling and preparations for completion precluded recording meaningful sustained flow rates. After some Q&A, one poster noted that:
There does now seem to be the suggestion that the failure to get sustained flow was less to do with well damage per se (remember I suggested that perhaps solids were being produced) and more to do with a heavy fluid downhole preventing the well from coming in. A kind of equilibrium between the well and the fluid may have resulted in the well 'surging' back-and-forth without actually getting flow. Rather like that unpleasant feeling when you really want to burp but can't quite make it...
The shocker is that the heavy fluid, which would originally have been left to provide some protection against a blowout, may have reacted chemically with the production fluids put into the well prior to testing. This resulted in something heavier and/or more viscous and thus held the well back. Now, this is all supposition based on half-facts from a guy sitting several thousand miles away from the well and could be wrong, but if it's close to the truth then (yet another) sub-contractor needs his bottom kicked.
Yep, me again. However, the main point here is that the test flowed gas and condensate to surface.
At the same AGM in June 08 where those Q's were A'd, Soco described TGD as something that appears to be a very significant asset for the Group.
That wasn't all, though. DST2 was hampered by limited of the perforations, which had to penetrate two casing strings and associated cementing. Again, the problems encountered during both the drilling and testing of the well affected its ability to flow and there were no meaningful sustainable flow rates.
Designing for the future
Soco now have a lot more data to work with - not just in terms of the well itself, but also where to site it. The re-processing of the seismic will have used data from the previous TGD holes as calibration and that, alomng with some refinements in the model, should mean that they can aim at a part of the structure that seems likely to give some sound results.
Sitting thousands of miles of way with about 0.001% of the data available, I imagine that the real challenge for drilling is not the pressure per se, more the likelihood that there is a severe change in pressure gradient below the volcanics. Constant pressure gradients mean that a conventional mud column can be designed to hold back pressure from the well without causing too much invasion of the pore space. As soon as there is a change in gradient, then the mud has to be weighted up to deal with the higher pressures, meaning that the (always consistent) pressure gradient of the mud column causes invasion higher up in the hole, damaging the well.
I would guess that this means that they will deal with the well in two bites, the first down to the volcanics layer, where the well will be logged - and generously I hope - formation testers, fluid sampling, the whole works. They will then run casing to seal off the upper zone (without cocking-up the cement job) before drilling ahead in the lower zone before running another equally-generous wireline programme.
Once that's done, they can move on to the excitement of testing and finally give us some proper answers about this blessed structure...
I'd quite like to be there for the last few days of drilling and logging; if everyone can get their act together I really do believe that this is going to be a company-maker...
SW10
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442 comments
'The Te Giac Den licence extension has been granted by the Government of Vietnam; seismic acquisition will commence later this month'
does anyone know if this has started, and how long it will take?
thanks
No I don't know if it has started but you can assume it will take several weeks to do....and then several months to analyse! Don't expect any conclusions before year-end.
ee
ok thanks ee,
thats probably where the thought came from then,
I thought you had been suggesting a farm in if the licence had been in a new co, and the rest could be sold, I was assuming this result would block that, which is what made me think perhaps the licence goes to the buyer, but a farm in is done to new co,
only a subbtle difference I guess,
cheers K
I'd suggested both versions as possible at different times, mainly to indicate that the economic value of TGD wouldn't have to be left for any buyer unless the price was right. It was a very different story when PTTEP still had a seat at the TGD table though, because there would have been fewer structuring options to play with.
All speculation though - the only thing that matters is what gets delivered and when.
ee
I know that double negatives are usually incorrect, but on this occasion I have to state categorically that:
1) I am not bald (not even receding a little bit). I used to be told I looked like Gerry Adams, but I've subsequently shaved my beard and more recently have started to turn a distinguished shade of silvery grey.
2) I have never met Isaac nor anyone who could remotely be mistaken for him.
Maybe Isaac has met Gerry Adams
Tournesol,
1. Good call by you on TGD licence as well.
2. Did you look more or less like Gerry Adams than Alan Booth of Encore does?
3. Did Isaac meet:
a) Alan Booth
b)Gerry Adams
c)You, but CONCEALED HIS OWN IDENTITY!!!!
4."but I've subsequently shaved my beard and more recently have started to turn a distinguished shade of silvery grey". I assume you mean your hair, otherwise please post a current (colour) photo.
w
btw hat tipped to ee, one of the few who always thought this was likely, good call, I had my doubts,
what are you thoughts on how this effects the possibility of a vietnam based deal going forward ?
it's starting to look like 2012 might be another chance at 2010, with more drilling in Africa, and another shot
at TGD, hopefully with a better result this time,
As I write , I'm thinking guessing that soco has kept the same share of tgd, perhaps one option for a deal is to sell SOCO vietnamn to someone and at the same time have son of soco farm in perhaps on a carried basis to TGD ? allowing a deal to go through, and retain some upside in the outcome of TGD ?
K
I don't think there is any chance to the probability. There is one other material matter to be settled (re gas prices and reserves) and then it could be game on.
This is a theory I have advanced previously on these boards and, unless there is a whole company deal (which I still think possible), I'd expect the VN deal to contain this sort of feature. 60% of TGD is a tradeable commodity, given the OOIP size, at least if they still think that it may be moveable with wells in the right place and the right technology.
ee
well this is surely good news yet the price hasn't moved yet, I wonder how all this fits in with different theories discussed here. I appears to be an extension so I assume that means it's the same company, and that costs will be recoverable against TGT production ? I'm also guessing it makes a vietnam deal less likely in the short term, which I guess explains the lack or reaction in the share price this morning ?
K
Isaac, it's far better for someone to keep their mouth closed and have people think they are uneducated, than to open it and remove all doubt.
Buffy
RG
Is your stockopedia picture suppose to show that your bald? It's just that you are not bald......I know because we have met.
Isaac, does the WOOOHOOOOOOOOOOOOOOOO! represent a cry of pain?
WOOOHOOOOOOOOOOOOOOOO!
The Company has been informed by the Hoang Long Joint Operating Company, the Operator of Block 16-1 in the Cuu Long Basin offshore Vietnam, that PetroVietnam has relayed the Government of Vietnam's agreement to the extension period for the Te Giac Den Appraisal area. The extension period is for 15 months (from 1st January 2011 to 30th April 2012) or 21 months (from 1st January 2011 to 31st October 2012) in the event that the Company elects to drill a well.
http://www.investegate.co.uk/Article.aspx?id=201105050700099688F
http://www.investegate.co.uk/Article.aspx?id=201105050700099688F
The Company has been informed by the Hoang Long Joint Operating Company, the Operator of Block 16-1 in the Cuu Long Basin offshore Vietnam, that PetroVietnam has relayed the Government of Vietnam's agreement to the extension period for the Te Giac Den Appraisal area. The extension period is for 15 months (from 1st January 2011 to 30th April 2012) or 21 months (from 1st January 2011 to 31st October 2012) in the event that the Company elects to drill a well.
Several 3D seismic acquisition options are currently being reviewed and it is anticipated that acquisition of the 150 square kilometre 3D programme will commence in late June to early July 2011.
PetroVietnam has also informed the Company that the Government of Vietnam has approved the Full Development Plan for the Te Giac Trang Field, incorporating the second phase development. Installation activities in the field are ongoing and the H4 jacket for second phase drilling and production has been installed. The project remains on target for Phase I production start in August 2011.
A couple of points of interest relating to TGD from PetroVietnam’s presentation in London last summer, albeit could prove academic :-
http://www.slideshare.net/thepipeline/dr-phung-dinh-thuc
Projects 2010 to 2015
Slide 13 - Exploration tests for stratigraphic traps in Cuu Long Basin
Slide 14 - Exploration priorities - appears to encompass the business end of 16-1 in the Cuu Long circle (note colour codes refer to licence type I think eg JOC vs PSC - looks like PVN have the 9-2 relinquished acreage)
Not sure whether anybody has viewed this - it was posted yesterday. I just wondered what exactly they had without TGD so browsed the website
http://www.socointernational.co.uk/index.php?cID=95&cType=document
Summary:
Substantial upside remains
Significant amount of near term news flow
Stock down 3% today in response!
Yes thanks for that. It was mentioned over here in post 297 and there has been a limited amount of useful discussion about it.
Stock move today more likely to the Jefferies note out this morning, which seems to think nothing is going on (in contrast to the comments re upside and newsflow above). No surprise really - the analyst was equally negative when he was at MacQuarie, I believe, and I'd guess this was a "dusting off" of a previous note.
Re the upside/newsflow claims, we'll have to wait and see (though, if one ignores the obvious, it is very easy to see how Warn reached his conclusion).
ee
Interesting to note that the neighbouring block 16-2 has had two gas/condensate discoveries, the latest being reported last week. Very sketchy details but upper Oligocene is mentioned. What intrigues me, IIRC, is that this ex-Conoco block was marketed as being prospective for oil in the Miocene. This is a PSC licence operated by PetroVietnam. Since PV will be at the helm driving explo, I wonder if they’ve changed their objectives in what they’re searching for on the block. You can understand discovering gas/condensate whilst searching for oil once but hitting gas/condensate twice seems pretty unlikely unless it was targeted. Are they probing for Su Tu Trang lookalikes and similar based on 16-1 data?
PV could be feeling quite warm on Oligocene prospects south of TGT running into 16-1. Point being, they were most likely equally enthusiastic over TGD, hence their apparent support for licence extension.
Thinking on about the Ministry of Trade and Industry’s non-supportive stance, that was hardly surprising given what had gone before alongside their brief to promote new business, which isn’t quite the same as PV or the Ministry of Oil. PV has to produce both oil gas and more importantly profits, which for TGD under a new PSC wouldn’t necessarily be so attractive to them. Similarly, the Ministry of Oil has the same sort of objectives as PV. Long and short of it is that several layers of bureaucracy need to be negotiated through before the PM makes his decision. At the end of the day, two things matter. First and foremost, are Soco’s relationships with those who matter in Vietnam as good as they were with the earlier regimes? Secondly and crucially, do they know what the key is to unlock the TGD prize?
The jury is out. I’m not holding out much hope personally but as I always say, life is full of surprises!!
http://www.energy-pedia.com/article.aspx?articleid=143593
http://www.allbusiness.com/government/government-bodies-offices-government/14835768-1.html
http://www.hd.jx-group.co.jp/english/newsrelease/2010/pdf/20110105_01_01.pdf
All good points, as usual. :-)
It is difficult rationally to "hold out much hope" for TGD in isolation. However, in the wider scheme of things, TGD is just another element in a fairly complex negotiating map and I'd expect a resolution of some sort as part of a broader deal. These things are rarely as straightforward as they appear from the outside.
ee
Dodos are dead but this has not been reported as so....
Maybe it's just that managment feel that this news could affect the sp so neds to be in the open and/or maybe it is also part of a way of negociating.
Dead as a dodo. Time for some to move on.
Anyone who has ever haggled in a third world market, negotiated commercial deals in the west or just bought or sold a second hand car, a boot fair bargain or a horse knows that the first rule of negotiation is to make it look as if you really are not very interested and have almost - but not quite - reached an irrevocable decision to say no and walk away.
What you are doing is setting your opening position for negotiations and putting the ball into the other party's court.
Of course sometimes people who give an impression like that really are just about to walk away - but then they usually just walk without opening a dialogue about the unattractiveness of what is on offer. The fact that such a dialogue is going on indicates to me that there might well be a price at which a deal can be struck. It's just a matter of working out what that price is and whether it would work for both sides.
T
...which is simply what I was saying in post 410, even though (for reasons unknown) some people seem to pretend otherwise. Its a pity your post 415 was called for again.......I don't see why it should always be me who gets taken to task for not explaining something that looks so blindingly obvious.
Whether a deal will get done or not is a separate matter and one should consider it no better than 50/50.....not that the odds actually matter, since analysts and the vast majority of investors seem to be (wrongly, IMO) assuming it is worthless anyway!
ee
Well I'm no more sure if there is a dialogue happening any more than I am of ee's earlier emphatically stated belief that no other parties were involved. The JOC has asked that the decision be reconsidered. That's all we know.
Government's tend to be reluctant to change decisions once they announce them and I would have thought it would have been prudent of government officials to open a dialogue with other interested parties once it became clear that TGD had not been proven up as a commercial discovery. Soco and partners have had more than enough chances to get this right and haven't done so. Any half sensible person would have asked the question as to whether there were people better placed out there to participate in further attempts to prove up the play and acted upon it.
The chances of Soco participating further in TGD look minimal to me.
repo
Just on that point, in 405 kenobi said: "this is a much bigger deal for soco than the other parties involved." I then pointed out that there were no other parties involved other than PV and the Government, to which kenobi responded that it was them that he meant. End of story.
Yes indeed (though I might take issue with the "more than enough" comment, especially as the term "JOC" indicates that responsibilty is joint). But since PV is the principal partner (and the only other partner with an ongoing interest in TGD), and remains in government ownership, one would have thought that question would have been asked by PV before they endorsed and approved the JOC making a formal request to the Government!
It can't be a career-enhancer for anyone at PV to recommend a course of action to the Government and then get a knock-back, so it looks to me as if we have a "good cop/bad cop" negotiating game going on.
FWIW....though no doubt other people have a much better idea than I do ;-)
ee
As expressed earlier, it has been my view that the odds were against Soco securing an extension. The Ministry of Trade's lack of support therefore comes as no surprise. However, we don't know the Ministry of Oil's view, nor that of the Prime Minister, who ultimately, if history dictates, is the final arbiter. I'd say the odds are still against but one can see why Soco are continuing to pursue the matter. They've been there before....and pulled it off, so it's not quite dead and buried just yet!
I'm sorry to see personal antagonism creeping in yet again. Surely it should be possible to disagree without ad hominem sniping?
Repo,
Possibly it depends on the outcome of the Congo well and how the market is pricing it now?
Will there be a lower (re)entry point.? Or perhaps there wil be success, finally.
I'd agree that it seems a reasonably safe bet for at least 25% from here, whatever the fluctuations in between.
B
Surely their initial response is just that. I would expect the Government's position to be "Well last time you gave us 10% of this prospect, what extra are you offering this time Soco?" before making any final decision. To do otherwise would be very poor negotiating tactics.
Or maybe ee it does just mean what it says e.g. the Government is not supportive of a license extension given that they have not managed to get a commercial find on TGD after two attempts and years of trying. I cannot for the life of me understand why you can't take any negative news on this stock at face value. How you can infer
I would think that some accommodation may well be reached
from
the initial response from the Government's Ministry of Industry and Trade was not supportive of an extension to the licence.
Your view is really rather strange!
I'm afraid repo is right here - sure Soco is worth more than the current price but £4 to £4.50 seems fairly realistic.
Log
I don't know what the situation is, I'm not at all surprised if they want something in return for an extension , but why they would make an interim statement like this, isn't clear to me, rather than just come to a deal,
I would guess that they want something like either a free carried farm in to something else, or something to do with the gas price that soco get for the gas they produce. I recall soco talking about the price they are paid for the gas, and how the contract entitles them to a independent valuation on the gas prices. Well clearly the government wants to pay less, and now they have soco by the short and curlies, is an ideal time to negotiate on this and any other outstanding points they are unhappy with.
To be honest I'm split on this one, obviously we would all like them to get an extension and hit commercial quantities of oil, but how likely is this and what will it cost us ?
oh well, not sure I've said much, just thinking aloud about what might be thrown into the pot to make an extension happen,
K
Te Giac Den Appraisal Area
In its Interim Management Statement on 18 November 2010, SOCO stated that it was applying for an extension to the Te Giac Den Appraisal Area licence. The Company has been informed by the Hoang Long Joint Operating Company (JOC), the Operator of Block 16-1 in the Cuu Long Basin offshore Vietnam, that the initial response from the Government's Ministry of Industry and Trade was not supportive of an extension to the licence.
However, the JOC intends to further pursue the extension request and will make clear the case that the JOC's level of geological knowledge of the appraisal effort is the most expedient route to unlocking this vast potential resource, thus providing the most immediate benefit to Vietnam.
http://www.investegate.co.uk/Article.aspx?id=201101100700061447Z
Not really news any more.
The end game has moved a tad closer and the close out price should, imv, be 25-30% more than the current one at least;-)
I don't share the optimism of some on timescale or price, but six months and £4,50 look decent markers to me.
How many shares out there offer that sort of potential minimum return with next to no downside risk?
Any views?
repo
I would see the way this is put as indicative of some form of negotiation . Quite what the complete context is is difficult to guess at, but it would not be unreasonable to suppose that the Government may wish to see other parties involved - and one can also see the sense in the JOC position re expediency.
I would think that some accommodation may well be reached (and so must the JOC, otherwise they would just drop it) - but it may perhaps affect (or be tied to) timings for a sale in VN.
Whatever the case, I suspect the situation is a bit more complex than it may appear.
ee
It always takes time to get these things decided upon, it's not usually a thing that one person picks up, reads and decides yes or no. It seems to involve more people and discussions, no doubt some persuasion,
and it takes time. Lets also not assume these people are sitting there doing nothing waiting for this to come up.
this is a much bigger deal for soco than the other parties involved.
cheers K
a) there ARE no other parties involved, other than SOCO and PV/Government
b) the ball is firmly in the Government's court. As with any government, it is uncertain when precisely they will decide whether or not to approve PV's recommendation.
c) I wouldn't rule out the possibility that there are wider considerations other than merely an extension at TGD ;-)
ee
by the other parties, I meant the government and PV,
it's a much bigger deal to soco than to the other two, as they have many more assets in the area, and if they don't grant this they will both still be partners at some time in the future on this same block. alat the terms and timescales will be is another matter.
re b) absolutely, all I was trying to say is while this seems urgent for us, it cannot be nearly so high priority to pv/gov.
happy new year to one and all, hopefully we can look forward to a good year for soco holders,
K
Why not? Any idea what is holding this up and why the government is taking so much time signing it off?
Surely it is either a yes or no decision regarding the extension?
What does this delay mean? Soco Vietnam not likely to be sold of in Feb ?
TIA
FWIW I understand that the final decision on TGD may well not happen this year. Certainly there is no reason to expect any particular timing.
>> I don't think one can make such a simple assumption. Negotiations are exactly that - any NEW licence would be substantially longer .
Yes I think given the amount of effort and money that has been thrown at tgd, and how tricky it has proved, the company would be in a reasonable position to say, look we want to progress this, but we don't think we can commit more expense on a single attempt. None of us know what''s required to get oil out of this area, and we've under estimated what's required in the past. We're willing to commit to see this through but we're going to need commitment from your side too, regarding length of licence .
I would hope this kind of approach would yield dividends, but I hope the other side of the licence is that you have to drill a well next year. I think it would be silly to give a 3 year licence and then nothing happens until the last year and we're in the same boat again.
As the vietnamese government I would have one eye on what soco are going to do. I would guess there's a lot of personal relationships involved here, and these may hold weight, at the same time, I recall an agm where we were awaiting some licence or approval and they openly said it's the head of PV or some other body, and nothing would happen until he moved on. So perhaps it just depends on the personalities,
Mind you as you say EE we'll see soon enough, I wouldn't expect anything before christmas except perhaps drilling news from the congo , but that's for another thread,
thanks everyone for your thoughts,
K
I'm also not loosing sleep on this.
I give it ZERO value as incidently is the market.
If anything happens then it's a Brucie Bonus.
JonnyT
You make very good try at getting Oil Soco shame you didn't find any for us. You have another - go no probem. Just give us 100 million dollar and you can try again. Other company offer us 150 million dollar but we like you better.
Log
I think one can assume without any doubt that if it wasn't perceived to be adding shareholder value then they wouldn't be trying to do it at all.
>> of course, and if you have a single buyer, then you can ask him and assess. However if you have a number of potential buyers and you are trying to extract the maximum value from the sale of everything then some might be willing to pay more for TGT alone without and TGD commitments and others might be the other way inclined. I don't know, I'm just speculating.
I think Davjo sums up my thoughts (or fears really)
put and end to this ever-growing sum of money being recovered from TGT, start afresh and put the area out to tender on much better fiscal terms for a 5 year licence period, including a 2 to 4 well commitment, complete with a free carry for PV? In my eyes, everything points to that sort of view prevailing....but we'll see ;-)
>> But we'll see, I'll be delighted if SOCO pull something off and at some point it generates extra value,
but we've often talked about what good terms we have in vietnam, and we have the recoverability against TGT at
the moment. Seems to me that they have access to all the data so far, everything is bought in (rigs, analysis etc),
SOCO might not be the best people to explore this anyway, they won't even touch below the volcanics, after the last but one attempt, so the Davjo suggestion seems to have some merit. Even though it's counter to our interests.
Best thing is to assign no value for now, see what soco management can achive on this front.
Cheers K
Ordinarily, that would have fallen short of the legal requirement but you’ll recall Soco provided a sweetener in the Congo-B farmout to PV in order to secure the licence.
This is my point, we didn't even get the last extension out of good will for free, the idea that we'll get on now seems unlikely to me. In which case it comes down to what is the deal now ?
If SOCO can get an extension, and then sell soco vietnam, and immediately farm into tgd, interesting idea ee.
I guess it would need to be done along with a commitment to drill, but then I imagine that would be part of the extension to the contract anyway. They need to be careful here because a tgd extension and expensive drilling commitments might make soco vietnam less desirable rather than more to some buyers.
I guess this could all be part of the dance that is going on now ? Checking out possible buyers, and resolving their willingness to pay for the components.
Another thought is that the buying/selling of assests is all about capital gains. Another option might be to sell the share of socos tgd licence to soco vietnam 2 , for a nominal amount. before the sale of the other assets.
I don't really see the issue with PV, why wouldn't the Goverment issue a new licence for TGD to PV and let them find a major partner to farm in ? would soco be able to get a better partner ? or perhaps having the scale of tgt nearby makes it more desirable for a major ?
Cheers K
I think one can assume without any doubt that if it wasn't perceived to be adding shareholder value then they wouldn't be trying to do it at all.
Highly unlikely that such an idea could work from a tax perspective.
It'll all come out in the wash this month anyway.
ee
Yup - thats about right. The fact that licences were granted to a JOC involving PV may also be material.
I don't lose a second's sleep over the TGD licence issue - after all, those who are most vociferous in writing off the prospects for the licence are usually simultaneously claiming that the acreage is worthless anyway (which is, of course, the analysts' view if one looks at the composition of their NAVs), so it really seems to be a (rather boring) fuss over "nothing"........for now, anyway ;-)
ee
Seems to me that the rules that restrict licenses being extended repeatedly are there for one reason and one reason only. The VN govt does not want under-powered/under-capitalised/under-resourced E&P's to grab licences and then squat on them without doing exploration in the hope that discoveries (or at least positive explo results) will be achieved by other companies on adjacent licences and that this will drive up the value of the unexplored acreage. The squatters can then farm out and get a free ride. The squatters benefit. The host govt just sees its assets/resources beiong left fallow and producing no benefit.
To prevent this scenario, licences are issued with constraints attached in the form of expiry dates. Retention beyond the expiry can only be granted if exploration activity has been undertaken - seismic shot or wells drilled.
Now in the case of TGD there has been no hanging back by Soco and Co. They have spent a lot on explo.But surprisingly the proof of commerciality has eluded them by the time the date has arrived when the licence has to be renewed as a development licence where commerciality has already been proved by appraisal and the obligations attached to the next licence term are development milestones.
Frankly I see that as a technicality rather than a show stopper. VN wants exploration to continue. if Soco will commit to doing that a way will surely be found to permit it. The alternative is to hope that some other E&P will take on a licence which has so far disappointed and will prioritize explo above its other propsects. Seems unliely to me.
And another thing. What about Soco'ssenior partner in the JV? Isn;t it in the VN govt's interest to renew their licence? Could they get away with refusing to renew Soco but renewing PV? Wouldn;t that be subject to challenge?
I'm with Davro, zero value to TGD.
It's game over.
JonnyT
Thanks Davjo. Does this mean your in the Sell in Feb camp of Soco Vietnam?
What chance Soco get the TGD appraisal area licence extended? When you consider Vietnam’s Petroleum Law, virtually none!
Exploration periods expire after 5 years. Extensions in certain circumstances can be awarded but can only occur once under the law and cannot be extended for more than 2 years. Since Soco’s contract was issued in 2000, how come they got this far without relinquishing all the acreage outside the approved development areas? The answer to that can only be slick negotiating on Soco’s part.
But how do things stack up now? The 16-1 licence was due to expire whilst TGD-1X-ST was drilling but Soco managed to get a 6 month extension to complete operations, following which they applied for another extension in the form of the appraisal area. This was basically approved on the premise that TGD-1X-ST was a discovery worthy of appraisal because of it’s commercial potential. Ordinarily, that would have fallen short of the legal requirement but you’ll recall Soco provided a sweetener in the Congo-B farmout to PV in order to secure the licence.
Fast forward to the latest application to extend and you have to wonder what sort of negotiating prowess is going to be needed to succeed in getting what effectively will be a fourth extension of exploration rights. Hats off to them if they do it but I don’t think they’ve got anything left in their bag to offer which will swing it their way….unless they’re willing to give the rest of Marine XI away for example! Furthermore, I really don’t see any chance at all of Soco retaining and farming out TGD after a sale of SV.
Hello dj,
I think you are looking to paint what is a rather grey scene as if it were in black and white. These things are rarely as clear as they appear to be from the outside, especially when there is a longstanding incumbent partner willing to continue to commit to spend money. Both TGD-1X and TGD-2X have recovered black oil and gas to the surface (nb - we don't know how much in the case of TGD-2X) and, in any event, it is going to be a fairly rare situation in Vietnam that oil and gas are recovered but the licence-holder still wishes to pursue appraisal rather than relinquish.....so I don't see it as a black and white situation.
AIUI they have already successfully negotiated with PV - because the application is with the Government for approval.
I didn't suggest that would be the case - what you have written won't happen due to the tax reasons we've discussed many times. What I am talking about is a clean sale to a 3rd party and then SOCO farming back in almost immediately with a smaller stake. This would be a matter of negotiation with the 3rd party that buys SOCO Vietnam and OPECO.....and is only likely to occur if the 3rd party is unwilling to pay much for the TGD area (assuming a new licence is approved).
rgds
ee
Morning ee
What I am talking about is a clean sale to a 3rd party and then SOCO farming back in almost immediately with a smaller stake. This would be a matter of negotiation with the 3rd party that buys SOCO Vietnam and OPECO.....and is only likely to occur if the 3rd party is unwilling to pay much for the TGD area (assuming a new licence is approved).
OK, I see where you're coming from but I'm not sure that's feasible, given that they'd be farming in to a small part of a general licence. It's not as if the appraisal area is separated out from the overall contract. I imagine opting out (as with PTTEP) is rather different. It would of course require government approval and that could be a bit awkward if the timescale available amounts to just a few months. As you say though, it does hinge upon the licence being extended.
The thing is, you'd have thought any extension wouldn't be worth much without a commitment to drill, something Soco seem reluctant to do. I suppose that could be because Soco considers a buyer may resist offering any value for such commitment? TBH, I'm not quite sure what Soco expects to achieve with a non-drill commitment, other than a last gasp effort to hang in there in the hope of extracting some value. At the end of the day though, the licence contains very attractive fiscal terms and there's bound to be those in government saying what is the point of having a Petroleum Law which limits explo for a maximum of 7 years and then ignoring it? Why are we repeatedly allowing the loosest interpretation of the law? Where would another (fairly non-commital) extension actually lead us? Wouldn't it be in our best interest to stick to the rules, put and end to this ever-growing sum of money being recovered from TGT, start afresh and put the area out to tender on much better fiscal terms for a 5 year licence period, including a 2 to 4 well commitment, complete with a free carry for PV? In my eyes, everything points to that sort of view prevailing....but we'll see ;-)
dj,
I'm not sure that it is feasible either but, especially given that we are looking at a freshly-negotiated scenario that is just a bilateral arrangement between SOCO and PV (since PTTEP aren't now a party), I would have thought it entirely possible. We'll see soon anyway.
I'm not sure exactly what the appropriate commitment would be in the circs - one or two wells in the next 3 years? To be clear though - there will only be a deal if both PV and SOCO think a deal adds value to themselves. It would seem that this has now been done - but whether the government is happy to go along with what PV have agreed is of course uncertain for now. AFAIAA though, they don't generally overturn recommendations.
Basically if a licence is to be extended then it should IMO be done in a way that allows the sort of flexibility that I'm expecting - and I'd be disappointed if a fresh deal hasn't been done with all the options firmly in mind.
ee
It would seem that this has now been done
>> wow, well that's interesting, I think we need to know exactly how value is being added to PV and soco before we decide that it's a good deal,
Basically if a licence is to be extended then it should IMO be done in a way that allows the sort of flexibility that I'm expecting - and I'd be disappointed if a fresh deal hasn't been done with all the options firmly in mind.
>> Well I don't think you'll find any disagreement here on that count, it wouldn't make sense to do deals now that would preclude a short term sale of soco vietnam.
gotta go, the little one's awake !
ee
I'm not sure exactly what the appropriate commitment would be in the circs - one or two wells in the next 3 years? To be clear though - there will only be a deal if both PV and SOCO think a deal adds value to themselves. It would seem that this has now been done - but whether the government is happy to go along with what PV have agreed is of course uncertain for now. AFAIAA though, they don't generally overturn recommendations.
Basically if a licence is to be extended then it should IMO be done in a way that allows the sort of flexibility that I'm expecting - and I'd be disappointed if a fresh deal hasn't been done with all the options firmly in mind.
It’s true to say that a traditional explo contract for a new block would require something like 2 wells during the first 3 year period, with an option to drill 2 more in the following 2 years but there is no way, imo, that anything like this would be incorporated in an extension to an existing licence, especially in today’s high oil price environment. That would be like awarding a new contract on year 2000 $15 oil terms! In any event, the last two extensions have amounted to 6 months and 12 months. One really can’t expect anything more than that for a third extension.
I agree PV approval in the past has been constructive in moving things forward but this time around politics are much more likely to be in play imo. These decisions pretty well always require a nod from the Prime Minister. If you were PM, what would you do in the circumstances, bearing in mind the interest of the country?
I don't think one can make such a simple assumption. Negotiations are exactly that - any NEW licence would be substantially longer .....and there may well be new elements in the negotiations that have taken place that open the question of timescales more than you might suppose.
If I were PM I'd be trying to get as much economic rent from the acreage as rapidly as possiible. It does NOT follow that this is best accomplished by turning the acreage over to someone else who then has to spend a further 2-3 years getting up to speed.
Anyway - I'm "done" on these questions......we'll know the outcome soon enough ;-)
rgds
ee
Repo
The objective for Soco is to persuade the VN authorities to extend the licence with the minimum of obligations being attached thereto.
What SOCO want is an extension which is conditional on a modest amount of seismic acquisition. Clearly the whole point of seismic is to decide if it is worth drilling but Soco don;t want to prejudge that. So they will be looking for an extension which does not impose an obligation to drill.
What they don;t want is to make an upfront committment to drill as a condition of the extension. That just closes down the option of walking away if the seismic interpretation is negative.
So I'd expect Soco to be going into th current extension negotiation with a gloomy expression and the demeanour of people who might just agree to spending a bit on seismic but are not likely to agree to any driling committment as a condition of extension.
Its a negotiating strategy.
If they were convinced the project was dead they would not be discussing an extension.
I agree that the TGD experience to date could give the impression that Soco's geo dept is out of it's depth but the bulk of the work will have been farmed out to various experts and it's not as if PV hasn't approved. Clearly, Soco and the JOC have been chasing the elusive Oligocene ever since the large Su Tu Trang discovery in the Oligocene E and F sequences...and with some success in that horizon in TGT, albeit the C and D sequences I think, but we shouldn't forget that Su Tu Trang wasn't exactly a cakewalk for Conoco, having drilled some appraisal dusters. That discovery was made in November 2003 and is still not actually producing, albeit it's largely wet gas (STT-1X was 70mmcfd + 8682bcpd - API 38 to 55).
A presentation earlier this year by Conoco indicated that development was being appraised with provisional start-up 2012+ and gross production of 30 to 50 MBOED. With all the original hype surrounding STT, I don't think anybody at the time would have forecast that.
ee, is erringly silent...
Like almost everyone else I'd like to see conclusions being drawn on Vietnam, but TGT development continues with the likelyhood that it will add further value.
In the meantime, without further explanation on the TGD 2 failure, which I expect we'll get in due course, I see this extension application as no more than a means (low cost, I hope) of keeping the door open on potential value in TGD.
It's a positive IMO but I'm interested to hear what others think.
fuiseog
Rigzone still show the Maersk Convincer as 'Ready Stacked' in Vietnam which means it could theoretically start drilling at a days notice. I would have thought that unless Maersk had some confidence that it would be drilling again shortly in that area they would have started to run down the crew to at least a 'Cold Stacked' state. Someone is paying for the rig to be maintained at a high level of readiness.
Eric
IMS out today...
http://www.investegate.co.uk/article.aspx?id=201011170700163079W&fe=1
TGD: The Company is in the process of applying for an extension to the TGD appraisal area licence, which is otherwise set to expire at the end of 2010. The extension period would allow for an appropriate evaluation of all the drilling results on TGD to date and an opportunity to acquire further seismic, if needed, over the appraisal area.
Africa: the Company continues to seek positions offering material exploration potential in those parts of Africa where it has a clear business edge.
...not retiring yet then ;-)
Further seismic?
Well I have to say that the technical capability and judgement of these people is not quite as strong as some people here think it is.
They have talked up TGD for the best part of four years and drill the most critical well in the company's history in the wrong place and now they are scrambling around for an extension on the basis of shooting further seismic.
Not impressed at all and I don't hold out that much hope that they'll get 'lucky' in Africa.
Enquest looks a safer bet to achieve something with the drillbit in the future.
http://www.investegate.co.uk/Article.aspx?id=201011170700083016W
repo
In spite of recent disappointments they have generated a very satisfactory return on my investment over the last 6 plus years. I, for one, am happy for management to attempt to extract value from TGD and hope that they do manage to obtain an extension to the TGD licence. There is clearly oil down there. Let's get it!
Regards
Impvesta
Repo
I feel you are being too harsh in your judgement. Bear in mind that there is oil in the structures previously discovered - that is beyond doubt. The key questions still to be resolved are
- how much oil is there in place?
- how much of the oil in place is technically recoverable?
- how much is economicaly recoverable?
The recent surprising drilling results have demonstrated clearly that some details of Soco's previous interpretation/model of subsurface geology at TGD were incorrect. The extent of the shortcomings are still to be determined. It might need a minor modification. It might need very significant alteration.
The company now has three choices
1) simply relinquish the block and write off the large amounts invested in it so far
2) get an extension and then undertake further appraisal drilling without doing any more seismic. This would mean spending a lot more money on the basis of an interpretation/model now known to be incorrect - which would seem somewhat foolhardy.
3) revisit the geological interpretation/model, integrate the information obtained from the recent drilling, reconsider the overall interpretation/model, identify anomalies and gaps therein, do additional seismic required to fill any gaps and resolve any anomalies. Then redrill according to the revised interpretation/model of the subsurface.
Which of these choices would you make if you were running the company? what would you prefer Storey and Co to do?
Bear in mind that seismic is relatively cheap and drilling very expensive. And bear in mind that the next drill is undoubtedly the last chance to crack this field.
I was a shareholder in Dana when they walked away from the licences offshore Ghana. (Admittedly they had not drilled any of the deepwater prospects because they could not find a farm-in partner). I would really prefer that Soco does not walk away from TGD allowing Tullow or someone else to pick up the licence, gain access to all the hard won geological data and drill a successful well in a year or two without Soco getting any benefit.
Hi tournesol,
Harsh it might be but I don't think Soco has much choice at all as regards TGD. I don't think they'll retain the license and today's RNS is an admission that they've messed up. I note that the reference to seismic is somewhat tentative and there is no mention at all of further drilling. An indication to me that they're not making the progress in negotiations that they'd like to.
The Vietnamese authorities will probably want to make a fresh start on TGD and I can't blame them if they make that decison.
I would prefer Storey and Co to sell the whole company at the first opportunity as soon as the reserve upgrades on TGT are firmed up. There is oil in TGD but I don't think Soco shareholders will see any value from it.
jonnyT,
ee is on holiday I believe.
repo
http://www.bloomberg.com/news/2010-11-17/soco-to-spend-150-million-on-drilling-in-west-africa-vietnam.html
not really on tgd, but just adding weight to the idea that even if Ed and some others are planning retirement
there are plans for soco into the future,
K
Yes - I've been away on holiday and am now catching up.
re
.....I'd suggest that this would rarely be the sort of decision that host Governments and their agents would take. Generally an incumbent is going to be be better-placed to spend money intelligently than anyone coming in new to the data, unless the incumbent has run out of ideas.
I read the IMS as a "straight up and down" statement of the present position. Soco has never been a company that counts its chickens before they have been hatched (and ratified), so I think there is nothing at all to be read into the IMS comment on TGD.
I am expecting further comments/information in the coming weeks to be more material. Meantime there is very little new or worthwhile to be said, IMO.
ee
The Vietnamese authorities will probably want to make a fresh start on TGD
Possibly, but as ee rightly notes "this would rarely be the sort of decision that host Governments and their agents would take", particularly if the contract terms provide for an extension in certain circumstances. Here's an interesting example I've found of Vietnam contract terms (Oxy Block 12W) relating to this very question :-
http://www.fmc-law.com/upload/en/publications/2007/hgc_handbook_vol_11.pdf
For example, the 1994 Vietnam Example HGC provides (at Section 4.2):
At the conclusion of the exploration period, the Contractor will be under obligation to surrender the remaining Contract Area, except for the following:
(a) Development Areas;
(b) Areas being evaluated further to a Discovery, in accordance with a defined evaluation program; and
(c) Areas related to inventoried geological concepts that have not yet been fully explored, subject to PETROVIETNAM’s approval of a technical-economic dossier specifying proposed work and a time-frame.
I've no idea if Soco's terms actually include (c) [they obviously do include (b)] but it would seem rather silly to make an application to extend if they didn't. Furthermore, since approval ultimately comes from government, one assumes PV must approve otherwise an application would be futile, so the chance of success must be fair to good.
As to the IMS referring to evaluation and vague mention of further seismic if needed, it certainly doesn't sound as if Soco want to make much of a commitment in respect of a work programme but in the circumstances of (c), it would be enough to keep the prospect alive if an extension is granted. It's anybody's guess whether Soco actually intends to hang on for the completion of any evaluation/seismic but it strikes me they're more likely intent on safeguarding the opportunity for someone else. It'll all come out in the wash though :-)
One problem I see is that if a well does come in like catcher for eo it is then hard to know if the stock should be chased up.
For the strategy to work one needs to have done detailed home work and have a good understanding on a) the core nav of the stock & b) the upside the current well can offer
Then when the news is released in the market one needs to be well prepared to take prompt action. Just think of the City traders who do their homework on certain key news releases are published in the markets. Do you not think they have a strategy in place?
If x happens then we will do Y and if z happens then we will do a? etc ...
The reaoson stocks keep going up after the intial news is because other players in the markets are learning about the stock and recent news releases and it clicks in their mind that the stock should be valued higher, And this expectation of a higher valuation makes people want to buy the stock and it is the desire to buy a stock that drives it highe not necessarily excessive buying. You could buy lots and lots of shares but if there is a big seller in the market it won't drive the price higher etc.
So in this case we could have all said if Soco comes back with a stonking flow rate then buy the stock heavily in the meantime it has had a good run so sell it etc
One refinement I would make would be to stay long for a drill with a low cos as there is a low expectation anyway
I disagree low CoS does not translate into low expectation just look back at some of those Aminex wells which ran up when being drilled they had low CoS & countless other examples in the small cap world. Does this mean your currently buying Soco? I think it is only worth staying in if there is further significant news to come which offers significant upside. This could be in the form of further drilling or the market slowly realising the value held in a stock e.g. Sterling Otherwise your money gets stuck.
One of the problems with Soco at the moment, is we don't know what the management will do next. It is incredibly frustrating that we have this uncertainty over our heads. I know we will see £5 at somepoint again........but it is the waiting around that gets to me without knowing how long it is likely to take.
Like most I thought that there wasn't much in the price for tgd but as it turns out there was a lot.
Just because the analysts did'nt have much in their valuation for TGD does not translate into the market thinking there is'nt much in the price for TGD. Infact I knew there was something in the price for TGD. After Nganga failed the markets pretty much wrote of the current exploration programme in Africa and so when TGD failed the markets just pulled the rug under our feet because it thinks there is'nt much left to drive the price in the near term.
And this is precisely the time when one should be buying when we are pretty much at core value and there is nothing in for the current african drill so surprises can come to the upside with no downside for the patient. But that is also the theme we worked on with TGD and look what happened....
So one is probably just better of buying on the news from the african well.......I'm not convinced we will see £3, there just seems to be a lot of people who are looking to buy on the news from Africa.
Issac have you back tested this theory? I don't think it is without merit. One problem I see is that if a well does come in like catcher for eo it is then hard to know if the stock should be chased up.
One refinement I would make would be to stay long for a drill with a low cos as there is a low expectation anyway. The big mistake I made with Soco was that because the stock had already run up there wasn't much of a free option in the price. Like most I thought that there wasn't much in the price for tgd but as it turns out there was a lot.
Log
Apparently TGD-2X had a 90% CoS - I.e. If TGD-2X was a success then it would have de-risked the fan therefore potentially find about 1bn bbls of Oil. That would have more then doubled the share price of Soco.
That situation is no different to lots of other opportunities that offer more then 100% upside.
The problem is in all my investment career when I have come across 90% of opportunities that offer about 100% upside only 10% or so of these opportunities have actually delivered on what many thought would make serious profits. Either this is just normal or I just have'nt been investing long enough....
Does this mean the CoS from one of these so called 100% upside opportunities one is better of selling up prior to the event due date and then paying a slightly higher price for certainty if the stock delivers?
I mean looking back over the last 5 years we have had MANY opportunties where a stock offering 100%+ upside did deliver and anyone that bought after the news still made decent profits.
HOIL on the back of UG/Kurdistan, GKP in Kurdistan, CNE in India, Soco at TGT, Encore/Sterling on Cladhan/Catcher, Dana in Rinnes, Tullow in UG/Ghana etc etc
It all just goes back to simple rules like selling euphoria and buying pessimism.
I think one is better of doing loads and loads of homework on all E+Ps, compiling a JonnyT drilling database of significant wells, taking positions about 4 months before the well is due to spud and then selling up anything after the well has spudded and a week or two before the well hits TD.
One can repeat this mechanical process many times. Certainly beats buying something offering a lot of promise and then holding on to recive failure news.
I think it is a better approach then getting to close to directors of a company and being emotionally in love with a share.
Time is a teacher.......
Art,
so very sorry to hear of your loss, shares mean nothing when we look at whats really dear to us, I lost a packet lately along with a few more holders, but your post serves as a great reminder as to whats really important.
Almost nothing worse AN. My (and I'm willing to bet) many other's condolences.
ftf
Haven't posted the last few weeks as my Mother passed away suddenly at quite a young age just 4 weeks ago. There isn't anything else matters at the moment so investing seems almost irrelevant. However...
I bought my latest Soco tranches in my ISA and another broking account almost 2 years ago having held the shares in the past for a profit.
On the day before the downfall when they were up 20p I was one of those that did think of top slicing, but naturally, didn't. Instead of being up a whopping 60% up I offloaded two thirds of them as of yesterday (over the past few days) for a 30% profit overall. In one broking account there was a loss but all that has done is eaten into my DNX profits.
On the flipside I've bought a large chunk more in my SIPP at £3.44. I view my pension differently over a much longer timescale and for me one day in the next 18 months there'll be a good profit locked into the ones I already held and now have in my pension.
I'm also of the idea that if Congo does not come off then I will be able to start buying back into SIA at a later date into accounts such as my ISA. If DRC comes off and share prices increase for SOCO then my pension is a direct beneficiary. I think, for me, this is the correct strategy going forward.
I was always told to take a profit, it's getting the timing right and protecting that profit that counts and I've done okay on this one but oh how we all wish I could have been better. ;)
Good luck to all going forward, whatever investment you make, it sure beats getting 0.5% in your bank account.
Art Nouveau
David,
It does'nt matter what I hope for or prefer at this stage. The management will do what they think is best.
There is no denying that there is a lot of Oil at TGD. But at the same time...
1)We have had a few shots at it
2)Spent alot of time
3)and money
4)IMO Management have not demonstrated they have the ability to extract the oil*
*To elborate further on this point it is worth noting that we spent about a year re-processing seismic, but still ended up drilling on the flank of the structure. Whose idea was it to choose the drilling location? I think management played a part.
In the annual results management stated
The appraisal period expires at the end of 2010. During the intervening period, the contracting parties will attempt to demonstrate commerciality of the initial TGD discovery, which would then lead to an application for field development.http://www.investegate.co.uk/Article.aspx?id=201003240700150649J
The statement the past week said : The Te Giac Den appraisal well encountered significant hydrocarbons.......it flowed at sub-commercial rates http://www.investegate.co.uk/Article.aspx?id=201010120700042158U
In a Vietnam update management stated : With the difficulties encountered in the prior TGD drilling campaign and with safety being the paramount concern, this well has been designed with a very fundamental "belt and braces" approach. http://www.investegate.co.uk/Article.aspx?id=201007220700207298P
Their tone and language came across as this well is very likely to be succesful, they did a lot of preparation etc. In fact from all the statements and AGM I got the impression they were going to prove up the Oil and will prove commerciality of TGD etc.
Reading this statement back just shows how badly this has all turned out.....
Notwithstanding the risks associated with exploration drilling in our sector, we believe we have taken all of the necessary steps to maximise our success ratio for exploration and appraisal drilling, which has averaged over 60% since our listing. In the event that all of the frontier exploration proves unsuccessful, an already proven oil field in Vietnam could provide considerable upside just from the appraisal/development drilling alone.
http://www.investegate.co.uk/Article.aspx?id=201003240700150649J
I don't know what you think but their credibility has been shot to pieces as far as TGD is concerned. I just don't think the market will put much weight in what management say, the markets will take it all with a pinch of salt. I.e. markets have lost confidence in Soco and that is what the share price reflected the past week.
When you try your best and are still not succesful then what else have you got to throw at it?
What is even worse is we sole risk of a well that failed.
All the above just does'nt look good on Soco management IMO. I'm sure Vietnam.gov is well aware of the above and will be thinking VERY carefully about any extension or throwing a lifeline. The above is also perceived badly by fellow shareholders & large stakeholders like PontOil/BlackRock.
How do you continue to justify to your boss that Soco is still a good holding in ones portfolio? With difficulty. I think management will come under pressure from all fronts to realise the value from Vietnam.
I think BlackRock/Pointoil combined stake was worth over $450mn before the news from the past week but is now worth less then $300mn due to the falls the past week. That is quite a painful loss for them. I wonder how that will impact their YTD compared to the figures reported for Q3. Now if only Soco sold Vietnam then End of year performance will be significantly better for them then it is likely to be now etc.
But that does'nt change the fact that there is a lot of Oil at TGD and it does make sense for TGD to be drilled.......But I did'nt say I would prefer Soco to drill it.
My preference is we walk away and sell up Vietnam. Perhaps Son of Soco can retain a 15-20% free carried interest and a bigger player can operate and extract the value from TGD pushing PTTEP out the picture?
What I am hoping for from Soco management is to put their top class negotiating skills in action to negotiate an extension but would hope Vietnam.gov give it on the condition Soco allows a more able player to develop the TGD potential.
What a week...we all lost a chunk of money. Easy come easy go....
What is obvious to me is TGD has lots of Oil. And when you find a prospect that has lots of Oil it does'nt make sense to walk away from it. The industry has companies drilling for Oil all the time but most fail to find any Oil. Whereas Soco actually have Oil in TGD, it is a case of trying to crack the secret code on how to get it out.
It makes more sense to drill TGD and extract the Oil rather then spending lots of money drilling wildcats that are likely to fail. Drilling wildcats is a bit like me Investing in loads of small caps hoping one of them comes in.
What I find really frustrating is the time it takes to drill and the fact that we can only drill certain periods in a year
If management do decide to drill then it won't happen for atleast another 6-9 months. It will take a long time to negotiate an extension.
Then we will have to wait for the monsoon season to pass. Then it will take time to secure a rig and it will take about 3-4 months to drlll.
I think if Soco does consider drilling TGD again then they should drill two wells simultaneously. My problem is the time it is taking to realise the value. I believe the management in thinking there is a lot of Oil in TGD.
Why would you not drill two wells simultaneously? Surely more chance of success...and given we know there is Oil there it would be lower risk.
I also think if Soco are going to apply for an extension then they should apply for about 5 years. We seem to spend a lot of time re-negoitiating the licences. Just think if Soco had the licence in place then they would be more decisive and drill the next well sooner then what has happened. I can understand them wanting an extension etc before commiting further cash.
2+ Years of waiting, no return on my cash, high inflation, opportunity cost etc Clearly this will seem irrelevant if management can pull it off.
Does anyone know how much cash is likely left on Soco's balance sheet after the recent drills? They had $258mn end of June, how much is the drilling budget for 2010? $100mn?
Can Soco cope with the Capex if they have a decent find from Nganzi, to develop both Vietnam and Africa? Given the very decent acreage it is only a matter of time before they strike in Africa IMO.
I appreciate there will be significant cashflow next year.
I've personally written of my cash in Soco for the next 1-2 years. An early sale of Vietnam will be a nice surprise, but that probably won't happen. Would like to do a repobear in the next 12-24months as property prices drop significantly if they can sell up Vietnam...
What is obvious to me is TGD has lots of Oil. And when you find a prospect that has lots of Oil it does'nt make sense to walk away from it.....It makes more sense to drill TGD
I'm a bit confused, since earlier in the week you said :-
http://www.stockopedia.com/content/tgd-lets-go-drill-a-well-34777/?comment=307#307
I am hopeful we don't get an extension to the TGD licence. I just think we have thrown too much money and time at it. And when you keep trying and failing after making about 3-4 attempts then maybe it is time to walk away and try something more positive? It feels like we are throwing good money after bad
http://www.stockopedia.com/content/tgd-lets-go-drill-a-well-34777/?comment=347#347
My view is Soco management do not posses the skills to realise the value in TGD and therefore the best course of action is to sell Vietnam.
Are there two of you? Which one would you prefer we take notice of?
A little management buying at this juncture wouldn't go amiss.
UW,
(Starting to get of topic)
A reserves reworking prior to any serious demonstration of TGT performance (mid 2011) would certainly be prudent, as there must be a range on TGT performance.
Yes peak may be 55Kboe/d (Gross) but what about long term performance.
Brings up a point raised a few times in the last few days about appropriate (SOCOS description of "when") time to monetise an asset.
Producing assets can produce surprises as well ,though in a tighter range. (I can recall steep declines in some N Sea fields just POP)
It made me wonder if you sell a producing asset after payback of capex,before to much decline set in etc.
The actual performance of TGT will be interesting to watch,along with upgrades for the 2009 PSDM on TGT via the new wells. Sothere may actually be a fair spead on TGT, and worth waiting for.
The production profile for SOCO going forward is TGT (See Macquarie Jan2010 presentation on SOCO website.As an aside does anyone know what VT is on slide 10 of that presentation? (Missing from similar slide H12010 pres) Also note slide 10 has H5WHP or TGD)
Thailand/CNV would appear to be flat,unless the following is doing better than expected:
"The Phase II development injector well in CNV was designed to maintain reservoir pressure to allow higher production rates from the field. Thus far, the injectivity reaction has been favourable and at the high end of the anticipated range. "
FH
(trying to be more cheerful and forward looking than yesterday)
55k boe/d is only the phase 1 peak. Phase 2 plateau is in the 125k boe/d area, scheduled for 2012. One might expect a decline of course from there in due course, but the TGT reservoir is pretty conventional vs for example CNV, so perhaps should show a more conventional decline curve?
I haven't looked at that presentation but the Voi Trang area was relinquished.
ee
Well this will please some, and not others,
"The company has not given up on TGD and is likely to seek an extension to its licence once the post drilling analysis is complete."
http://www.oilbarrel.com/nc/news/display_news/article/soco-international-vietnamese-development-targeting-55000-bopd-from-august-2011/860.html
registration needed,
My hope is that this dissapointment will end the PTTP involvement, which I don't believe was witheld on the basis of lack of faith in the prospect, allowing Soco to negotiate a license extension with the intention of bringing in a top class experienced operator as perhaps a 40% partner with Soco free carried on their residual 18ish%.
The vietnamese government would, I expect, recognise that Soco have invested a great deal in this prospect in time, money, and effort, terms, and the fastest way to progress the prospect would perhaps be to add to the accumulated expertise (by bringing in a major) rather than completely replace it, with the inevitable temporary hiatus that would bring.
I know, I know, wishful thinking!
Regards.
It is interesting to speculate along these lines......
One alternative deal structure that would have some appeal in Vietnam is the complete sale of SOCO Vietnam and OPECO to a larger company with strong technical expertise - and to simultaneously agree to farm in to the TGD appraisal area 50/50 or 40/60 with the new owner of SOCO Vietnam. That way they would monetise the bits of SOCO Vietnam where they have a limited amount to add (CNV/TGT) but would retain an interest in the area where they have a good deal of accrued knowledge.
This would get around the issue of needing to sell VN in its entirety for tax reasons whilst retaiing an interest in TGD (if they wish). The difficulty with this though would be whether the "best buyer" in Vietnam has enough technical expertise to add.......so it isn't an impossibility but it is perhaps unlikely?
ee
There is a lot of negative sentiment surrounding Soco at the moment which is perhaps unsurprising but seems to be generating a lot of heat and not much light (although Isaac's reaction is typically jejune - why does anyone even reply to the guy?). Whilst the result is unpleasant for the short term, it would be a serious error in my view to lose sight of the fact that a great deal of value has already been proved up by the company in Vietnam and is close to production. The consistent gap between the 2P in the ground price per barrel and the value of the same barrel once it is extracted means the NAV is rising inexorably month by month as production looms. And the oil price is still seriously high by historic standards with no apparent likelihood if it dropping despite the recession.
I have long been highly sceptical of the view propounded by ee that a sale was ever "imminent" and I am afraid I remain of that view after this result. We are nowhere near where they were when they sold Yemen which was where it became a "plumbing job" with most of the mystery of the play dissolved. I believe that management will try to extend the licence and drill again. Why wouldnt they? This is the biggest play of their lifetime and they believe that the fan has gigantic further potential. This means further delay for long term investors. Suck it up. Thats E&P investing. I believe the chance of a rapid (or even medium term) sale of Vietnam has significantly decreased although I partially reserve my judgement pending the further guidance that has been promised once the dust settles. Ed and Roger are not as young as they were.
As far as Africa goes, we are in wildcat territory so of course the most likely result is failure. I think those suggesting that its in for "free" and failure would have little impact on the SP are again misguided as they were over TGD being "in for not very much". Announced failure will result in share price falls. To where is anyone's guess but for what its worth I think £2.50 (£10 in old money) must be a floor. On the plus side, a success in Africa could have a very positive upside reaction but as it would be very early days it would perhaps do no more than return us to where we were before TGD at which point I think WWSD (What Would SirLurkalot Do) must make even the longest term holder consider a sale, a breather and reconsideration of buying in on spud of any further fan exploration. Its what I would/will do.
I toyed with buying before TGD but stayed my hand on the grounds that Soco has historically reacted slowly to good news. I could of course have been wrong about that but as it turns out I was therefore lucky not to be in heavily myself (although I retain a legacy holding and have family and friends who are in and phone me up periodically). I look forward to the news from Africa and very much hope it is positive to in some way remedy the damage caused by the TGD outcome.
Oh and I dont believe management have done anything wrong really, although the figure of 90% might have been unwise. Unwise is a long way from incompetent.
KoD
From the back of the class and from memory we have a variety of analyst's estimates of core nav of around 350-420p excluding all TGD and the Bongo. For me the current price seems reasonable, at least until a way forward is mapped. Undoubtedly the price will get hit if as likely the next well fails but I would think that anything under 350 would be short lived and anything under 300 unlikely KoD
How long we stay around 350 is another question..
Just to clarify, once again, that my expectation of a sale was always connected to the obtaining of a clear result from TGD....with a sale following within a few months of that time (as per the long-running ADVFN thread header). I have also pointed out, from time to time, that it only requires ONE serious bidder - and a deal could be done at any time (eg the KNOC bid for Dana would have come completely "out of the blue" if a friendly agreement had been reached).
It remains to be seen whether people (at SOCO and elsewhere) regard what appears to be another ambiguous result at TGD as providing enough information to reach a deal....but, if they do, then I would still anticipate a quickish deal - or, more particularly, I won't be making decisions that are based on the assumption that no deal will happen! Some have considered that the latest RNS provides little information - there may be some good reasons for that, in addition to the more obvious point that analysis will be needed before conclusions can be reached.
rgds
ee
Yes there would be a knock to the mark to market but looking further out to the sale and judging a possible drop to 300p, is it now worth avoiding that 15% or so hit when DRC could just well come in - 200M bbl prospect? That comes in and what happens to the SP then. DJP
In a nutshell - yes it's worth avoiding - at avoiding adding.
Chance of failure in Congo 75-85%. So avoid - and buy around £3.
Bugs
In a nutshell - yes it's worth avoiding - at avoiding adding.
Chance of failure in Congo 75-85%. So avoid - and buy around £3.
And why do you think it will go to £3?
Nigel
And why do you think it will go to £3?
We can argue the toss about valuations endlessly, but I think we can probably all agree there's been an enormous disconnect between companies' share prices and what we might think they should be.
We've seen a lot of hope and excitement surrounding many O&G shares in the last 6 months, some have delivered - many have not. In fact there seems to have been a run of poor to bad news for Serica, Salamander, Desire, Rock, Soco and several others.
It gives me no pleasure to see Soco's SP so trashed, but the market is pricing in good news and overeacting on bad.
If we accept around £3 as a conservative base case, then bad news from Congo could easily see the price pushed well below £3. All those prospects come to nought, and no immediate outer - things always take longer than expected - as demonstrated by the long-standing "in joke" about the sale being imminent.
I appreciate this view is not popular here but I think there's been a rather rosy tinted view of soco of late and some are nursing large disappointment and hole in their portfolio.
On the flip side I can see that all this can be turned around in a blink with a positive result in Africa and an extension on the licence.
Still I'm going to bet that the short-term upside from here is no more than 10-15%.
B.
That's a risk reward I'm not averse to. That's what I mean by not getting emotional and screaming at the BoD and BB posters when you've (Isaac) previously praised them and set them up as an example of a good board.
Darron,
Good post, your good at telling it how it is.
The work the management did on TGT was fantastic. But in light of the new information I do think the management team do not have the right skill set to execute a drill and realise the value in TGD. Do you disagree with this?
They have had 4 attempts :
Prospect E
TGD-1X
TGD-1XST
TGD-2X
All 4 failed.
In light of these results I think it is reasonable to say the management are actually not as good as I gave them credit for. There is nothing wrong with that though! There are things that I'm not good at, like knowing not to bet on binary bets and appreciating more that 90% CoS wells can fail.
I think the important bit is to realise the limitations in ones ability and then to take action. By looking to drill again on TGD does not address this concern. My view is Soco management do not posses the skills to realise the value in TGD and therefore the best course of action is to sell Vietnam.
At the core there was TGT. On a takeout/sale of TGT, assuming everything else came to nought, I saw a value in the 450/475 to maybe 550p.
I hope your right on this. I think the key is how quick they are to take action.
Oh I agree log, it smarted a lot.
You and I have discussed the situation a fair bit today and yesterday so you know how I viewed it.
At the core there was TGT. On a takeout/sale of TGT, assuming everything else came to nought, I saw a value in the 450/475 to maybe 550p.
That gave me a "free" option on whatever TGD turned up (and the fan theory) and DRC and block 5. The potential value add from those was collossal if proved up.
So, downside limited and upside v strong.
I further thought that a fail with TGD/DRC would lead to a decision to sell up, possibly retaining Block 5 in a Son of Soco type scenario, maybe merged with others to build up a sub Saharan play.
So, if we see a fail on DRC (odds on given the CoS) then I'm certain that we will see a fairly rapid move to sell on TGT, which would be a very nice asset for another company/NOC. So should I sell now? IMO no.
Yes there would be a knock to the mark to market but looking further out to the sale and judging a possible drop to 300p, is it now worth avoiding that 15% or so hit when DRC could just well come in - 200M bbl prospect? That comes in and what happens to the SP then.
So downside to 300p and upside of TGT sale at a 50% plus premium with an option on current DRC well, prospect H, Block 5 etc....
That's a risk reward I'm not averse to. That's what I mean by not getting emotional and screaming at the BoD and BB posters when you've (Isaac) previously praised them and set them up as an example of a good board.
Sorry if this is a bit rambling, been at the firm's Annual Pub Quiz - we got whopped. 9th out of 10th!! Then again, I'm happy that that proves I know nowt about soap operas and modern music so I guess that's good.
'cept bulletin board soap operas of course....which tend to have more repeats than Neighbours ;-)
FWIW my line of thought is very similar - hence my views in post 336.
The other point to make is that the risk/reward balance varies with one's timescale. As someone who has taken a very long-term view, I am essentially looking towards the exit price you refer to. Yes it has come down a few quid from where it might have been, thanks to the last two wells being only technical successes and not commercial....but it remains at a substantial premium to the current share price - and will do so even if the next two DRC wells also fail! That is why I referred to it as being in "one-way-bet" territory!
If, of course, someone who is a more active trader is looking at where the share price will be next week or even next month, then they may well take a different view - because an exit price is unlikely to emerge in that timeframe, whereas the next well result may have a major bearing on the price.......though, as you indicate, any down move should be quite temporary - and ultimately the takeover pricing level will come into play (and we may well get no warning when that will occur, IMO!).
Interesting times anyway....a tad too interesting in mark to market terms....but that is all.
ee
At the core there was TGT. On a takeout/sale of TGT, assuming everything else came to nought, I saw a value in the 450/475 to maybe 550p.
All the talk about TGT, has everyone forgot about CNV? Current 2P at TGT and CNV is approx 125m, I have confirmed with Soco that current drilling (2 already positive result)at TGT plus some production data could add an extra 60m 2P. Personally I consider this a probable result, but it would take until this time next year to get some production data. I have also confirmed RC's estimate of $20 per barrel was based upon an OP of $75, which we are still above. So there could be upto 650p of value in TGT/CNV if we wait that long and OP stays where it is. Alternatively they may sell a bit sooner for a slightly lower price or try and have another go at TGD if they get an extension, either way I believe core NAV is well above the current share price as long as OP stays roughly where it is.
So am I buying? No. I have gone on record as having bought at 415p and 460p pre drill results, I haven't sold any, but I believe sentiment is very negative at the moment towards SOCO. If DRC fails I could see 300p being tested despite it being illogical. I realise if DRC is a success I will miss some upside but I already own a decent chunk. If DRC does fail and we go 300p or below I will "fill my boots".
Unwize.
Unwise
Current 2P at TGT and CNV is approx 125m, I have confirmed with Soco that current drilling (2 already positive result)at TGT plus some production data could add an extra 60m 2P. Personally I consider this a probable result, but it would take until this time next year to get some production data. I have also confirmed RC's estimate of $20 per barrel was based upon an OP of $75, which we are still above. So there could be upto 650p of value in TGT/CNV if we wait that long and OP stays where it is.
Having quickly re-visited my CNV/TGT models at $75, I'm seeing $17 to $19 per bbl. A couple of points here. I certainly wouldn't argue with RC's estimate as he'll have intimate knowledge of all the details but I think it's a mistake to think $20/bbl is necessarily a fair expectation reflecting any takeover price. Firstly, the $20 quote is what RC reckons each barrel is worth to them on a NPV basis at $75 oil as if they held the asset to maturity. That doesn't necessarily mean a buyer will pay that price. Any buyer will need to make a profit. Of course, potential suitors may have a long term expectation of higher oil prices but historically, very few will actually factor that in when determining what they'll pay today. Also, whilst $20/bbl might in some quarters seem to be a justifiable expectation, some sort of discount to the headline reserves needs to take account of the 20% minority holding of Soco Vietnam. Yes, their interest will be heavily reduced by very costly charges over their free carry but it still amounts to something substantial which reduces Soco's booked reserves. That's why I'm sticking to $15/bbl as a conservative estimate for takeover value at the mo...until somebody proves I'm being too stingy....getting my Missus on side doesn't count ;-)
Hi Davjo
Using your $15 conservative figure
Vietnam 185m 2P (if TGT works out as planned) x $15= $2.775 Billion
Shares (fully diluted) 343 million= $8.09 or £5.05 per share.
I realised TGT development isn't a certainty, but I think it is a probable outcome considering the results of all the wells that have been drilled into it.
Regards.
Looks like someone is a little bit too emotional about their stock positions.
Yeah me! Don't think it is going that far to suggest the TDG result did "smart" a little for most of us though!
Isaac, compliments from you are hollow indeed. I have no desire to hear the words pass your lips.
Looks like someone is a little bit too emotional about their stock positions.
Amazing stuff. In my earlier post just after the RNS I stated "I'd be very surprised to see £3.50" but we now have it and you could potentially buy quite a lot of stock up to those levels.
I've been buying more FWIW and have to agree with Mark and ee - the only reasonable posts today.
I happen to think a dana-esque situation could arise from this which would see a lower offer price BUT a much faster resolution.
At £3.50 assuming the oil price doesn't get hit we are definitely close to a one-way bet - I don't think it'll get hit much harder on a congo duster either so don't really see the value in taking a chance on getting in cheaper espeically as lots of people have posted on different bulletin boards that they are planning to strike then.
Isaac :
If we attach blindly and strongly to views and opinions (beliefs) we can end up persecuting others who hold different beliefs. There is plenty of historic and current evidence for this on any BB.
Everyone has an opinion, you dont have to follow it.
I wish you well whatever your investment decisions :)
Have we had this promise yet-was this the P&A or do we expect more to come?
"1 September 2010
SOCO International plc
('SOCO' or the 'Company')
After the completion of testing there will be a further release with results and mapping a way forward."
FH
I'm sure the way forward will be mapped in a few weeks time....once everyone has decided which way is up on the map ;-)
ref post 330 kenobi.
I for one hope the weather does not/should not change too soon as the NE wind (monsoon)is expected to fill in around or after 1st or 2nd week of December. if it fills in before that it will not be too pleasant in those seas and may have increased strength.
OT. I know, but those are my interests
Phil
phil
I totally understand what a 90% CoS means. I do understand that we were perhaps a bit unlukcy and I'm totally happy that I took a fairly big position before the drill results. Under the same circumstances knowing what I knew then I'd hope to do the same thing. I'll keep rolling the dice given those odds anyday - so far in my investment live taking such risks has proved to be very profitable on average.
I'd probably be less annoyed if it was just a case that the oil wasn't there but it does seem to be the case if they had not had had the problems of the first drill or had drilled at a different point on the flank we'd have had a much better result. Now that has to be down not only to luck but also the way it was executed. So I think we are all allowed to be a bit annoyed. I'm sure management are livid too!
Also it would be very nice if they hadn't lumped the RNS together with the TGT news and given us a bit more colour but perhaps that will come in due course.
Meanwhile the leveraged holders will all be getting stopped out soon and the price will probably go lower for a while.
Log
I struggle to find anything worth commenting on amid the gnashing ot teeth (other than the fact that Mark's post #325 seemed well considered and sensible - and thus a beacon! ;-))
However, "a bit" unlucky really doesn't do the situation justice. I'm amazed at the way the share price has reacted, despite the fact that it is a big setback for my best hopes on value. Why? Simply because if you read the analysts notes they had very little value in for it anyway. At 10% below core value (MS's figures) or 20% below core value (RBC's figures) we seem to be firmly in one-way-bet territory IMO, given management's declared aims and track record in execution. I understand all about sentiment and the ability of markets to over-react to news, but this simply provides more evidence IMO that "the market" simply is a mindless buffoon (with apologies to any other varieties of Buffoon reading this ;-))
The share price may stay down for a bit....and may even go further...but at the end of the day the company will be worth what it should be worth - and the day when someone provokes that valuation with a bid approach must be getting closer the longer the shares stay at bargain levels.
Of course, according to other people on ADVFN etc (you know - all these folks who pop up with post-event wisdom and cod "analysis") I don't know what I'm talking about. All I can say is that I'm just as relaxed about the outlook as I was a couple of days ago, despite being a serious six-figure sum poorer on paper and despite having seen at least £2 clipped off the potential exit price that will be achieved in due course.
We started out the current drilling programme with SOCO potentially targeting 700mn bbls of net reserves. We appear to be 300mn down with 400mn to go. I don't think the world has ended quite yet!
ee
And ....
who knows maybe we're due a bit of luck and one of the DRC wells will come off ? that's put a different view on things,
I have to say I know this isn't odds on (but I don't know if odds off is a term)
cheers K
To be fair to SOCO's management, at the last AGM, they quoted the 90% COS that has been thrown around,
but I think Ed said something like, but nothing is 90% in this business.
Anyway, getting back to reality, what is the situation on the ground now, if they really believe that they could get commercial flows by going back to the crest of the structure, or having a punt at the fan, then surely we've got time for one last shot at it? or is the rig due to be released ?
will the weather close in too soon ?
If they don't think it's worth throwing good money after bad, fair enough, but if they're willing to take the chance and believe it's possible before the end of licence then surely we should give it a shot ?
(there was talk of a second shot at TGD 2, if the first failed I believe either at the agm or in the famous stockopedia podcast, though perhaps delays have made that impossible now)
cheers K
PS some you win, some you loose, I'm struggling to believe things are as bad as they seem now reading the posts here. this time next year (rodders), we'll be producing 55kbopd, from tgt.
There are lies
There are damned lies
Then there is COS
Winston Duster
There seems to be a lack of understanding here about what it means for a prospect to have a 90% COS.
If one is lucky enough to have an investment opportunity which is risked at 90% COS and which, if it comes off, will make returns of several hundred percent, then it is rational to go for it. That still leaves you with a 10% COF (Chance of Failure).
In any period where you make a large number of investment decisions some of them will deliver "unexpected" results which seem to go against the odds. That is entirely normal. It does not indicate that the investment decision was a mistake. And it does not mean that the COS/COF figures were incorrect.
Consider the analogy of a poker game where you hold 4 aces. The odds are strongly against there being a better hand around the table and strongly in favour of you winning. You have to bet the hand. Not to do so would make no sense. But it remains possible that the unlikely event does happen and that someone else has an even better hand and that you lose. In such an event it is absurd to conduct a post mortem about why you lost.
Sometimes you can do the right thing, the intelligent thing, the correct thing and still have the outcome go wrong. That's what makes being alive so glorious. Without chance and uncertainty we would be simply cogs in a machine. Thank goodness for unpredictability.
The lesson to learn is about managing your overall position so as to be able to survive set backs - ie not betting everything on an outcome which is less than 100% certain.
Marben
I am sure Ed and Roger will be a lot less worried about the bashing than you are.Its part of the territory, fair or not. Everyone who invests has come in a different phasings of Soco's development. I came in in 2007 so am not a flash in the pan investor.
I guess my patience is running out, and I cant control whats done at TGD, but they can.
My main wrinkle is with the well testing. We have oil,gas,pressure,temperature but no commercial flow, and no attempt to discuss how it might be commercial. (its almost we cant be bothered anymore, we are P&Aing-fine if theres a bigger plan, but then what is it?)
Soco do appear very good at developing plays,moving in new fairways ,but I question their technical experience/ability in HPHT testing.
First time round this was acceptable, but twice, I dont think so.
They may be honest, but there is not much transparency.
Their Cv's also indicate that they have been away from the operational coal face for a long time.
My post #324 about whats next is not for them to read and implement, but for those of us who dont have direct phone lines to the top ,to strawman the possibilities for the future. Leave a void and it will be speculated on.
FH
Nice post Mark and all very well but simple fact is that they didn't bring home a very important asset that they previously gave a CoS of 90%. Furthermore, it was very important that they did so after having failed once before and the license was running out.
If you expect investors to take that on the chin and not have at least a bit of a moan about it then you are deluded in you assesment of human nature.
I don't think anyone is telling them how to do their job or pretending they can do it better - however with the benefit of hindsight it does look like they could have made better decisions on this one. Either that or TGD was not the prospect they thought it was, in which case they perhaps should not have played the card so highly in the first place. All easy to say in hindsight though I accept.
The corollory of what you are saying of course is that we should always trust management as they are invariably more experienced than private investors in the businesses they run. Now I'm pretty sure you don't believe that to be true. Applying some validation on what is going on is defintely a worthwhile pursuit in this game even if we lack the information and skills to do it properly.
One last point Roger Cagle and Ed Story have a lot of their own paper profits in Soco in the last couple of days and they probably feel as gutted as we do but I'm not sure it is as bad to loose $10m when you have $100m in the first place.
Log
Personally, I find it sickening the way that some investors leap on honest managements, when things don't go according to plan
I don't want to knock management - honestly!. I have met them at AGMs and been impressed, nice guys and enthusiastic dyed in the wool oil men, with interests that completely align with mine as a small shareholder. It's just that I cant make head nor tail of the reason given for the failure of the latest TGD well.
I air my ignorance in the hope that someone such as (but not necessarily) SW10 or Passinthru could shed some light.
Thanks for pointing out that fully listed companies have assumed competance.
The recent TGD news almost begs a new thread on how to return some shareholder value from Vietnam.
Certainly for me I have made no money from Soco,have been patient, relied on the simpler strategy for the TGD well etc.
Can one can envisage a Heritage like super dividend?
A statement I saw in August by Ed was "we are adding reserves,not time to sell."
However ,we can see this goes both ways and that picture is slowly changing with the drilling results.
I suspect as is suggested by ee in #322 the "books" are being prepared-likely one of the big boys-Sproule/Gaffney cline/D&M but could not find out who exactly.
FH
Thinking further, if the reservoir pressure was lower than expected, what happened when the drill mud weighted up for a higher pressure encountered the reservoir?, wouldn't the mud invade (and bung up) the formation and register as a mud volume loss?.
Hi FH
I believe the trend you refer to is due to AIM rules and doesn't thefore apply to fully-listed co's, though there's nothing to stop them doing so if they so wish.
A recent announcement from NOP contained the following paragraph, as do all of their previous ones relating to operational matters:
In accordance with the AIM Rules - Guidance for Mining and Oil & Gas Companies, the information contained in this announcement has been reviewed and signed off by the Exploration and Technical Director of Northern Petroleum Plc, Mr. Graham Heard CGeol FGS, who has over 35 years experience as a petroleum geologist.Regards
Steve
One trend I have noted on RNS's is that there is usually a competent person who reviews the technical information the RNS for release. I dont see this with Soco?
For example on a recent Encore release:
"Peter Williams B.Sc. (Hons.) in Physics and EnCore’s Group Technical Manager, who has over 35 years' engineering experience in the oil exploration and production industry, has reviewed and approved the technical information contained in this announcement."
Looking through the SOCO website its not clear who would do this (The only PE I can find is Peter Kingston a NED). Some of the release language used (Technical) is very basic and does not make sense to a person with Petroleum Engineering experience.(in part because so little actually useful info is divulged)
People have hit the nail on the head,with HPHT,yet not enough pressure to flow,Degassed yet gassy.
Suggest's to me that with TGD they are punching above their capability.
It think they need to wake up and get a grip on their technical assurance within the business.
FH
One reason is that the requirements of AIM are different from a fully-listed company. I'm not as "up" as perhaps I should be on the differences, but listed companies like Soco, Dana etc don't produce "Competant Persons Reports" as such - and they don't have the same disclosure requirements in terms of identifying the "Competant Person" . *
They do, of course, go though very similar processes. In the case of fully listed companies, they invariably use outside advisors to verify management figures before they get taken into published reserves figures. And sometimes (as in the recent Dana defence) they will publish a full reserves report directly, naming the external Competant Person (Senergy in Dana's case) who has actually reviewed the data.
I don't know who SOCO currently use to advise on their reserves. Sometimes companies use different people in different parts of the world (depending on availability and familiarity with the assets etc). However, I have a feeling we may very soon find out - because if I were on SOCO's board I'd be very keen indeed to see that the year-end reserves statement was as complete and up to date as they could possibly make it (perhaps including 3P reserves as well as 2P numbers, even though little or no value is usually attached).
I think you can be pretty certain they will be doing this - any deal done in Vietnam or for the whole company will take full account of the reserves metrics!
ee
* [ps...sorry for the slight echo - having just been beaten to the point]
Similar to CNV was quoted
Has anyone seen a quoted figure for the oil API's from either well? I dont recall seeing this. This would help sort out its flowability.
I think it is safe to say that any value the market ascribes to the fan structure and the main TGD 100m bbl prospect going to be a big fat zero from here on (actually it seems like negative value at this point).
Any speculation of what it might contain is rather pointless because unless they drill again and/or get a license extension one will never know. If they do drill again with a license extension the market will probably assign an even bigger fat zero to the idea. "Flogging a dead horse" springs to mind.
It may not be fair and it is especially gauling to think that there might be a billion barrels of oil down there just waiting for us but what I care about is the share price. Thing is they had their shot at this - actually two shots and they screwed it up both times.
Soco should move on now. They should try and get a deal done to sell the Vietnam assets as that is the best way to improve shareholder value. I'd be happy if they could parcel up Vietnam and get £4-4.50/shr for it and leave the rest DRC etc. with shareholders. The danger of messing around for too long with TGD is that the world can change pretty fast and a deal might not be on offer later.
Obviously, this view won't go down very well on this board as there has been so much hope ascribed to Soco's eventual value and a lot of this from the prospect of a huge fan structure within TGD. Thing is hope doesn't pay the bills and perhaps some are just too in love with this stock to see it's failiings.
Log
Bring on the big red thumbs!
Two things that I consider in assessing Soco's management of their and my assets:
Considering those facts, are they likely to make worse decisions, on the available informaion, than I would?
Personally, I find it sickening the way that some investors leap on honest managements, when things don't go according to plan (quite different when published information and "off the record" chats can clearly seen to be misleading, with the benefit of hindsight). It's a fact of life in extractive industries that things often don't go according to plan. My one criticism is that the "90%" remark, as SW10 pointed out in the heading, was leaving a rather large hostage to fortune and was, IMO, a foolish thing to say.
As far as where they drilled, how they drilled, whether they drilled, I think it's supremely arrogant (even stupid) to suggest that any of us (perhaps with one or two notable exceptions ;0)) would know better than Ed, Roger and their team. More importantly, when it comes to suggesting what the company should do next, I think it's idiotic for us to make "recommendations" - based on a microscopic fraction of the information and expertise that they have available. So, rather than speculating I am happy to wait & see what emerges in the fullness of time. For now, the share price (on a 2 year view) seems well underpinned by proven assets, so in fact I've decided to add a few at 350p (buying back my topsliced shares nearly 25% cheaper), giving me a free "option" on any Congo upside and any "hidden" value in TGD, which may or may not emerge. Of course, the SP will probably decline further if (as is likely) Congo fails - but I should still at least get my money back in the fullness of time.
If you don't trust Ed, Roger and co to invest your money wisely (as well as rather more of their own), then it doesn't make sense to invest in Soco. Simple as that. Perhaps the lesson for some to learn here is to always be aware of the risks and consider what your position would be if things didn't work out. That's why I topsliced prior to the drilling: had I not done so, I would have made a painfully large loss on a share price fall of this magnitude. As things stand, obviously I am not happy about the result, but it is not disastrous for me
I would also observe that for many months after the failure at Esmond, Encore's Alan Booth was "bashed" on an almost daily basis by certain posters on ADVFN. Funny how he's everyone's hero now. Also funny how I get criticised on ADVFN (and even here ;0)) for repeatedly topslicing shares like Encore when the price rises significantly above my assessment of the value of likely PROVEN reserves. Yup, I will make less money if the next well comes in (and so far this year Encore has had an extraordinary string of successes), but I will sleep soundly when, finally, a well does not come in as investors had hoped.
I value my sleep.
Mark
* For anyone that needs reminding, here are Ed & Roger's brief CVs:
I cant for the life of me figure this out. Soco should have formation fluid pressure readings from three wells. They should know the gravity of the reservoir fluids. It ought to be elementary to work out a projection of the reservoir pressure at the latest TGD well. A great deal of expense was incurred due to the need to cope with the high observed pressures. But we are told that the well failed to flow not due to poor or inhomogeneous permeability, but due to a lack of pressure (from gas drive). Is the mooted sealing (boundary) fault lower down isolating the penetrated formation from a water leg in the reservoir on the lower other side of the fault?. Did they believe it to be water driven before?.
An obvious (and probably stupid) solution would be to allow a metered flow of gas from the HPHT stuff below the volcanics into the upper reservoir to pressurise it.....
Is it fair to deduce that management are telling us they have a gas driven field with no gas?.
Going back to questions about the "gloop" and the 2008 AGM, it's all in the header post above:
I have no doubts about the veracity of anything that Soco said or showed us at that meeting. It does perhaps raise the question as to whether the presence of the 'gloop' prevented them from knowing whether there was insufficient gas to drive the oil - though you might consider that to be answered when you consider that the second test flowed gas and condensate.
It doesn't give a definitive answer, but my feeling is that SIA are probably right when then say there will be more likely to get commercial production from the crest.
SW10
Yes - we're all wise after the event on that, it would seem. The big unknown of course is what the implications are for the fan - the indications prior to the flow test were all supportively positive, I believe.....but the flow test may put all that in a different light?
One for the experts - and the jury is out!
ee
...just above the text box you type a comment in is a link called "show editor". Click it before you post and all will be revealed! :-)
The 96% relates to the percentage of the formation they thought had been blocked with the plastic (so the limited flow to surface was from only the top 4%)
I'm sure there will be a later reference to SW10 comments re the photo - but perhaps he'll pop up here and comment first-hand?
ee
ps....I see it is Rockhopper's turn to be down 18-20% this morning - which was somewhat more expected than SIA's fall yesterday IMO.
Does this help ? from SW10's write up on AGM 2008 on TMF.
DST1 being the first drill stem test on TGD-1X ( sorry dont know how to do italics ) :-
SW10Chap: What happened with DST1 – heavy fluids has invaded into formation – are we saying that the problems was couldn’t clear fluids?
Fluids solidified in the well – precluded when perforated – polymer based mud – plastic and then hardened. beyond that setting up the same thing over these perforations
It plugged the formation – loss of circulation material - coming up in surges so rate not meaningful flow test data - 96% rocks (?)
Going through two strings of pipe – excitement what comes out not the quantity. Later result won’t be exciting
I'm struggling to find any straws to clutch at today.
First looking at DRC, the most likely outcome of the October well is of course another failure. In that event, DRC looks pretty dead to me, 'prospect H' or no.
Then we have TGD, or what's left of it - the RNS seems very economical with any real detail, so we're left with a lot of guesswork as to where it goes from here - if there's anywhere left to go.... My hope is that the management are going for a low-key positioning (for PTTEP's benefit) , but this feels (yet again) to be optimism triumphing over realism. - Are we likely to get some steer on TGD direction soon?
Always thought holding SOCO long-term would be worth the wait, and would end with fireworks, but it's more like an exploding cigar at the moment.
Spurti
Comimiserations all. We took a risk and it simply did'nt work out :-(
It's clearly cost us all a lot of money. Failure was always a possibility. But as they say, I'd rather try and fail then not try at all.
TGD has cost us over $200 million the past 3-4 years and a lot of time. This 5 year chart shows everytime there has been sharp sell offs it has been related to the TGD prospect....
http://www.advfn.com/p.php?pid=charts&symbol=L%5ESIA&period=12&freq=6
I am hopeful we don't get an extension to the TGD licence. I just think we have thrown too much money and time at it. And when you keep trying and failing after making about 3-4 attempts then maybe it is time to walk away and try something more positive? It feels like we are throwing good money after bad. And maybe by selling Vietnam it will draw a line under TGD.
I've stuck by these people for a very long time. I've been very patient and have given them many chances to deliver. Clearly drilling TGD is not easy and I'm starting to think maybe it's not a project for Roger and Ed? I'd rather see these guys drilling something that is easy and being succesful rather then something that is very difficult and the odds are stacked aganst them. No one likes to lose......
I'm hopeful BlackRock/Pontoil put pressure on management to do a deal and sell Vietnam.
I'm getting old and so is Ed and Roger, I think it's about time we enjoyed whats left of our hard earned cash before the market decides to pull the rug on the whole lot.....
We won't be in a bull market in Oil forever....the clocks ticking......I will support a sale of Vietnam in it's current state....
Hi Isaac
I'd rather see these guys drilling something that is easy and being succesful rather then something that is very difficult and the odds are stacked aganst them.
I'm sure we all would - I guess the difficulty is that knowing in advance what's going to be easy and successful ain't always easy! If everyone thought so in advance then you would probably have to fight tooth and nail for small slice of the action and not make a lot of profit. It's been by taking on the ones that aren't obviously easy, for whatever reason that Ed and Roger have made some of us so much money over the past 10 years.
We've had bad times in the past, COD wasn't anything that any of us around at the time are likely to look back on with any pleasure, and the dreams of 1bnbbls there came to naught. But that hasn't stopped the share price rising about 5 fold since, at this evenings prices. I'm not going to suggest that I expect to be holding in another 5 years, or to see 5 fold increases from here, but I do think there's been a bit of overreaction in some of the comments I've read today. Events like this are part and parcel of investing in E&Ps, if we didn't have these we wouldn't have the Catchers and the Cladhans and the TGTs either.
Don't mention that you've gone to the other side. Especially today!
I mentioned it on TMF, but I thought I'd mention it here in passing,
In light of what has happened with this well, I wonder if there is any doubt as to whether the last well didn't flow because of the mud reacting in the well, or whether indeed there were issues there too with flow.
And how would it be possible to categorically state that the problem is due to mud reacting rather than a problem with the well flowing in general.
I'm not criticising the company, I'm just saying that maybe at the time it seemed like the logical reason, but with hindsight perhaps soco were a bit too willing for the mud to be the cause of the problem to allow another shot at the big prize,
k
Hi kenobi,
My recollection of what was said at the AGM immediately following TGD-1X was that oil flowed strongly to surface but that the flow was intermittent, which they put down to wellbore/casing/perforation problems. I'm not expert enough to know whether that rules out a drive problem but it seems less likely to me. SW10 was at that AGM too and I'd be interested in his recollection/thoughts.
Cheers,
Mark
Mark/Kenobi,
I was sat next to SW10 at that AGM. He asked a question about the mud reaction problem which led to Ed ferreting around in his bag and producing a photo which illustrated the problem. SW10 had a better look than me and will have had a more informed view - but from where I sat there was no reason whatsoever to look beyond the plasticky gloop as the explanation for flow problems.
My recollection of their description of the problem with the flow brings to mind the thought of trying to blow air gently into a Slush Puppie or similar very viscous liquid.......you get unstable intermittent rushes to the surface followed by a closing off of the route to surface. I'm sure SW10Chap can give a more appropriate analogy.
In other words, it wasn't a lack of pressure or flow - it was the persistence and frequency of the interruptions to flow that was the main problem. All the contemporaneous accounts of the AGM are probably in the TMF archives if anyone is so minded.
ee
Reading between the lines, I'd say that Soco aren't really that interested in artificial lift (whether gas or nitrogen). Which is probably right; they're explorers by nature, not producers.
Of course, that's not to say that a future buyer may not give it consideration.
SW10
Holding, slightly tempted but not adding...
But presumably, if they are still of the view that there is a lot of oil down there, it will only be worth something to Soco, even as a seller, if they can negotiate an extension in respect of the TGD appraisal area.
Regards
Impvesta
What happened to the High Temperature High Pressure nature of this prospect? The last well failed because of too much pressure, and this one failed because of too little?
My initial thought, the printable one that is) is that could gas injection using the produced gas from TGT be an option? The revenues on that gas is pretty low from what I recall.
Of course that isnt an option without a lot more work on the reservoir and the associated costs so probably not a runner.
Then again, maybe its just RC and Ed's cunning plan to keep the Thais from earning in......
Okay, so Im straw grasping there on a bad day but thats the oil business.
Hi djp,
I also observe what Soco HAVEN'T told us in this RNS but must know: what the reservoir characteristics are. If permeability, porosity and oil properties are all good, then production from this field may well be economically viable, though obviously more complex than would have been hoped.
I'm keeping an open mind but, as ee and others suggest, writing it off for valuation purposes at this stage.
Cheers,
Mark
To answer a few questions on my comments.
#292 They have stated that the well flowed at sub commercial rates due to the fluid properties(or lack of).These properties extend beyond the well. How far who knows. The reprocessed 3D perhaps can see this.
This impacts the commercialliy of the reserves with these properties. How far does this non gaseous oil extend?
Many producing oilfields have wells that are sub commercial-thats the nature of depositional environments. My view is that its strange (i said silly) to state its a sub commercial rate so fast. It may be commercial as a horizontal/fractured/water driven/gas drive (AKA GRANE). Sounds like others understand and are comfortable with why they said what they did, and without that knowledge or means to get it makes SOCO a difficult share for me to invest in.
#293 Finding oil gives you some 3P reserves. Its conversion of 2P /3P to 1P that really creates value, or demonstrating that's possible via flow tests - In my opinion the Vietnam well testing track record on TGD has been poor so far. We keep getting surprises without any back up plans to improve things.(ie nitrogen lift ing the well)
#297 Yes they do seem quite happy to not make the most of the bad news for some underlying reason.
FH
A few broker comments in the piece ..
http://www.guardian.co.uk/business/marketforceslive/2010/oct/12/soco-slides-vietnam-disappointment
Good old Grauniad - never complete without a major typo:
Fair comment from Phil Corbett at RBS - though I'd put little store by the others quoted, especially since the Grauniad doesn't put their comments in context.
Obviously all of the analysts are (correctly) removing the potential for TGD upside from their forecasts at this point - as would I. But the shares have fallen by more than that reduction in most cases (RBS -63p, RBC -59p, Collins Stewart -30p, Evolution -68p, JPM -117p, ML -113p) and most/some brokers have added back amounts (10p-30p ish) for the improved outloook at TGT.
Interesting to see that Alphaville quote a Bloomberg report:
Quite. Pretty shocking for us too!
nb Alphaville also note the RBC comments as "contrarian"...though RBC's line is firmly in tune with my own thoughts.
ee
Picking some of the following information to pieces:
"The Te Giac Den appraisal well, TGD-2X, will be plugged and abandoned. Although the well encountered significant hydrocarbons in a clastics reservoir sequence at approximately 4,550 metres measured depth and produced both black oil and gas, it flowed at sub-commercial rates.
The TGD-2X well was drilled on the flank of the structure, whereas both the TGD-1X and TGD-1XST wells were on the crest of the structure. However, the oil leg on the flank of the structure lacked the gas content encountered on the crest, thus there was insufficient reservoir energy to generate acceptable flow rates. Post drilling analysis continues as the well is being prepared for abandonment and a decision as to the future of the TGD appraisal area will follow. "
I am suspicious of "lacked the gas content encountered on the crest, thus there was insufficient reservoir energy to generate acceptable flow rates" also "flowed at sub-commercial rates"
This implies that the oil is low GOR. The gas must have escaped, if all other variables that combine to produce flow are acceptable (Permeability,viscosity,pressure drop,skin etc)
Whatever a reservoir with grossly variable properties is not good.
What they say is this wells rates are sub commercial. Has a rate for commerciality been stated? Whay make such a stupid statement for the whole field -this is just one well.
Tounge in cheek put out an RNS (like Xcite) that says modeling of the flow rates by Schlumberger show that a horizontal well with gas lift , and water injection support would produce the equivalent of x-y,000bbls/day and a such might be commercial.
I wonder if the oil is totaly dead in situ?
Has there been depletion of pressure/gas over time (to other horizons or by another field?). Normally the gas is seen on seismic where gas chimneys are.
I guess we will find out what the explanation is from those with the data ,assuming they are smart enough to work it out.
I am starting to loose faith in SOCO's technical ability (or ability to get the right people working in Vietnam) FWI, having been in this business some 26 years.
They should stick to Elephant polo.
FH
What they say is this wells rates are sub commercial. Has a rate for commerciality been stated? Whay make such a stupid statement for the whole field -this is just one well.
Not sure what your point here is FH? They haven't said anything about the whole field, just that this well is non commercial. Whether we ever find out if the field is commercial or not, under Soco's part ownership at least, will depend on whether an extension can be negotiated, and whether Soco decide the terms, if it gets that far, are worth paying for.
I am starting to loose faith in SOCO's technical ability (or ability to get the right people working in Vietnam) FWI, having been in this business some 26 years.
They should stick to Elephant polo.
They have found some oil in Vietnam, and elsewhere.
Hi FH,
That could be where ee's pet theory comes in. ;0)
Now, I don't want to be over-exuberant here and we certainly don't have hard evidence that TGD overall is a commercial discovery... but Soco DO have sound commercial reasons for NOT making public statements about future options and potential, even if that knocks the SP in the short term.
Fortunately, I can afford to be sanguine because I did topslice a couple of times in the run-up to drilling. I am not tempted to add to my holding at present: there could be a further hit if the current Congo well is a duster - and that would probably offer a safer buying opportunity. Neither am a I tempted to sell.
Big thank-you to davjo for allowing me to be a little lazy and confirming my view that, irrespective of the Congo result, the current SP is probably underpinned on a 1-2 year view (barring an oil price collapse). That makes me comfortable with the size of my current holding: not too big to be fearful in the (highly possible) event of a Congo failure but big enough to benefit meaningfully from "unexpected" good news over the next few months.
My sympathy to larger holders and hope that good news will flow in due course.
Regards,
Mark
oh dear , so yet another inconclusive result,
I guess there was pressure to drill a distance from the previous ?TGD1 to avoid any structure damage ?
Shame to have this result, when it all looked so good, for my money, I'd rather they just drilled it again or
drilled the fan, rather than persuing an extension. last time we got an extension we had to give away a significant farm in to the DRC acrage, which so far has proved worthless admitedly but might still end up costing us 100's M $.
Won't it be a pain, if we loose TGD and the fan, and DRC comes up with a couple more dusters and we give up,
not really the results we were all hoping for !
Its a tough game this oil expo business !
Cheers K
JT,
You said
"You topslice if you want too
This mans not for topslicing"
Thanks very much, I did.
I'm not in the slightest bit surprised by the outcome, a well with a difficult structure, ongoing problems with the repeat well. The size of fall was quite expected.
Some of you just seem not to have grasped how over-reative the market has become since the crash, and ignoring trends and sentiment is poor IMO.
The economic crisis is not over, you need to protect your downside more than anything, even if that means losing some profit.
It's insurance and common sense.
Bugs
PS I might buy in again but I don't think it's sunk in yet just how bad a result is, all those hopes dashed. Surely they won't drill again in hurry, too mush cash wasted here. It will be interestig to see if the licence is extended - I guess quite probably. perhaps redrill in Q3/4 2011
Yes a extra 16m barrels for TGT given Soco's share
Yes, what happened to the way forward update?
Hopefully the next release is so close they never thought it worth the paper?? Over to DRC.
I've just bought another slug of Soco at 369 - I was keeping a bit of money back in case the well didn't come in but not much to be honest as I thought CoS>80%. Not averaging in much. Having said that I think we'll get back to 400 quite soon and given we were 438 two days ago we are only looking at 10% on the downside. If the well had flowed well it would have been much higher on the upside so still was the right thing to do.
I'm a bit annoyed that there wasn't more guidance on what to do next as it doesn't seem like a totally lost cause - but then these failure statements always do try to paint a rather rosy picture.
Good luck to all
Log
Well I didn't know they were drilling the flank. Belt and braces don't really help keep your trousers up if you don't even start with them near your waist.
Did anyone else know this and could they link it?
repo
Of course no-one knew! THEY didn't even know!
It only became apparent they were on the flank of the fault block when they announced TD at 4669m, which looked likely to rule out communication across the fault because the reservoir section wasn't as deep as expected (see slide in the interims). Nevertheless, in theory the "flank" location should have given them a more oily result - which it did......but unfortunately rather TOO oily to get reservoir drive at that depth (AFAICT).
Rather "unfortunate" in the circs, I think......and a PITA for shareholders.
Hi ee,
Well considering the belt and braces approach, as JonnyT points out drilling too far away from the original well was a mistake.
They've been supremely bullish about this well for so long and a series of cockups and this poor 'gung ho' decision has lost them quite a bit of credibility.
It is a mistake to go overly negative on this news, but following the 'confidence' of management on getting an extension on TGD, or a result on the fan with too much money might be a costly decision.
The jury is out on Africa too.
I hate these summary lump all the news together RNSs.
I'm doing nothing today but note that several warnings about the likely market reaction have proved accurate.Did you take the opportunity to top up as you said you would yesterday?
repo
It was rude not to at 365p ;-)
So assuming SIA relinquish the TGD appraisal areas and the current Congo well is P&A'd, and we see an accelerated sale in Vietnams based on the TGT development, when and how much is SIA likely to be worth?
So assuming SIA relinquish the TGD appraisal areas and the current Congo well is P&A'd, and we see an accelerated sale in Vietnams based on the TGT development, when and how much is SIA likely to be worth?
Dunno about "when" but in the back of my mind for Vietnam :-
124mmbbls (as of 31.12.09) + say 16mmbbls for TGT = 140mmbbls
@ $15/bbl = 386p/sh
@ $20/bbl (per RC NAV quote on S'pedia) = 514p/sh
Take your pick....I personally wouldn't bank on anything above $15.
I'm resisting temptation to buy today since success on the current DRC well will see the sp recover handsomely, whereas a duster may possibly present a better value opportunity than is on offer today?!
Hi Davjo
124mmbbls (as of 31.12.09) + say 16mmbbls for TGT = 140mmbbls
I don't understand where you get 16mmbbls for TGT, I thought that development drilling plus some production at TGT had the potential to add more like 200m barrels, of which Soco's share would be closer to 60m?
As I posted elsewhere are am going to wait and see what happens before I might top up.
Unwize
G'day Unwise
I don't understand where you get 16mmbbls for TGT
I'm referring to potential y/end booked reserves on a conservative basis. I personally don't expect full potential to be booked until some production history is established. Others may disagree ;-)
davjo
Dunno about "when" but in the back of my mind for Vietnam :-
124mmbbls (as of 31.12.09) + say 16mmbbls for TGT = 140mmbbls
@ $15/bbl = 386p/sh
@ $20/bbl (per RC NAV quote on S'pedia) = 514p/sh
Take your pick....I personally wouldn't bank on anything above $15
Thank you. Cheers, Martin
Will they have time to redrill closer to the original hole before the license expires on Dec 31st (assuming it is not extended)? Can they side track from the last well or is that not an option?
The RNS was a bit sparse on details given the gravity of the situation.
Log
I understand that extension is the possibility being pursued. Expert input is going to be required on the conclusions of the two TGD wells with respect to the fan.
In retrospect it is galling to think how different the overall outcomes may have been if the tests on TGD-1X hadn't been screwed up and we'd had some sort of result first time.
I'm surprised that the shares have come off as far as they have (creating the buying opportunity that some certainly anticipated) - but it never helps to release news like this on a down day for stocks in general and when oil is off too. Still....good news for some....especially with only a few weeks to the DRC well result ;-)
This was the most important well in Soco's history. Management stated they drilled this very carefully to ensure a result after the FCUKup last time. So why didn't they drill close to the original hole rather than take a leap of faith with a step out?
In my view Management have to take responsibility for what on paper could be a £3 billion plus pound mistake.
Just to pick up on JT's comment :-
So why didn't they drill close to the original hole rather than take a leap of faith with a step out?
This was technically an appraisal well intending not only to prove commercial flows but also commercial reserves. Had they drilled close to the original hole and achieved the former they'd have still needed to drill a step-out to achieve the latter.
FWIW...
Maybe so, but when you look at the well locations I personally think they were cautious on the well design parameters and too gung ho on the appraisal well location. That's cost shareholders potentially £3 billion plus.
JonnyT