Vietnam Assets

Ahaaaah!

so perhaps the game is once again afoot?

I had been looking at the share price this week and wondering whether the time was right for a bit of toe dipping.

I'm out of oil altogether these days and am not contemplating a major re-entry - but perhaps a couple of toes would be worthwhile.

Will sleep on it.

T

The early start-up of H5 that was flagged at the 2015 AGM in June seems now to have been confirmed:

.....everything is now ready for the offshore installation to secure the target of first production from the TGT H5-WHP in August 2015, two months earlier than the deadline approved by the Government, which increases the production output from the TGT field by more than 11,000 barrels per day. This achievement not only safeguards the production plan of PVN, PVEP and the Petroleum Contract’s Partners of Block 16.1 (SOCO, OPECO and PTTEP), but also makes a contribution to the national energy security, territorial integrity and offshore economic activity security.

Given that the H5 topsides sailed away 5 days ago for the installation, I'm guessing that this morning's announcement of the results date followed confirmation that all had gone well in Vietnam with the installation of the topsides - and that we may be looking at 5th August as the date of first oil from H5. That early increase in production will be very welcome indeed as should help considerably in progressing the RAR and revised FDP for the TGT field as a whole - which is a key catalyst for value, IMO.

Article from 7th Sept that I've just noticed:

Construction of the H5-WHP (wellhead platform) jacket and drilling deck is complete. Offshore installation of the platform should be completed soon, with the jackup Naga 2 due to start drilling the five initial planned wells from mid-September onward.

Production will be tied-in to the FPSO serving TGT via a pipeline from the H5 WHP to the H1 WHP.

The FPSO’s oil throughput remains contractually limited to up to 40,000 b/d of its 55,000 b/d capacity. De-bottlenecking of the facility and increasing TGT production are therefore priorities for the partners.

However, a delay to this year’s drilling program has forced operational planning changes, the main one being to accelerate testing of the FPSO’s total liquids (oil and water) handling capacity.

The test program in July successfully confirmed an increase to around 140,000 b/d of liquids. It also confirmed minor additional modifications are needed to increase the capacity to more than 160,000 b/d.

IIRC the previous total fluids capacity was 125,000....so if they can both raise the total fluids capacity and convert some capacity to oil then perhaps production can be raised sooner than expected?

FH - interesting thanks.

In 2013, HLHVJOCs’ successfully drilled and performed well testing operations on the TGT-10X. This was the key for the HLHVJOCs’ Management to turn the green light on for the construction of the Production Platform for TGT-H5 structure.

I assume that they need to have decided between using an FPSO and a tie-in before constructing this production platform?

ET

Small snippet on drilling challenges(Cementing/high pressure) & opportunities with new rig:
http://www.hlhvjoc.com.vn/hoanglong/en/news/content/410/2014-2015-hlhvjocs-rsquo-drilling-campaign-opportunities-and-challenges.html

FH

Hi ee,

On a glass half full basis, that means there's more capacity for our own production.....

On a glass half empty basis, is there any read-across for us in the reasons for Talisman's shortfall ?

ATB

Slide 16 ("page 14") from recent Talisman presentation, showing production at HST/HSD was only 8,000bopd for 2013 and is forecast stuck at 12,000 bopd for most of 2014 - suggesting that the capacity boost for FPSO testing is likely to have to come from TGT as HST/HSD doesn't seem likely to deliver as planned.

It is interesting to compare the flow test results on the TGT-10X well on the H5 fault block with the test results announced by Talisman in the Nam Con Son basin.....a total of 7,000bopd from three zones - all of which were much heavier than SOCO International (LON:SIA) 's recent test of 27,600bopd.

I'd say that Talisman's Vietnam business is in need of a big shot in the arm!

ISTM that the farm-in sends out a signal that anyone interested in buying the whole co in order to get hold of the Viet Nam assets could achieve a cleaner deal by moving in the near future rather than waiting. If Soco does more farm-ins or buys more early stage explo assets then a) they make the portfolio more difficult to integrate/rationalise and b) they spend cash. A predator would probably prefer to avoid bot those things.

So does the recent farm in make a whole company sale more, or less attractive to potential suitors?

Seems like more work for the buyer if his priority is production as he will presumably want to cover himself on what value he can achieve on any likely disposals of the exploration side before coming up with a sum of the parts bid price?

http://www.upstreamonline.com/epaper/article1342628.ece

Te Giac Trang satellite 'set for Spring sanction'

...Soco International chief operating officer Anthony Maris said that the explorer was looking to add another wellhead platform to the development.

“The H5 is the fifth fault block in the sequence, it’s a southern satellite to the existing field and we will be looking to put a new platform similar to what we already have on the field and tying it in over the next 18 months to two years,” Maris said.

“We’ll be going through the winter pulling together all the required documentation and approval processes that we need for both internal and Vietnamese government approval, and hopefully sanction the project early in the New Year, in March or April,” he said.

....preliminary development plans for the satellite expansion could see jacket and topsides construction in October 2014 and first oil in September 2015.

Thanks ee.

Thanks ee. I had wondered if PTTEP were potential buyers of SOCO's stake wishing to keep production low or at least talk down the value. Do PV tend to issue statements about well tests? I haven't seen one, but it would be helpful to see their take on this.

ET

I think all parties struggle to avoid putting the PR cart before operations horse. We are some way off getting a clear and agreed decision from the JV about how production could be raised. Those discussions must reach a conclusion (and be approved!) before they can be RNS'd.
The direction of travel is pretty clear....I have in mind the Spring as the time when they can be clear on the forward production plans - assuming we get that far, given a 2P update in the meantime.

PTTEP's view suggests a different attitude to SOCO, with no mention of raising production:

Tevin Vongvanich, president and CEO of PTTEP, said that the well is the first appraisal well drilled in Area H5. The drilling campaign started on June 19, 2013 at the 3,880 metres depth and successfully yielded petroleum discoveries with 119 metres of net pay, on August 11, 2013.

The flow tests showed in 1st zone of Oligocene C, crude oil flow at approximately 6,083 barrels per day (BPD) and associated gas flow at approximately 0.88 million standard cubic feet per day (MMSCFD); in 2nd zone of Lower Miocene 5.2L, crude oil flow at approximately 4,896 BPD and associated gas flow at approximately 1.29 MMSCFD; and lastly, in 3rd zone of Lower Miocene 5.2U+L, crude oil flow at approximately 4,835 BPD and associated gas flow at approximately 23 MMSCFD.

Further development plan is being studied to maintain the production rate of 40,000-45,000 BPD in Vietnam 16-1 Project.
http://www.nationmultimedia.com/business/Successful-results-from-Vietnam-project-PTTEP-30216272.html

DFTT

Hay you guys there is a lot of chat about this socco but NO ACTION. I have held this stock a few years before & between 2005-2007 the share price moved from around 100p to 500p but now it is not moving yet 0.8% in a month and 6.2% in a year is no good for me! I need to see things moving .Today , (since we are talking oil stocks) , I have noticed DESIRE PET UP 32.7% in just todays movements. From a one year slide AND the average number of shares per day has shot up from about a quarter of a million to around 10 MILLION! Is this a good time to consider buying I wonder? There is a lot of red dots on the stockopedia screen at the moment, I am still trying to find my way round it, BUT something is happening I must investigate further. Don't miss out on the action. Cheers from Lightningtiger & thanks to the 700 club.

I do take SW10chap's point. We should not get over-excited.

In reply to EE - I first heard about the possibility of connectivity at the AGM (I think it was last year). AIUI the ops team had noticed that recent well testing was directly correlated with variations in pressure measured at distant wells already in production. I understood that there were several possible explanations, including the most desirable one. AIUI recent efforts on this subject have been directed towards determining which of the explanations is correct.

The body language was interesting here. Although the person telling me was diligently cautioning me against over-exuberant optmism, he was patently unable to conceal his own excitement/elation at the potential upside.

I read the recent RNS and reported interview as being in the same vein. The RNS was very positive and very confident. It's not often you read an RNS expressed so strongly. Roger Cagle said that this was the best well he had known in his long career. How does the language and the views expressed colour our own assessment of the likely impact? It seems pretty positive to me.

Very good point, SW10. However, I understand that they are confident that connectivity has been demonstrated, even though I don't know the exact basis of that. Perhaps (as someone suggested) they have observed some evidence of depletion.
In any event, I'm sure they will want to do further analytical work and modelling before they can announce any further indications of numbers.

I would draw a distinction between connectivity and the term attributed to RBC by Alphaville which was pressure communication - a term which is (rightly at this stage) more cautious.

It's perfectly possible to have pressure communication even while the hydrocarbons are compartmentalized - pressure can be transmitted through water underneath.

Those who have their mitts on the models will have a view as to which end of the spectrum we are, in the meantime RBC's caution may be worth sharing.

SW10

Surely the key issue touched on by connectivity is the size of the reservoir and the extent to which it is charged with hydrocarbons.

If the reservoirs penetrated by two wells are found to be connected, then the implication is that there is a charged reservoir which extends, unbroken, all the way from one to the other. That suggests that prior estimates of reservoir area and capacity, based on the idea that discovered accumulations are separate and discrete, will need to be raised to recognise that what has been found are not discrete accumulations of hydrocarbons but a single large one.

The increase in reserves concommitant on improved recovery factors is then a double whammy since it will apply to a larger reservoir.

It looks to me that my £7 target price might very well prove unambitious and pessimistic.

:~)

:-)
No rhomboid, I really don't, I'm afraid. The connectivity is going to help recovery factors (for which even RPS will give them credit) but I am wondering whether charging from below might indicate greater OIIP than they have thought hitherto.
But trying to guess numbers is a problem for those well above my pay grade on technical matters.
Perhaps we'll get some clues when all the tests are in and have been integrated into the models.

Evening EE

If your theory is correct do you have any handle on the likely impact on recoverables?

"How long is a piece of string" does not constitute a satisfactory response (:

IMO they simply observed pressure changes in some of the production wells. My guess is that the connection are mainly in the lower Miocene LBH 5.2.
I have a theory that the charging of TGT as a whole may be mainly from the Oligocene under the H5 block (via faulting up from the source rock to the ILBH 5.2 where most of the gas migrated to)

The only way you can tell if a field /well is in pressure communication is if there's depletion detected in any new wells drilled, Or you detect the production pressure effect from one well in another. It may be on the same pressure gradient,but not connected but that's a different thing.
So I wonder if they found depletion? The high GOR upper layer also indicates a different hydrocarbon regime. It will be way more complicated. However a great problem to have and a great result.
FH

.................The latest well and the “imminent gas sale” contract will boost the total TGT field resource estimate to more than 1.3 billion barrels of oil equivalent, Cagle said.

lets hope they can convince RPS of that figure, at 30% ownership (is it a little more?), that gives 390M

so at recovery factor, and assuming $20 a barrel

30 117M $2.3BN
40 156 $3.12BN
45 175 $ 3.5BN
50 195 $3.9BN

so, pretty good considering there's nothing in there for cnv, or africa,
(given that current market cap is just over $2BN)

So will RPS suggest 1.3BN ? what is the story re connectivity ? could this possibly lead to a bigger upgrade,
or is this 1.3BN a soco figure they have because they think they can prove connectivity ??

we shall see in the coming months,

K

There has been some comment in various quarters (eg ADVFN I think) on the lack of comment in the RNS about connectivity. Plainly, however, concerns are misplaced - and the well has indeed proven connectivity with the rest of the field.......

....belatedly I looked up Alphaville from today and found this comment from RBC (having not seen the note from my usual sources):

Before year-end we expect SOCO to complete the gas sales
contract for the TGT field, and early in Q1/14 we expect the company to
release a reserves update. The TGT-10X well encountered nearly 120m
of net pay and it is in pressure communication with the rest of the
field. The reserves auditor should be able to build in the well (net pay,
permeability, porosity etc) and seismic (velocity data for depth conversion)
data, plus a further 12 months of production history, to finesse their
reserves estimates.

Happy days.....or should that be daze?  ;-)

A little more from that article:

This is another excellent result at the TGT field and confirms its status as a world-class asset,” VSA Capital Ltd. analysts led by Dougie Youngson wrote in a report. Soco has “potential as a takeover target.”

Cagle declined to comment on any possible bids.

“You’d think that people who are interested in production assets would be more interested now than they have been before,” he said. “There has been plenty of interest.”

http://www.businessweek.com/news/2013-10-02/soco-doubles-estimate-of-vietnam-well-to-200-million-barrels

It isn't entirely clear to me who said the sentence in bold

ET

Thanks ee. I hope that the partners are as keen as SOCO to step up production.

I would be interested to know whether the company, along with their partners now have enough information to make a decision about ordering an FPSO / tie-in, or are they likely to want further drilling of the H5 block to firm up the likely production capacity requirements?

I guess that placing such an order does not require an RNS (?), but it could be a very positive signal to the market.

ET

ee and fh - thanks for your commentrs

The upper zone has a high GOR(Gas oil ratio)-6300scf/bbl,the lower zones in the 120-220scf/bbl range. This would appear a volatile oil ,and may have a higher API verging on condensate. It will be interesting to see what the CGR (Condensate gas ratio)is in liquid yield terms from the gas. Without having seen the logs its hard to know if this is gas from a specific interval or due to the oil charge characteristics of this upper section.

Knowing the nature/form/pressure of the gas is important. It may cause some issues with connectivity in a pressure sense (not geologically)
FH

I take great exception to the claim that I have been abusive just because I raised the question about the South China Seas in relation to Soco. Whilst emptyend might be the authority on Soco it should not give him the right to kibosh innocent questions. I regard this last post of his as quite scurrilous and defamatory.

Comparing the results from the three tests I see that the gas flow from the final zone tested was about 20 times higher than from the first two zones ( and the oil flow was substantially less).

Was this to be expected ?

Rightly or wrongly the reaction was intemperate, arrogant and just plain rude.

Rather rich given your colourful commentary right from the off when you started posting on the Soco thread don't you think?

And that's was before your subsequent remark above - "the Prima donna and all his sycophants threw their toys out of the pram."

Pot kettle methinks.

The history is that I dared to suggest that the South China Seas dispute has a political bearing on Soco and the Prima donna and all his sycophants threw their toys out of the pram. (i.e. that the Vietnamese assets are not in the disputed zone and therefore can't be affected, whereas my point of view was that Vietnam would come under intense political pressure from China, etc..). Rightly or wrongly the reaction was intemperate, arrogant and just plain rude.

Hi Fangorn.

Thanks for alerting me to "History".

Apologies to emptyend and anyone else I've offended.

I'll crawl back under my stone ...

Fleeced,

Adam has had, say we say, a "History" of pointing out the negatives, or implying there are negatives when in fact there are none. Hence the response.

Anyway, water under the bridge. Let's just enjoy the stupendous fact we are now a decent divi paying Oilie, watch it re-rate, and then retire gracefully to more pleasant shores, preferably one without internet..

In case any budding millionaires are looking for some solitude

http://www.buzzfeed.com/lukelewis/7-private-islands-that-cost-less-than-a-flat-in-london

Should you want something a bit more exclusive I have an island in the Maldives for sale at $27m.

Hi adam.

Just a quick message to say thanks for your post 410. I hadn't been aware of the typhoon until you posted.

The intemperate reply (post 412) was unfortunate because it may serve to discourage yourself and others from posting. Six thumbs up for post 412 leave me staggered.

The reply and the six thumbs up say more about those concerned than about you. Keep posting.

Yep, looks too far (500 km?) north to cause a problem at TGT. Also peak sustained wind speed reported as being 73 mph - so not a mega-storm.

Is the typhoon Wutip in Vietnam (74/75 dead so far) affecting operations?
It looks too far north as it made land fall at Dong Hoi and the 3 lost vessels were at the Parcel Islands

As we know, PV have their own agenda as far as timescales for development of this field goes. They want to extend its producing life as long as they can, and their new refinery will not be on line for some time yet. If the potential increase in production does not suit them, I was just thinking that rather than argue with their current or possible new partners, it would make more sense to buy out SOCO Vietnam outright. PV is wholly owned by the Vietnamese government so presumably finding the cash would not be a problem and as Ed formerly said of another field, 'the exploration side is nearly done and we are now left with a plumbing job'
Just a thought, as PV knows the figures better than anyone.
Eric

Hi EE
I think we are firmly on Donald Rumsfeld territory here, ie.

“There are known knowns; there are things we know that we know.
There are known unknowns; that is to say, there are things that we now know we don't know.
But there are also unknown unknowns – there are things we do not know we don't know. ”

The final test result and the validation of connectivity together with high flow rates simultaneously creates a series of vital new "knowns" but equally leaves us with a series of new but good "unknowns"

The chief of these being that if this is one giant interconnected multilayered reservoir the company and by extension shareholders cannot know its scale until a new "model" can be validated by a mixture of revised seismic interpolation in the context of the latest flow tests, and perhaps additional drilling if required?

All in all I'm happy ...

Moving on from the question of next week's test RNS, I've been thinking ahead (no change there then, ed ;-)) to what the potential impact would be if next week's test also "exceeds all pre-drill expectations". In particular, I am thinking about the impact of "exceeding all pre-drill expections" in relation to RPS STOOIP estimates, especially if the connectivity theory can be proven, but also in relation to what the high flow rates might imply for supporting SOCO's view on likely recovery rates.

This is what was said back in February:

RPS estimates a STOIIP range from 466 to 958 million barrels of oil ("MMBBLs"). Additional undiscovered STOIIP of 53 to 152 MMBBLs are attributed, in particular in the undrilled southernmost fault block, H5, which will be drilled as a step-out appraisal well early in 2013.  This independent view confirms the Company's overall assessment of the TGT field.

From the information available to date and the limited extent of development in each fault block, in particular the number of producing wells and the provision of injection support, RPS take the view that recovery factors range from 28% to 35%. SOCO believes that additional drilling and longer term production will continue to de-risk the field and impact positively on both the total number of reserves and recovery factors, with recovery factors anticipated to achieve 45-50%, as has already been demonstrated in several producing intervals and as is seen in similar producing horizons in other producing fields in the same basin.

It is worthy of some serious thought to consider how these views might have changed in the last 9 months:

1. RPS should be close to having a working model of connectivity between reservoir horizons (end Q3 was indicated originally - but I'd now not expect the work to be finished until December), rather than assuming there were 55 discrete "buckets" as they did in February.
2. Since (if my guesses in post 400 are close to reality) the results of TGT-10X will be streets ahead of all other wells on TGT and also well ahead of all internal estimates, I think we can certainly assume that the top-end STOIIP estimate will be much higher.

I would guess that RPS's core range for STOIIP (excluding H5) will be raised and narrowed, as a result of the interconnections in their new model. Something like 680 to 1100 MMBBLs STOIIP perhaps?  Add on a number for H5....say....... 200 to 350 MMBBLs.........and that would raise total STOIIP to 880 to 1450 MMBBLs. I'd assume that additional undiscovered STOIIP would be around 50 MMBBLs.

What do others think? I am wondering if that might still be an underestimate. Much depends on the impact of connectivity on their STOIIP numbers - and I really don't have a good feel for the figures (because none of us have any idea of how big the "blanks" were between the 55 discrete reservoirs in the previous model).

ee

Re. Press coverage - there was a piece in Tempus today (The Times - 26 September). It may be on-line but not available to non-subscribers?

Final paragraph verbatim - "Soco is in an unusual position among smallish oil and gas explorers in that it can offer a reliable dividend stream and a projected yield of about 5 per cent next year. The shares, up a penny at 430p, have risen by 12 per cent since I suggested they were worth a look in March, but they still look a good long-term punt."

First four paragraphs of article broadly reiterate recent RNS announcements.

Although I knew yesterday's general meeting was going to be confined to the one resolution I arranged to attend with a friend who is an extremely long term holder. Only one other PI attended, someone that is known to my friend and I from Oilbarrel and the old Motley Fool pub evenings ( I have long given up on both of these).

The meeting was chaired by Roger Cagle with Cynthia and John Norton in attendance. After the meeting I asked why Soco still gets such scanty and inaccurate press coverage ; apparently over the last two years oil shares had been out of favour with " buy side " analysts but the forthcoming news flow from Soco should raise the company's profile as in addition to the result of the final test currently in progress on TGT - 10 more news is likely from Africa.

The only thing I can say for certain is that the quality of the coffee and biscuits which Clifford Chance serve to their clients is second to none.

It certainly looks to have the potential to be excellent.
This well would likely be in the top 50 ,or even top 25 wells of any major-another way of looking at it.

The final test is of the Lower Miocene Intra Lower Bach Ho 5.2 Upper and Lower sequence, testing an additional net 88.6 metres. This test has just commenced and should be completed in another 5-7 days.

I've just been chewing through some of the prior test RNSs on tests of these sections to see if some reasonable expectations can be extracted from the numbers. The distinction between ILBH 5.2 upper and lower has only been made on two nearby wells - namely the TGT-6X and the TGT-7X:

6X : 30m of the lower ILBH 5.2 was tested at 6,650bopd (221bbls per metre tested); 28m of the upper ILBH 5.2 was tested at 7,840bopd (280 bbls per metre tested)

7X: 36.5m of the lower ILBH 5.2 was tested at 7,100bopd (195bbls per metre tested); a test was also conducted on 13m of the upper, producing 1,000 bopd (77bbls per metre) but this was noted to be relatively tight.

The TGT-3X test (which was also close to the 6X) RNS just referred to the "LBH 5.2" and tested 60m to produce 9,008bopd (150 bbls per metre)

Obviously there is the potential for massive variations in the test results, depending on tightness of sands etc. But, on the face of it (from the above numbers), we might think that a flow rate of 150bopd per metre tested would be a conservative expectation for a successful test and an optimistic expectation might be around 250bopd per metre tested.

That would suggest that a successful test of 88.6m in the ILBH5.2 can be expected to produce somewhere in the range 13,290bopd and 22,150bopd. Given that even the "conservative" estimate here would take the total combined flow at TGT-10X to a shade under 30,000bopd...... and a more optimistic expectation could be as high as 38,700 or so...... I think  there is every chance that the test results will contain a headline-grabbing number in the industry press (even if the regular press manages to miss it entirely! ;-)).

Put another way, how many exploration wells globally have produced 30,000 bopd on test in the last year? Does anyone have the details close to hand?

......ps I think that would be the sort of test result that Richard Slape used to refer to as a "barnburner" ;-)

 pps....I think I'll update my unresearched guesstimate (23-30k) in posts 388/389 above......35,000bopd would sure be a nice round number ;-)

I don't want to muddy the waters but perforating is also referred to as gross perforated  interval and net interval.

For example the gross perforated interval is the distance between the top shot and bottom shot. Where as net is the footage of perforations. Guns quite often have blank sections,gaps at the connections,are loaded to match the sands to be perforated etc. Hopefully your net pay equals your net perforated interval.

Another issue with net pay is that its determined using cut offs--Sw,/resistivity/Shaliness,Rw etc. Quite often in thin bedded zones net pay is underestimated initially due to these cut offs and the fact that resistivity logs are suppressed in thin beds.

So if we are perforating more net footage than stated net pay it may be because there's a suspicion that some thin beds may contribute to production.

However all in all excellent news  far.

FH

Fantastic results but I cannot make sense of the "net pay" numbers. The RNS refers to 250m of gross pay and 119m of net pay. The test results refer to a net 93m in the first section tested and a net 47.3m in the second section tested. Total 140.3m of "net" pay. Yet the RNS refers to 250m of gross pay and 119m of net pay with the third section still to test at a net 88.6m. The total "net" adds up to 228.6m. Can anyone explain the discrepancy?

Great result.

I thought it interesting that Ed felt it necessary to comment "This supports the push for bringing the H5 area on stream as soon as possible. might this indicate some partner drag? BTW still no news of any agreement on payment for the liquids delivered with gas to PV back in the day.

S.

couldn't agree more ee,
they can take as long as they like with these tests, I only wish they'd give themselves plenty of time in the rns, if they had said we will be testing for up to a month and then finished after 2-3 weeks that would be fine. when they say 2 weeks and then after 3 weeks still no results, that gets people nervous and no doubt they end up having to field endless calls from investors saying when will you have a result.

Anyway, roll on to the resevoir model in the next few months, lets see if connectivity can be proven and whether further reserves work, moves the reserves figures (or band), higher still.

K

They're doing a good job of news management......

Ops update:

http://www.investegate.co.uk/soco-international--sia-/rns/operations-update/201309250700068083O/

Looks good. I thought EE might be suffering from a bit of over optimism with his estimate of 20kbopd+. Looks like I was wrong, and he was right!

Peter

Second TGT-10 well test result now in.......16,500 bopd plus and counting!

The final test results are due within the next week and that will be covering fully 88.5m of the middle and upper LBH5.2.......which IIRC is generally the most productive part of the reservoirs (though of course it depends precisely what is being tested).

This could be a 25,000 bopd well IMO....and already they say all expectations have been exceeded!

Given that their expectations were (I believe) approximately double the assumptions contained in the RPS report, I think there is a nailed-on big reserves uplift coming at year-end......

....especially if they are able to highlight clear evidence of connectivity in their final testing RNS!

Thanks ee. It will be interesting to see the H5 results and their plans for expanding capacity, which will narrow this range down a bit.

ET

A slight diversion to the current discussion, but I tend to model future payments from investments for the next 3 years. Given the following five assumptions - H5 has a good flow test, H5 oil will begin production in 12-15 months, a new FPSO or tie-in will be available at the same time, stable oil price, no company sale, I have estimated the dividends as follows: 2014 30p, 2015 40p, 2016 45p Does that sound broadly sensible and in line with the expectation of others, assuming no sale?

Thanks

ET

Let me get my head round the double negative!

I interpret that as "Would I sell at £9.50 if H5 had been developed?

If the free cash flow is in excess of $150 million and there is more dividend growth to come; I will vote against killing the goose that lays the golden eggs, and will continue to add to the nest eggs in the family's ISAs.

Mike

I got the impression, at the agm, that they had a plan prepared, should the H5 exploration well find oil. A 9 month lead time for another FSPO was mentioned. Maybe had conditional contract /agreed heads in place? Obviously needs JOC approval but , 'this time next year', we could be producing >30kbopd net from TGT.

Vietnam to be sold autumn 2014?

Good find ee,
I wonder what kind of groundwork they are talking about. Planning no doubt,
The leadtime for another FPSO would be around 12 months wouldn't it ?
I'm not sure what the latest thoughts re geting h5 into production, I think Ed Storey said
something about having a platform there within 12 months, although I think since then,
we've had an estimate of 2015. I guess that this would mean they have 12 months to do
devlopment drilling to get an idea of what size fpso would be needed. I guess even if
they took the exact same designs, they might be able to make the changes that are being
retrofitted to fpso tgt1. This of course depends on what the water/ oil mix might be, which might
different to tgt stages 1 and 2.

I look forward to hearing more about this groundwork in the future,

K

This Upstream article may be interesting for anyone able to see it in full:

Vietnam’s Hoang Long joint operating company has laid the groundwork for a new satellite field development within its Te Giac Trang oil complex off the south-east coast where the consortium has just made a ground-breaking discovery.

Thanks ee. I am not a fan of news releases being bunched together in general, as it gives scope for burying bad news, but if it was planned to be released that way before they know the outcome, I guess that isn't an issue.

ET

Would they have announced the switch from logging to testing? I had assumed that they were testing by now.

Thanks

ET

well I'll go away and not worry about anything then, check in when I get back, hopefully the divi will be clarified then, and it'll give the shareprice a jab in the arm !

K

Should there be some imminent news ?

last we heard, they were logging on the /H5 well, that was back in July ? about the 20th ?
might they be testing too or wouldn't we get an rns to this effect ?

the well in drc can only be a week or two away too, plus of course the results where we expect to hear about the dividend.

going away on holiday, sorry chaps, me being away has never boded well for share price movements, I do hope that this time is different !

K

That is extremely helpful. Thanks ee and Peterg.

I'm afraid I had forgotton your AGM question, ee.

ET

A bit on Alphaville worth looking at: http://ftalphaville.ft.com/marketslive/2013-07-22/
Covers Jefferies and Merrill's views on today's news.

Note this from Merrill: "Management will
now negotiate with the relevant authorities in Vietnam whether to drill on c.200m
to Target Depth (TD). Soco would not expect any significant increase in net pay
but the authorities may require it for the purposes of gaining geological insight."

Which suggests, if they are correct, that they have currently got to the bottom of the Oligo play, which has presumably come in a bit higher than expectations. If so no likely extension to net pay - but there's nothing in what's been found so far to complain about!

Peter

While this is clearly very good news, I wonder what level of flow test will be required to persuade PV to invest in a tie-in to Bach Ho or a second FPSO lease? Without a means of processing the excess oil, assuming that the existing FPSO is the limiting factor, a fantastic result at H5 could be largely of academic interest to SOCO International (LON:SIA)

When I spoke to Anthony Maris 12 months+ ago, he talked about these options for expanding output, but I have heard nothing since.

I would appreciate the views of others.

ET

"I'm surprised there isn't a little more fix in the price this morning, perhaps later .... "

I'm not. The level of comprehension amongst many "professional" analysts is quite unimpressive. They can't quite seem to get the proposition clear in their minds. Only when there is a briefcase* of used readies open on the desk in front of us will they grasp the idea.

* suitcase, trunk, portmanteau.....

Great News !
lets hope they read target depth and produce a great test,

fingers crossed for LDKEM-1 too !

I'm surprised there isn't a little more fix in the price this morning, perhaps later ....

And all the while the resevoir model is being progressed,  and data is being collected,  hopefully leading to a reserves upgrade,  haven't checked on the figures for H5,  but presumably this is a good chunk of the uncertainty on the way to being derisked,  assuming it flows as hoped,  

I have topped up a few more shares in my pension this morning,

G

I wonder if this opens up the possibility of a smaller than expected distribution in order to husband resources for unexpectedly expensive explo and appraisal? - let's hope so......

RNS at www.investegate.co.uk/soco-international--sia-/rns/operation...

...SOCO announces that the first well drilled in the H5 fault block of the Te Giac Trang field, the TGT-10X exploration well, has encountered approximately 117 metres of net pay section (circa 250 metres gross pay)...

goes on to say that hasn't reached TD yet.

Ca Rong Doh (30% operated interest)
We exercised our option to acquire an equity interest in Block 07/03 from Vietnam American Exploration Inc. (VAMEX) in December 2006 (see press release). Block 07/03 is located in the Nam Con Son Basin. It lies on a trend of oil and gas discoveries directly south of BP's producing gas fields (Lan Tay and Lan No) and immediately to the south east of our producing Chim Sao field.

In 2009, the CRD exploration well (07-CRD-1X) on Block 07/03 intersected approximately 90 metres net oil and gas pay within multiple stacked reservoir layers (see press release). In April 2011, we appraised the exploration success at CRD in Block 07/03. Two drill stem tests of hydrocarbon bearing sands in the Oligocene section were conducted. The first zone tested flowed gas and condensate at rates of 9.7 million mmscfd and 870 bopd respectively through a 40/64 inch choke, and the second zone tested flowed gas and condensate at rates of 17 mmscfd and 1,730 bopd respectively through a 56/64 inch choke. The well was sidetracked to further evaluate the distribution of hydrocarbons in the Miocene sands (see press release).

The exploration potential of Block 07/03 has since been further reviewed and, as a result, it is expected that a further exploration well, Ca Duc, will be drilled in the third quarter of 2013. Our partners in the block are VAMEX and Pearl Energy.



In July 2013, Premier sold its 30 per cent interest in Block 07/03 for a consideration of up to $100 million.

http://www.premier-oil.com/premieroil/operations/vietnam

 

Premier is pleased to announce that it has sold 100 per cent of the shares in its wholly owned subsidiary Premier Oil Vietnam South BV (POVS). POVS holds a 30 per cent operated interest in Block 07/03, offshore Vietnam, which contains the Ca Rong Do (CRD) oil and gas discovery and the Ca Duc (Silver Sillago) exploration prospect.

The consideration in respect of the transaction is up to US$100 million, which includes an immediate cash payment of $45 million. Further payments of up to US$20 million are due depending on the results of the upcoming CRD-3X appraisal well and a subsequent milestone relating to a potential development. Payments of up to US$35 million are contingent on success at Ca Duc, and on reaching certain targets in relation to its development.


The CRD-3X appraisal well will spud at the end of July, or in early August. The rig will then move to drill the Ca Duc prospect. Premier continues to provide drilling support during the transfer of this asset but will not participate in the capital cost of the wells.


Simon Lockett, Chief Executive, commented:

"We are pleased to be delivering against our commitment given earlier in the year to rationalise our investment portfolio. We will continue to focus our resources on projects where Premier is best positioned to add value."

 

http://www.premier-oil.com/premieroil/tmpl/b/m/regulatorynews_item.jsp?ric=PMO.L.TK&ref=66117

 

Very interesting legal article, summarising the difference between the "old PSCs" and "new PSCs" in Vietnam - which are especially relevant because the "new PSCs" are to come into effect for PSCs signed after 8th June.

The conclusion is especially interesting:

Conclusion

Some of the most important legislative developments in the last eight years in the oil and gas sector have been incorporated in the New Model PSC. However, the New Model PSC narrows the rights allowed under the Old Model PSC, and introduces some new obligations for the contractors. This may affect a contractor's decision-making process when investing in Vietnam's oil and gas sector. For instance, since the New Model PSC will not affect existing PSCs, contractors may consider farming into current blocks more attractive than, say, investing in a new block. We would recommend interested parties to watch this space closely in the near future.

.....I am, indeed, watching this space (especially as SOCO's PSC's pre-date even the "old model" referred to in the article).........  ;-)

ee

apologies, duplicate with other thread

>>There may be other significant events - but you all know I don't know the dates of those!

shame !

could someone remind me of the dates of final results and AGM and any other significant events?

thanks

Hi kenobi,

>>>>> although I'm not adverse to them investing in more exploration acarage, I would prefer them buying into something which was a discovery and providing the capital to bring it on line. Something they have proved excellent at in recent years.>>>>>>>>

I wonder whether Soco is amongst the oilco's to have had a look at Aminex's data room ?

Their Tanzanian acreage appears to meet your bill, having had discoveries that need money to develop; the acreage appears quite prospective, being ontrend/onshore the world class gas discoveries adjacent Mozambique; it would tie in with the Son of Soco theory (Africa - focussed); in RC(exChair DPL) and the Portuguese exAmbassador the BoD already has what may be considered 'relevant' East Africa experience; and the 'price is right' (probably) in terms of affordability......

I'd rather see cash-back at this stage, myself, but if they do feel the need (tactical/ego or otherwise) to go down the acquisition trail, I think a full buyout (not just a farm-in) of AEX might be an acceptable way forward........

ATB

You do have to sympathise with the company / JV that until they find out what they have in H5 and probably testing more wells and infill drilling it is hard to plan for capacity that might or might not exist. Add to that, you then have to convince partners who aren't that interested in spending money to increase production an the situation is doubly difficult. So it's understandable that no decision on linking in to Bach ho has been taken. It is more disappointing that the work to increase fpso capacity hasn't been agreed/started, since the costs in this seem relatively minor. I think unwise posted on the fool that this issue with this is getting agreement from the lease company, the insurance company and the company that put up the money for the fpso in the first place. I have no confirmation of whether this is the case, but it sounds plausible. As ee says I'm more interested in the solution to the problem, but we do need to understand something of the problem to understand what the possible solutions might be.

All in all, I can't see anything happening before the summer, and then assuming H5 works out we'll have to bring it into production, and then we'll need some production history, so while anything could happen, conservative planning would suggest we're looking into 2014 before the Vietnamese assets will be sold, and that assumes the partners play along. In the meantime, I hope the management do start paying back some of the cash pile to the shareholders, although I'm not adverse to them investing in more exploration acarage, I would prefer them buying into something which was a discovery and providing the capital to bring it on line. Something they have proved excellent at in recent years.

cheers K

ok peter, I was refering to the report, which we were told would be ready in sept, and has now turned into an ongoing work with no definitive target date. apologies if I've misunderstood, but there is a certain amount of overlap between the work needed on tgt and work needed to be done to get the cpr that we were all hoping for. I appreciate your point re recovery factors, but I do feel that the info we have had so far doesn't match up to the expectations set at the agm. Its easy to fall in the trap now of saying, "oh well, it was always going to take longer". If that's the case, perhaps management might set expectations appropriately,

K

There seems to be a lot of guess work going on regarding the inability to produce & sell more oil at TGT.

I once heard it said that if you dont ask the right questions you dont get the right answer.
So far  suggestions have been:
Insurance on the FPSO
Reservoir testing of layers
PV dragging its heels due to some agenda
Vietnam building its new refinery,but dont see how this is connected as cargoes are open market sold via tanker
Water handling constraints
FPSO hardware constraints-I show these below

There was comment earlier about the value of AGM's. Its an opportunity to ask the right question,but unfortunately one often needs to ask several questions to get to the bottom of things and thats often not possible,so one could say that the way an AGM is run could be changed and broken out to allow shareholders to get to the bottom of things if management dont care to really explain. WIll we see that happening--I dont expect so. I have seen first hand that often management try to think of all the questions that might be asked at at meeting of shareholders and come up in advance with the answers. So you can see what happens-a single question might be asked thats possibly the wrong question and a one liner answer ,pre prepared is given--nothing really is found out.

Looking at the FPSO capacities,and that cargoes can be sold on the open market,the oil storage capacity of 620,000bbls is only 12 days storage. The tanker cargoes are 300,000bbls and thats  6 days production Tanker unloading likley occurs during daylight and may take half a day,so you can see that a bottle neck there could quickly occur. Again its a guess based on data available. We hear of an aquifer,therefore something has to be done with the produced water-is it reinjected,is it cleaned up & dumped overboard & if so whats that capacity? It may be that injectors are not needed for recovery,but they may be required for water disposal. Again guessing as we dont really know the issue.

For what its worth this was given in the 2011 annual results presentation:
Vessel Name: FPSO TGT 1
Date of Build: September 1996
Type of Vessel: Double Hull Crude Oil Tanker
Main Functionality:
Receipt of fluids from WHP’s wells and processing of the incoming fluids,
Control of the WHP’s wells,
Storage of the stabilised crude oil and offloading of crude into “tandem moored” shuttle
tankers,
Treatment of effluent for discharge of water to the sea.
Storage Capacity:
620,000 BBLS at current mooring and riser design configuration
Processing Capacities:
Liquid rate 130,000 BLPD
Crude oil rate 55,000 BOPD
Produced water rate 75,000 BWPD
Water Injection System:
Water injection rate 85,000 BWPD
Gas Lift System:
Gas lift rate 60 MMSCFD

That is another valid point which supplorts our need for regular dividend payments. On a dividend yield of 5%, a 5 year delay will add 25% to to our total return.

Well I think it's hard to argue that that is the case unless you think the management will throw away the money !  The share price will usually fall by the amount of a divi,  however having a divi my lead to a re rating (unlikely to effect the final sale price though! unless its a full company sale including the cash) However it does mean that this % of the total pie can be paid out in advance which has obvious benefits for the holders.  The other think to consider is that it's not such a big deal paying a divi, they could call it a vietnam divi or tgt divi so that it's clear that it is only in place as long as the asset is owned by the company.  There have been hints about a divi,  I know the convertible needs to be paid back,  but hopefully the management will consider it possible to pay a divi too. 

K

But I've reflected and I've read what some analysts have made of things and I have come round to the view that it's more a case of poor expectation management than of failure. It seems to me that the triggers for a rerating and/or a bid are the reserves restatement, the raising of production and the resolution of the inter-connectivity question. I had expected 1 and 3 with progress on 2. What we got was really just a holding statement to the effect that all 3 remain work in progress. That's disappointing. But it's not failure.

Hi T,  please don't feel I'm having a go at you,  I'm not,  just adding my slightly less optimistic view.

Well we can all rationalise anyway we like, but it was a disappointment, analysts don't seem to have been disappointed, but that's because they had a very much less optimistic view coming into this than the average person on this board I would suggest. Which leads us to conclude that the analysts had it right, and I (dare I saw we, include yourself if you will), had expectations that have as yet to be fulfilled. Some of this is the talk at the agm, of reserves upgrades in the fall, increases of fpso capacity and connectivity, none of which have been met. So we thought the market had got it wrong, so far, the market seems to have been closer than I at least.

In fact the review of reserves provides support for Soco's views of OOIP and extractable reserves. Particularly if you consider the fact that the views expressed were effectively based on work completed tp date. For me that's the crux of the thing.

yes true, work completed to date, where as management gave us the expectation that the work would be completed last fall, now it's turned into ongoing work, who knows when they'll get some kind of validation to their views.  But really all we are saying here,  is the the competant people here,  (paid by soco),  many months after the deadline soco have set themselves have raised the possible oil in place to the level soco were predicting.  Not the same as certifying that this amount of oil is likely to be there. (which I presume is what they were hoping for)

Unfortunately, in my mind, all this has probably closed off another exit path, in that there was the suggestion of spinning of and floating a production company for tgt, which would produce income for 20 years, and pay divis,
I would have thought without some kind of certified reserves, it will be very difficult to get a good price for this company. So that's an avenue that is on the back burner for now.

The way I see it I guess the way forward now is to progress,  do the H5 and other drilling on tgt and cnv (if we can get the extra cnv well through).  this should narrow the band of oip,  hopefully up if H5 is a success.  Start some kind of divi,  And then in Q3,  annouce that the asset is for sale, and see what offers they can get for it. 

If other opportunities come along then they need to be looked at on their own merits.  But we surely are coming to the end of what we can add on these projects in vietnam.  Even if other projects came up in vietnam,  then it would be wise to do these in another company structure,  so as to give flexibility of potential exit routes. 

cheers K

Did a bit of googling and this is the latest update I can find on the current state of the new refinery.

A ground-breaking ceremony for the Nghi Son refinery was held in May 2008 but the project has suffered a number of delays.
It is still unclear when construction will start, an official from PetroVietnam told AFP, asking not to be named.

Read the full article.

http://business.inquirer.net/104585/vietnam-signs-9b-oil-refinery-deal

So a meaningful increase in production could be some way off yet.

O&G is is one of the Vietnam's biggest foreign currency earners, and taxes paid by PV amount to around 20% of Vietnam's budget. Meanwhile PV are  agressively increasing their reserves and Vietnam's oil consumption  is steadily increasing.. so I would say that PV clearly have a similar - though perhaps not quite as urgent- agenda to Soco.

You're right of course JD, I've actually done that myself with clicking the "wrong thumb" so should have thought of it! Thank you, appreciated.

Re: the Soco/PV different agendas point, I'd be interested if anyone can comment on whether they think my concern is unjustified, or is it something Soco shareholders just have to accept and hope doesn't become a serious drawback to extracting value?

Curious that my post, which I thought raised a reasonable question and concern, has just been given a "thumbs down" by someone.

Would that person care to explain their reasoning rather than remain anonymous?

They are playing a much longer game than SOCO.

That Soco and PV may have different agendas regarding timescales of production would appear to be an important risk for Soco shareholders. Ultimately, if PV drag their feet or refuse to agree to accelerate production is there anything Soco can do about it? My impression is that Soco have little or no power to force the issue, should they need to.

Also bear in mind that PV are in the process of building a new larger refinery and probably do not want any increased production until that comes on line. They are playing a much longer game than SOCO.

Hi peterg,

I'm not sure I agree with you on the FPSO capacity point : I seem to recall from the AGM and post-AGM discussion that (a) there was a nameplate capacity of 65,000 bopd and that (b) some capacity was earmarked for another co (Talisman ?) in consideration of their contributing for the cost of some other tie-in work........?

I may have been dozing at the back of the class (or flicking ink-balls) but that's my understanding , anyway.

After further reflection (and assimilation of the learned arguments here and elsewhere), I've partly rebought the trading positions sold off after the last RNS : like you/MadDutch, I think there's a more positive consensus than I initially felt.

Time (most imminently 11th March) will tell......!

ATB

Hi MD,

What I don't doubt is that ES was absolutely correct in his assumpotion that the filed is technically quite capable of those production rates.   Oh yes? Are you telling us that Soco did not know the FSPO capacity was more than a third less than the 95,000 barrels per day we were lead to believe would be achieved by August 2011? 

There is no evidence the capacity is less than 95k bopd, in fact there is plenty of reason to think it might be. What there is evidence of is lack of interest by PV in testing the full capacity, plus apparently issues relating to insurance. These can all be overcome, and hopefully will. Yes, as I said, the company could perhaps be criticised for not being clear enough about the potential road blocks in the way at the time, but I see no reason to suppose that the FPSO may not be capable of near to 95k once all the various parties get their fingers out.

This is why I am insisting that we must have a cash return or dividend

As I said, I suspect you will get your wish. However, the company have over the years added considerably to value, including the current value of your shareholding, through exploration, and they have also made it clear that they are currently considering investment in new opportunities. So don't be too surprised if some of the cash currently in hand or being thrown off does not make its way to your pocket via a dividend.

Would I welcome that? It would depend on what they buy into, and what they spend on it. However, I made a decision some years ago that I thought management overall knew what they were doing, and added value. They have always been prefectly clear about how they go about that so my view is if I don't like that then I can take my (considerable) profits and go elsewhere. What I certainly do not feel qualified to do is to make judgements about the best way forward for the company - if I felt my views were more valuable than management's I wouldn't be invested here - so I remain firmly not in favour of a campaign to persuade management to pay out cash. They are perfectly well capable of deciding on that by themeselves.

I was initially somewhat dispirited by the recent RNS. I'd been kind of expecting an announcement of a major reserves upgrade accompanied by a big cake covered in candles with a soprano* inside leaping out to deliver an aria to signal the start of the last act in the extended opera. And of course we didn't get that. In fact my initial reading was that it was all a bit of a non-event. And a not brilliantly communicated non-event at that.

But I've reflected and I've read what some analysts have made of things and I have come round to the view that it's more a case of poor expectation management than of failure. It seems to me that the triggers for a rerating and/or a bid are the reserves restatement, the raising of production and the resolution of the inter-connectivity question. I had expected 1 and 3 with progress on 2. What we got was really just a holding statement to the effect that all 3 remain work in progress. That's disappointing. But it's not failure. In fact the review of reserves provides support for Soco's views of OOIP and extractable reserves. Particularly if you consider the fact that the views expressed were effectively based on work completed tp date. For me that's the crux of the thing. Soco management are effectively looking forward. The reserves auditors are effectively looking at the state of play today. That's the difference between them.

Over the past 10 + years the single factor that has made me more money than anything else is that analysts and those who depend on their work tend to look at history, the present and a very, very short stretch of the future. Often as short as 12 months. I have been able to look further ahead than that and take the longer term into account and it has paid off.

i reckon that Soco management have a reasonable handle on things. I think there is a reasonable chance that they will pull it off. I expect a solid upgrade in reserves and a decent increase in production. As for inter-connectivity - that has always only been a possibility but it would make such a difference that anyone other than a very short termist would want to see it explored. I was disappointed that it was not mentioned. But I'd rather have a lack of mention than an annoucement of a disappointing outcome. I'm presuming that the thesis remains unproven either way at present and that is far from being the worst case outcome.

So, my position remains that I am holding 30% of my investible assets in Soco. I have not fallen in love with the share and I do not think that management are entirely above criticism for mismanaging expectations. But I think they are honest and competent guys trying to land a very big fish. And when you're doing that things do not always proceed according to a pre-conceived plan.

I think it was General Moltke who said "a battle plan does not survive the first contact with the enemy". In other words you can't figure everything out ahead of time, you have to adapt and change. You have to be resilient when things go awry. Of course that doesn't mean carrying on with a failing strategy. But the key thing here is that SOCO, as reported in the RNS, has not failed. It just hasn't won yet.

I'll wait a while longer and see what happens.

* ie a fat lady, not Tony of that ilk.

Re your post 280, I do not often disagree with you ee, so here goes. You posted;

"Put companies and director into two camps: those who seek to exaggerate and talk up their assets to the market and those who try their best to play a straight bat. I would agree that the former should always be treated with caution. And, ex-post, one can point to loads of examples where directors appeared to be giving a straight story - but events have turned out disappointingly for investors.
There is an easy explanation for this - which is NOT that they set out to mislead........ It is that, even if directors make their very best guess with 100% honesty about what will happen, circumstances, events, acts of god, random happenings, contractors not doing what they are paid for, contractors screwing up (eg TGT-2X), geology, data errors, pure luck and a whole bunch of other things can conspire to make it appear that they were being misleading.
I don't think that directors are any better at foretelling the future (for that is what it is, unless you have 100% control over events - which is something that non-majors never EVER have!) than anyone else - but I DO think that most of them try to give a pretty straight story on the way things will develop."

My reply;

Two AGMs ago, Ed told us to expect 95,000 barrels per day within a year. So what are the circumstances, events, acts of god, etc that apply here? 

Even more important to me; where is the return of cash to investors, or dividends? If  we do not get jam tomorrow, or rather jam on the 11th March, I will not invest anything in "Son of Soco."

We cannot feed our families on hopes that an African gamble might succeed one day. May I suggest that all who agree with me here, send personal letters saying that, and send them to all the Soco directors, well before the 11th March. 

A lot of letters does work; in 1996, I organized a campaign that got 2 million protests into the House of Commons, log jammed the postal system there, caused a public climb down by Tom Sackworth the minister,  and defeated the government. 

MadDutch

Hi ee,

>>>>Meanwhile cash is being thrown off rapidly. Merrill see the cash pile increasing by $400mn this year (based on current plans and policies) - which is around 75p per share.>>>

A payout of a third of cashflow, say 25p, would make a lot of PI's a bit more 'gruntled', I feel !

It would leave plenty of room for business contingencies, whilst being a meaningful earnest of management's intention to return value.

Let's see what happens !

ATB

I think with hindsight getting an auditor to accept a 50% recovery factor on a field thats barely started production,no matter what analogues was not a realistic goal,despite it being possible in managements minds.
They have done well to get the current range given that recovery to date is likley in the single digit %.
It may well be that the 50% will never make it to a CPR,but be a piece of factual information in the field's old age. I had thought equity in TGT was 28.5% +2% opeco=30.5% The other thing that was left to interpretation in the RNS was what the definitions of the range for STOIIP. The range has been assumed by many of us to be P90/P10, but it could reflect the end points (P99/P01). I did wonder as the quoted range is a big range for STOIIP so there must be geological uncertainty to create that range.

Given STOIIP is simply = Gross rock volume*(1-Sw)* porosity/formation volume factor and that Sw and porosity and FvF are likley well constrained,the variable is probabaly the gross rock volume and may reflect the connectivity argument.

They also discuss this in the context of being "discovered STOIIP",by stating additional undiscovered STOIIP subsequently. EUR and STOIIP are not really the same as categorised reserves (Read PRMS guidlines). At the end of the day you still need a well to recover the oil,and cleaning out all the STOIIP calculated geologically may not be economic (As pointed out by EE earlier)

My thoughts on yesterdays RNS:

http://boards.fool.co.uk/bit-of-a-surprise-12748445.aspx

Unwise

Regarding Merrill's comment below:
Importantly, management believe recovery rates of 45-50% are ultimately
achievable. This is based on experience of their own and other producing fields in
the basin, thus potentially adding a further 110mmboe to reserves.

Although the RNS says:
The field is early in field life and without a directly comparable field analogue.
http://www.investegate.co.uk/soco-international-%28sia%29/rns/operations-update/201302130700107400X/

So, how do these two comments fit together since the TGT field has no direct comparable field analogue!

Possibly not the clearest bit of text in the RNS, particularly when viewed like that. However, my understanding is that the first bit of the quote is based on actual recoveries achieved on intervals of TGT and by Peremco on the same sands in the adjacent licence, where apparently they exceeded 50%.

That doesn't prove that recovery rates will be that high throughout, but it does provide pretty hard evidence of what may be achievable.

What we should be looking for is sensible management, taking sensible risks. We don't explo companies where management takes no risk at all....

Absolutely agree,  and I'm not saying that the decision to drill tgd a couple of times was wrong,  given what they thought they had at the time it was sensible.  yet the second drill giving it a cos of 90%  was that sensible ?  I recall the agm,  ES saying yes we're giving it a 90%cos ,  and after a pause saying,  although nothing is 90% in this business. 

In this instance,  it seems that perhaps the more prudent info was the throw away comment at the agm rather than the considered published statement.  Maybe it was 90% and we were just the unlucky 1 in 10,  but I can't help but feel there was a bit too much optimism in that figure, 

back to waiting !

K

. I'd suggest it's the nature of being closely involved with a company (particularly a small-ish company) that directors can't help but err to optimism. Looking at it another way, if they weren't optimistic for the company's prospects why would they stay with the company rather than move on elsewhere?

Gosh what a sensible chap you are,  not only the above,  but if they didn't appear positive erring on the side of optimism,  wouldn't people wonder what they were doing in those positions ?   and perhaps invest elsewhere. The reality is they're always positive,  soco always has a story to tell at the agm,  sometimes they're right, cnv, tgt,  sometimes they're wrong,  tgd, africa so far, and this year the way things have panned out since the agm.

we as investors have to take our own views on this  and if we choose to go with their optimistic views or go even more optimistic,  then we have to accept that sometimes reality will let us down.  eg, tgt current production and reserves levels. 

K