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 30th Nov '12 978 of 1317

In reply to kenobi, post #977

is it too early to wish people merry christmas ?


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djpreston 3rd Dec '12 979 of 1317

You grump, Peter.

My three lads have their rooms decorated with their trees set up, advent calendars all's really starting to feel like Christmas chez Moi.
Just need Roger to leave a little present for me now.....

Fund Management: European Wealth
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kenobi 3rd Dec '12 980 of 1317

Soco International, an oil explorer operating off of Vietnam, is turning into the next takeover target for Asian energy companies as PT Pertamina's bid for Coastal Energy Co accelerates the race for energy assets.

Lets hope Darren !

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kenobi 4th Dec '12 981 of 1317

I enquired today re the progress of the reserves review and when an announcement might be made, I am sure that they won't mind me sharing the response here.

The reserves review is running a bit longer than anticipated, but should be available in early January. There are no specific plans for an announcement outside of a normal release on other corporate issues.

So I guess we'll be waiting until next year, and it sounds like they might not announce the results unless there's something else to announce,  or perhaps with the interims or the results

cheers K


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jseth123 4th Dec '12 982 of 1317

I'd say that's promising re discussions with another party actually...

Although, no specific plans for release doesn't suggest the material doubling of reserves or anything?

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peterg 4th Dec '12 983 of 1317

In reply to kenobi, post #981

sounds like they might not announce the results unless there's something else to announce, or perhaps with the interims or the results

Thanks for that K, though I do hope we don't have to wait for the Interims to hear :-) Prelims, or nearby, might well prove to be the case though.

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emptyend 4th Dec '12 984 of 1317

In reply to kenobi, post #981

The reserves review is running a bit longer than anticipated, but should be available in early January. There are no specific plans for an announcement outside of a normal release on other corporate issues.

Very elegantly put, IMO........  ;-)

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snodgrasse 5th Dec '12 985 of 1317

I thought there was a stock exchange rule to the effect that you can't sit on information that might have a material impact on the share price. It so, the statement, "There are no specific plans for an announcement outside of a normal release on other corporate issues" could imply that nothing's happening in the take over front and it's unlikely there's anything to be excited about in the upgrade.

Or, we could be optimistic and read the runes another way....

I hate parlour games.

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emptyend 5th Dec '12 986 of 1317

In reply to snodgrasse, post #985

the statement, "There are no specific plans for an announcement outside of a normal release on other corporate issues" could imply that nothing's happening in the take over front and it's unlikely there's anything to be excited about in the upgrade.

I prefer my interpretation - which is to say that all the loose ends in VN will be tied up at the same time (as I've generally been expecting ever since the reserves review was first mooted). If only I knew when..........

I hate parlour games.

This one is a cross between pass the parcel and musical chairs. Nobody knows when the music will stop - so it is perhaps best to hang onto the parcel or lurk close to a chair for as much of the time as possible. Unless one prefers to go off and read a book.

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snodgrasse 5th Dec '12 987 of 1317

In reply to emptyend, post #986

...Unless one prefers to go off and read a book.

Great Expectations?

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emptyend 5th Dec '12 988 of 1317

In reply to snodgrasse, post #987

 Very good  :-)

Or, even further back, "All's Well that Ends Well" (W. Shakespeare)?

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ExTownie 5th Dec '12 989 of 1317

Ignoring the possibility of a sale for now. On a similar point to snodgrasse, would a material change in reserves (say a movement beyond 10%) not require that information to be released to the market in a timely manner? That would make sense to me, but I am not aware of the rules.


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adam 5th Dec '12 990 of 1317

Not the Comedy of Errors?

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sander4709 5th Dec '12 991 of 1317

Let's hope it's not Much Ado About Nothing...

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tournesol 5th Dec '12 992 of 1317

I think the idea that companies are not allowed to sit on significant information without announcing it is a popular misconception.

AIUI companies are under an obligation to avoid circumstances in which different parties which are active in the market are in possession of different information. In other words nobody should be able to gain an advantage by getting price sensitive information before anyone else. That means that when price sensitive information is released it should be done in a manner which does not disadvantage anyone - ie via RNS to which we all have equal access.

However a company is not obliged to publish price sensitive information if that information has not been made available to any market participant. It can sit on that info as long as it wants to - possibly for ever. The right to withhold info is limited in that if the info leaks or appears to have leaked then the co must act to ensure a level informational playing field.

This explains why some information such as drilling results always gets announced - becasue it is automatically shared with JV partners so nobody can control its dissemination. Whereas other company specific info - such as a take-over approach is sometimes kept under wraps for months or even years - (provided obviously that it is unsuccessful).

In the case of oil reserves, AIUI, companies tend to conduct a formal re-assessment and restatement on an annual basis. In the interval between re-statements changes to reserves will accumulate because of discoveries, depletion, revised reservoir modelling, revised production profiles, changes in oil price which change the marginal economics, etc etc etc. It is not practical for the co to make an announcement every time any of these change. Common practice seems to be that reserves restatements are tied to the annual accounting period and reported in conjunction with financial results.

So, I exxpect that SOCO will undoubtedly restate its reserves but that will be done in an orderly manner in conjunction with its year-end reporting schedule.


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emptyend 5th Dec '12 993 of 1317

In reply to ExTownie, post #989

I knew it would be a mistake to mention Shakespeare    ;-)

The LSE rules are

The principal disclosure obligation for listed companies is to ensure that the
information emanating from it, its advisers or agents is given to the market as
a whole and is timely, sufficient and relevant. Selective disclosure of price
sensitive information, without an announcement, is not generally permissible.....

Listed companies must notify the Company Announcements Office of the
London Stock Exchange (the ‘Company Announcements Office’) of, amongst
other things:
(a) major new developments that are not public knowledge and which may be
price sensitive, without delay;
(b) any change in the financial condition, performance or expectation of
performance that is likely to be price sensitive, without delay;
(c) impending or strategic developments or matters in the course of negotiation
where there is reason to believe that a breach of confidence has or is likely
to occur, without delay;
(d) Board decisions that require announcement, without delay and by no later
than 7.30 a.m. the next working day; and
(e) any speech or announcement made to a shareholders’ meeting containing
information which could be price sensitive, at the same time or before.

The key point to bear in mind is the question of whether an event has or hasn't taken place. Many corporate matters could be considered to be developing situations and not a defined event - unless a document is signed, or a deal is done etc.

In the case of reserves, my view would be that there would be no obligation to disclose unless the definitive report has been both submitted and accepted by the company's board and the results showed a major, price sensitive change. From the latest information, this would appear unlikely to occur before January - and it may not occur then unless forced by some breach of confidence.

I'm focused on (d) for the time being.......


ps...the details may well have changed - I've just noticed that I picked up a 12 year old document. I'd be sure the principles haven't though...

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loglorry 5th Dec '12 994 of 1317

Won't the reserves report be shared with the JV partners and as such have to be released to the market rather like drilling news? I guess if there is a confidentially agreement in place they might avoid this but then that could also be the case with drilling news.

ITSM if it is material they'll RNS it.

"There are no specific plans for an announcement outside of a normal release on other corporate issues"

Really doesn't say anything because a reserves upgrade itself could be a corporate issue. In fact the statement just says they'll announce anything that they would normally announce to do with company. Which is exactly what we'd expect. I think all it saying is that they don't plan to make announcements on things like the price of tea in Uruguay.

So we wait!

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emptyend 5th Dec '12 995 of 1317

In reply to loglorry, post #994

Won't the reserves report be shared with the JV partners

No. Not unless the report has been jointly commissioned.

Any report by any consultant is usually on the basis that it is for the exclusive use of the client.

They would obviously notice announcements though.

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ExTownie 5th Dec '12 996 of 1317

Many thanks tournesol and ee for the clarification.


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kenobi 5th Dec '12 997 of 1317

It does seem odd that at the last AGM they stated there would be a review completed in the fall/September, with no mention that nothing would be announced. The whole thing slips, well at least 3-4 months, it's not over until the review is in, and now they're saying they won't release the info outside normal announcements.

obviously I'm hopeful that ee's interpretation turns out to be correct, the other interpretation I guess is that by the time we get to Jan, we're that much closer to the regular announcement dates, so perhaps it's more reasonable to wait until then.

Still no point fretting about things we can do little about, lets see what Jan brings.


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