Valuation, sentiment, and SP direction

Wednesday, Jun 17 2009 by

Detailed discussion of Soco's assets should take place on other threads, but this thread is to discuss the latest valuations both by ourselves and analysts, sentiment (ie will the shares go nowhere because there's not much upcoming news) and likely moves in the share price in the next six months.  How should the shares be valued?  How reasonable is it that any drilling without a firm commitment further than several months away is ignored by the market?

I haven't seen many recent analysts' reports on Soco, but I have one from Cazenove with a core NAV of 1370p and no doubt considerable explo NAV on top of that.  I imagine that's approximately concensus, but maybe with crude rising again these concensus NAV figures will start to rise.  Has anyone any other recent broker estimates?

My view, as stated elsewhere, remains that in the absence of much to get the market excited the shares will wander aimlessly for the rest of 2009.  I've previously guessed that if crude were $65 at Christmas 09, then Soco's SP would be somewhere near £13 then, and I'm still very happy with that guess.  What does anyone else think?

Of course unexpected bids and other events may overtake this, but these sort of events may happen to any company, and perhaps Soco (where management seem unlikely to accept bids since they believe there is considerable value not recognised by the market) is one of the less likely companies to be affected by the unexpected.  The key new news for Soco might be (a) a bid (IMO unlikely), (b) some sort of presentation by management of the drilling data they claim to have that demonstrates a significant strike has been made at E, currently ignored by the mkt, or (c) possibly hitting oil off the Congo.


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

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1317 Posts on this Thread show/hide all

peterg 8th Jun '12 618 of 1317

In reply to fuiseog, post #615

What I do care about, with TGT 2 completion almost a given, is whether total output from TGT 1 & 2 is capable of achieving the 90k BOPD forecast at this time last year or whether the total stays at 55k that's being settled on recently; that the CNV wet gas apportionment and valuation are concluded, and that the overall vietnam reserves position is determined. 

I don't have any real doubt that TGT1/2 are capable of well over 55kbopd, probably 90+. The issues for me are will PV go along with such rates of production (- almost certainly, given time) and how will they handle 90k? Can they/will they tweak the existing FPSO to handle that, or nearly that, level of production. What permanent solution wil they go for - Bach Ho tie in, 2nd FPSO? 

In practice I doubt very much that we will see 90k this year (or in Soco's hands?) Producing at those rates will involve planning, engineering and capex. However, what I do expect, and is critical in terms of SP (which may be irrelevant short term, but it would also have bearing on the longer term sale price) is to see 55k or so once TGT 2 is online. Anything less once phase 2 is fully bedded in (say 2-3 months) would be a serious worry. What I also want to see, and I'm hoping that those who are lucky enough to be able to get to the AGM may be able to elicit some hints, are signs that real planning for how to handle rates of over 55k. Put both of those two in place and the SP wouldn't be anywhere near it is now (if any logic prevails in the markets), and a sale of SV at a good price would look imminent.

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jseth123 8th Jun '12 619 of 1317

£1 for 50p, 60p, 70p...where do you draw the line?

Which management team looks most confident in their companies assets?

Which management team needs to be most concerned about how the market views their assets? It doesn't matter one iota what I, you or anyone else in "the market" thinks TGT is worth... other than the buyer and Soco management, who have control over any deal being accepted or not.

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jseth123 8th Jun '12 620 of 1317

For clarity, my point above is that the exit for Coastal is not so clearly defined and market price is more important for shareholders there; and also that the management control of the register is not as tight.

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loglorry 8th Jun '12 621 of 1317

If I only had a penny for every time an investor on a BB ranted on about how it doesn't matter what the current share price is and it is just a matter of waiting and value will eventually come to fruition!

I'm afraid it does matter. It is very hard in this market and generally for a bidder to pay much more than a 30% premium to the current price. The reason is simple because they don't want to look like they over paid. I'm sure many here will come along and try to dispute this fact but I'd like to see some evidence if that is the case. Sure Soco shares are tightly held which means that it is likely then no such bid would succeed but how does that help? It just means the asset stays as it and we stay where we are for more years to come. Not many here relish the idea of TGT not being sold as most don't want to wait 10 years for their money.

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jseth123 8th Jun '12 622 of 1317

There are several examples of 80+% premiums recently. I'm not going to list them because I frankly can't be bothered looking them up. Can you dispute that Soco Vietnam should be valued similarly to CoconoPhillips field next door?

Obviously things have tightened up in the last few weeks but it doesn't bother me. I think there could be some positive news flow to reduce the premium but in the mean time here's another penny: value will out. ;-)

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ExTownie 8th Jun '12 623 of 1317

In reply to loglorry, post #621

Not many here relish the idea of TGT not being sold as most don't want to wait 10 years for their money.- Log,

Given that at the current price, SOCO International (LON:SIA) could theoretically buy back every single share in less than 5 years, or pay dividends amounting to more than the current market cap in the same timeframe, it seems unlikely that you would have to wait 10 years to get your money. Personally, I would be quite happy if they slimmed-down and just sat there distributing their TGT earnings for years to come, although that looks unlikely.


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extrader 8th Jun '12 624 of 1317

Hi all,

Only 59K bought in today, out of approx 1 million traded. asleep on the job ?

Roll on the AGM, when (perhaps) we can turn heat into light !


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kenobi 9th Jun '12 625 of 1317

In reply to extrader, post #624

Disappointed to see the buy back stop at around 290p. One would expect that if management think TGT is worth $20/bbl or £5+ share price they'd continue buying.

Why pay more than you need too ?
where would the price be without the pontoil and buybacks ? assuming pontoil have finished buying at these prices at least, might the price not drop back ? then you have the pontential eurozone debacle waiting to happen, spanish banks and greek elections,
there may be chances to buy back much cheaper yet, I see no point in chasing the price up at this point.

Re share price vs takeout price since there's a good chance that SV will be bought rather than soco international, and given the shares are tightly held, so a speculative bid will fail, I see little point in worrying about the Soco int share price.

If we can't get a good price for it, float it off, and anyone who wants to buy the income can,


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MadDutch 10th Jun '12 626 of 1317

I know it has been posted before, but I do not want to arrive in the wrong place the day before!

Please post the AGM details here and I will meet you on the day.


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Isaac 10th Jun '12 627 of 1317

FTSE futures are rocketing, up 126 now on Fridays close. I guess that is the end of our buy back....

Brent is up 196points at $101/bbl now......Looks like we are going to have a few more bullish days.

Soco let's do a deal..... :-)

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MadDutch 11th Jun '12 628 of 1317

They will be in renewed misery at the ongoing Euro disaster in a few days time.

Meanwhile lets take advantage of the mini bull tomorrow.

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marben100 11th Jun '12 629 of 1317

In reply to MadDutch, post #626


The AGM is at 10:00am on Wednesday, 13th June at The Lincoln Centre, 18 Lincoln's Inn Fields, WC2A 3ED. I am not planning to attend myself, as I don't currently have a holding and have a bunch of stuff to catch up on.



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Spurticus 13th Jun '12 630 of 1317

A little news from yesterday.. more details likely from the AGM.

- PV Oil offered two 300,000-barrel cargoes of Te Giac Trang (TGT) for Aug. 1-5 and 7-11 loading. The tender will close on June 18 with bids valid until a day later.

The spot volume comes as Vietnam is raising output at the field to above 50,000 barrels per day (bpd).

Last month, PV Oil sold 40,000 bpd of TGT to term buyers
Shell, Vitol and Unipec at a premium of $6.60 a barrel to dated Brent for July to December.

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ExTownie 13th Jun '12 631 of 1317


Well spotted. Since these sales are two months forward, I wonder if they are including TGT phase 2 in the rise to 40k and then 50k bpd? Hopefully we'll have a better idea of production levels after the AGM.


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adam 13th Jun '12 632 of 1317

Just back from holiday. It seems to me the buy-back authority for £25m included the period prior 16/01/2012. Otherwise it is too much of a coincidence that just £50k shy of £25m was bought back from inception in November 2011.

8,962,268 Wt. Avg. 278.3897861 £24,950,039

Anyway looking forward to some AGM updates.

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Tan 13th Jun '12 633 of 1317

General sentiment poll of the 11 Foolpedias in the pub after AGM

Asked the usual question of will you buy sell or hold? Got a general "will hold " response then realised that 4 of the 11 were already overweight in Soco and 6 had a full single share allocation in their portfolio on whatever criteria they used to spread risk.

So most will just hold, one may sell due to lack of dividends or distribution, Only two will buy more if general market tanks.
So asked question would you buy more now if you currently had half a share allocation and 7 of 11 said yes.

My gut feel is that we will still be having an AGM next year. about half thought same.

some bits from AGM

US$180m cash in bank on this Monday

13,294 boepd entitlement production,
16,000 going forward from Sept when start doing 55,000 black oil
then tweak the FPSO to find limit, maybe start changing some of the water capacity over to Oil as the water pressure from sides is doing the job without need for injection.
Could we do 65,000 on FPSO....yes.

Then drill wells as we need them

we have 20 years in field (so not being timed out while under recovering)

HI to H4 does not justify another FPSO which was included when 90000 was mentioned last year so need to get good result on H5 to get agreement to spend $500m on second.

h5 has technical and information collection issues that we will cover before we decide to drill.

TGD - roughly a $80m lump of costs are not recoverable against TGT , a second smaller but not defined amount can be offset recovered against TGT.

Soco is now the second largest oil producer in VN, after Russians.

Issues with ramp up were due to technical views of partner used to the "bad" issues of water in a basement situation and getting them used to the "good " issues of water as a side driver in this type. Partner now understands and is fully on board with ramping up to capacity of the FPSO. This meeting of the minds process took a year.

We are woefully undervalued when compared to North Americans and ....

Enjoy and maybe see you next time EGM ,AGM or whatever


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nigelpm 13th Jun '12 634 of 1317

hmm.. to top up yet again or not.... very very tempting

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loglorry 13th Jun '12 635 of 1317

Good news if PV are really now onside as we are now told. A bid won't have happened while there was a dispute on production ramp up so vital that is resolved. Not sure if we can take their word for it though so the proof of the pudding will be where production is in September.


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ExTownie 13th Jun '12 636 of 1317

Log - i guess this talk of increased cooperation with PV fits in with the post by Spurticus (630) above which shows that they are already raising production to 40k and then 50k, so we should see more evidence of it well before September with any luck.


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kenobi 13th Jun '12 637 of 1317

Yes I agree definitely good news if PV are now definitely on side,

of more interest is talk of looking at reserves, a date of september was suggested, as a possible reserves update, I got the impression they were getting it assessed.
Talk of good recovery rates and perhaps using 50% is appropriate, but also of getting a P3 assessment of what else might be there.

The big thing that was new to me was the H5 prospect which looked typically big and to the south of the other blobs. I don't know on what basis this is talked about , but when asked when they were going to drill it, more siesmic is required first, so I think best consider that icing on the cake if it comes off. My notes say that H5 was initially planned for 2016, but that now it could be next year, I guess this could be the decider on whether to up production capacity. The issue isn't if they can get more than 70k out, it's justifying the costs of the extra capacity.

Last year the figures we were told were 55k by end of 2011 and 90k by sept this year on start up of phase 2,
now the numbers seem to be 55k on startup growing to 65 maybe 70 depending on what the fpso can handle. not much talk of tying into bach ho, although if H5 is a big strike that's still on the table as an option.

Our dear friend MD asked about divis, (I was about to as a follow up but I think they'd heard enough from me), It sounded distinctly vague, last year, it sounded definite, that there would be a divi this year if the money wasn't needed for other investment, when questioned they referred back to a slid that talked about distribution to share holders, point 2.3. So maybe something there.

If we take them at their word, then we've been through a rough patch with PV where we had to educate them to this being a very stable production unit, not like the basement wells that might water out. And now everyone is onside to up production.
Good news on TGT is that although water injection had been planned from 2013 it now looks like it won't be needed until later.

I got the impression that it will be tough to go beyond the 65-70k of the fpso, will the partners want to spend $500m on another fpso ? or pay for a 15km pipe to bach ho, and pay to use that ?
Mr Story mentioned that the Thais are loathed to spend money increasing production once an asset is producing.

So what of future prospects, well apparently we are nearly pregenant on several counts, as in deals nearly done, but a deal nearly done is worth nothing until it's done. Story mentioned about how he knew the head of the thai oil company, he had known his father, and got the company involved in vietnam where they had made a lot of money, I suggested that perhaps there might be opportunities there, and he said yes but there were issues to work around. So there might be some possibility of something in Thailand in the future, but nothing definite. Roger Cagle interupted at one point and suggested there might be 4 significant deals in the tubes, but they might well have said the same last year. The fact is if they come off we get a crack at it, if not, well that's life.

On to Africa, it hasn't worked out, but they're going to try different plays, pre rather than post salt, or vice versa, again, sounds like wild cat drilling, nice to have as potential upside relatively modest cost.

Block 5, in the DRC was mentioned, they plan to do the aero survey to target where to do siesmic. Sounds like perhaps focused on the lake to start with, they mentioned seismic on the ground very expensive to do, no doubt there is a boat capable on the uganda side of the lake that can be rented at modest cost. In so far as drilling, perhaps drilling from the coast under the lake. again to keep costs down. If there were a big find there then there is always the option to use a floating platform, to appease environmentalists, so it is virtually invisible, though I guess this carries more risks in the case of a leak. Interestingly Mr Story made the point that the protected mountain gorrillas are not in the block they are infact 30-35km from the block and up a mountain. My limited understanding of the situation was that they were in the block but nothing was planned near there, perhaps part has been relinquished, or more likely my understanding was wrong.
I believe there are still issues here, it is a national park, and a world heritage site, though of course it does depend how much oil is found. I guess there is infrastructure in uganda for export of the oil which might be usable limiting the disruption in this area.

Very little talk of selling Vietnam this year, thought the valuation gap is closing, and some others said that Roger cagle had said that with phase2 coming on line and production hitting 70k, the gap would shrink, I think we have to consider H5 speculative upside at the moment. The phrase "it's just a plumbing job" was not used, which has been code for it's for sale in the past. However as ever they did say that when someone elses valuation matches theirs it's for sale. With a reserves update due in September I would suggest the likelihood is that that is the earliest date, more likely 2013. As long as the share price starts to respond I don't mind waiting.

Another point that was made was that the company were looking at increasing their stakes in some of their blocks,
I guessed they meant in africa where I guess it wouldn't cost much, and would increase rewards on a success, with the cashflow from tgt, I guess there will be less pressure to farm down going forward.

On that note, Ed Story, did say something, now I might be taking this completely out of context, but he did say something about the company not being valued correctly in this geographical area. I know we've discussed here floating SOCO vietnam on an exchange, perhaps in Singapore ? I did wonder if this was what he was alluding to.
I did ask about the share buy back, and if they'd considered a tender offer, Story said yes, they'd discussed it but didn't sound like they were seriously considering it. Sounded to me like, there's a potential crisis in europe, if the valuation falls, we'll be ready with a big bazooka buying back shares.

Sounded very much steady as she goes, things are happening, they want the share price higher too, perhaps not keen on divis, not sure. Perhaps there will be an option of more shares or cash ? using the treasury shares to do this (just shooting from the hip). The real good news is that it seems everyone is on the bus to increasing production, hopefully this will get rid of any doubts people might have had that it was a geological issue rather than a partner issue.

I'm not planning on selling, I might top up marginally, like the company I plan to keep some powder dry just in case the eurozone problems get worse. I don't know if I've missed anything, I hope I haven't misrepresented anything, this is how I saw/read it, I'm interested in hearing other views.

sorry it's a bit rambling, I had a couple of pints after the meeting, and I'm only just back,

hope it helps,


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