Vietnam Assets

Monday, Jul 20 2009 by

This thread has been created to discuss the Vietnam assets. These currently consist of:

a) CNV - an operating field in block 9-2 with 155mn boe of gross 2P reserves

b) TGT - a field which is about to enter development. Gross 2p recoverable reserves of 300+mn boe (management think it will ultimately be closer to 500mn) should be confirmed soon, as the final government approval for the development plan is now very close.

c) TGD and the rest of the HPHT appraisal area - huge exploration potential of over 1bn boe P50 recoverable

d) VT appraisal area - a small discovery area likely to be relinquished

I'll fill in more details in due course.



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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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476 Posts on this Thread show/hide all

fuiseog 13th Feb '13 257 of 476

I am dissappointed by this release. Clearly progress has been painfully slow by comparison with the impression given at the AGM.

I'll be waiting to see if this drop in SP trigger buy-backs.

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kenobi 13th Feb '13 258 of 476

As far as I know there are no "problems" with the FPSO.

no problems but equally little or no progress on trying to extend capacity beyond the boiler plate 55k in the past 6 months or so, 

Considering in half year results august 22nd they said
since start up; peak production of over 60,500 BOPD to date as the FPSO capacity limits are gradually tested

It is disappointing to find that 6 months later we are still producing at 55k, despite the time we have had to gradually test higher volumes.


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kenobi 13th Feb '13 259 of 476

In reply to jseth123, post #253

>>So I've talked myself round to selling, probably, but I'd agree with KMcK that I've missed the boat for selling today though...

well looks like I might see you at another agm in the summer !

the q2 drilling won't quiet be finished, and we'll have some happy estimates by then !


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sirlurkalot 13th Feb '13 260 of 476

It's a shame that it seems reserves figures are quite a bit less optimistic than indications received informally at various Soco AGMs.

How much weight and trust to put on face-to-face meetings with management is an issue that regularly divides small investor opinion. One group of investors loves to meet management, and indeed sees the insights from doing so as their competitive advantage. Another group almost avoids meeting management, since they think that'll distort their viewpoint, and prefers to rely on published data only.

Soco management have acquired a reputation around the bulletin boards as being honest and telling it straight. Plenty of investors here have been to over half a dozen Soco management meetings of various sorts, and have come to trust what they hear. If what has happened today is a let down of reality versus the impressions given informally by management at AGMs, is that a kick in the teeth for the whole meeting-management-to-be-ahead-of-the-published-news investment approach?

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tiswas 13th Feb '13 261 of 476

Production is expected to average 16,000 barrels of oil equivalent this year mainly from operations in the Te Giac Trang field in Vietnam, Cagle said. That’s higher than the 15,496 barrels it produced in 2012......

Soco International Plc, a U.K.-based oil explorer operating in Vietnam and the two Congos, said it’s in talks to buy more assets in those countries as it sells a stake in an exploration block in Angola.

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peterg 13th Feb '13 262 of 476

In reply to loglorry, post #256

How do you feel about that ridiculously wide range of reserve numbers?

It's not the reserve report that many of us were hoping for, and it doesn't look like reserves will be upgraded formally for some time. That's the downside, which perhaps reflects some overexpectation by many of us. However, as flyinghorse has pointed out:

I also noted that the headline statement said that RPS was preparing a reservoir engineering view on STOIIP and recovery facors,not a specific CPR

And for that the wide ranges are probably not ridiculous, they are just the sort of wide range of numbers that a cautious auditor is likely to produce. Perhaps the RNS could have been written better, though I am not entirely clear how. I can see why the company don't intend to commit to reserves figures at this stage, since they are clearly convinced that significantly higher recovery rates can be achieved - and have already been achieved from some of the intervals at TGT (and higher ones of nearer 60% have reportedly been achieved by Perenco from the same sands elsewhere). The assessment is ongoing, and based on current wells and injectors. More will be drilled over the year, so there is good reason to think that the company's view may come to be reflected in the assessement over time.

However, it's not the headline grabbing update we hoped for, and that is not surprisingly going to be reflected in the SP. Even though there is useful confirmation of production working as forecast and lots of cash being thrown off, with potential upside confirmed - though unfortunately it remains potential at this stage.

If I had been sharp, like you, I might have sold this morning - though I suspect the size of my holding might have made it difficult to get the early prices - with the intention of buying back when the dust settled, but that sort of thing has never been my stongest suit.

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bankerbasher 13th Feb '13 263 of 476

Not great news today, however the drop in SP may just ecourage a bidder to make their play. If there is a bidder in the background I would expect them to make their move soon and the market may focus on this and therefore supporting the SP in the Short term. ...time will tell I guess

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tiswas 13th Feb '13 264 of 476

In reply to bankerbasher, post #263

bankerbasher, you could well be right looking at the sp action, unless these are buybacks.

Anyone seen any brokers notes suggesting they are "in play"?

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jseth123 13th Feb '13 265 of 476

There won't be a hostile T/O.

The final buyer won't be buying in the market or 'pouncing' when SP depressed. Being able to negotiate a lower price in light of negative news, perhaps, but nothing to so with SP

IMO etc

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jseth123 13th Feb '13 266 of 476

Just sold half of my holding at ~375p

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tiswas 13th Feb '13 267 of 476

In reply to jseth123, post #265

I am not suggesting it will be hostile but the stock has been well supported in recent weeks. This could be just in line with the market or someone building a stake.

We know from experience that Soco sp normally reacts very badly to "bad news" but this has shown some resilience to climb back 20p from the lows of the day, especially as the first reaction is that we will be waiting another year for an outcome.

And finally, we do have a large number of non-execs, 6 or 7 from memory. They may not have the voting rights but surely they would be expected to exert some pressure on directors if a reasonable offer were to come along, even though it might not meet their, or indeed our highest hopes?

Just my opinion.

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djpreston 13th Feb '13 268 of 476

Ive only seen two broker notes this morning:

BoA ML have issued an amusingly entitled note "A look under the bonnet reveals a well oiled machine". Essentially it says, Buy with 511p TP and NAV saying cash set to rise to $620m by YE13 with the key being the board meeting in March about use of cash.

RBC say - In our opinion, the lack of clarity on TGT reserves will continue to put off some
investors, but the upside case (combined with SOCO’s strong balance sheet and
cash flow) should help retain the interest of many shareholders. And in time,
perhaps with help from industry, we expect the share price to close in on our
core NAV.

So, a bit of a yawn from me. Until we have clarity over the monetisation of Vn and use of cash the shares will just bump along. Personally I stil thnk an eventual takeout with a value of 525p is the most likely so am happy to retain a reliable cash generating machine till then.

Fund Management: European Wealth
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djpreston 13th Feb '13 269 of 476

In reply to tiswas, post #267

I must say, Tiswas, that I had put the constant rising price (from the May lows) down to investors becoming a bit more "risk on" and seeing a company with high and rising cash flows with low capex requirements - a perfect, lower risk oily run by management with a track record for selling assets and the endgame getting closer and closer.

Just hope the strategy/board meeting in March doesnt bring about a decision to go off and explore elsewhere. Maybe a HOIL like development/explo deal woudlnt be too bad though.

Fund Management: European Wealth
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tiswas 13th Feb '13 270 of 476

In reply to djpreston, post #268

Cheers Darron, a better reason for the sp recovery than my wishful speculation!

You saw the businessweek comment above with Roger's remarks about buying more assets?

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WeeEck 13th Feb '13 271 of 476

SOCO seems to be very prone to sell-offs after bad news as I suspect there are a lot of investors/gamblers using it on spreadbets and the bookies are very adept at taking out stop losses and making margin calls which has a waterfall effect on the SP. Once they have been settled the SP usually starts to work its way back . I have used this on many occasions in the past to top up my holdings but am a bit top heavy at the moment with my last top up when they pushed it briefly under 280p

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loglorry 13th Feb '13 272 of 476

Thanks Darron - I don't think Soco is bad value here but its also nothing special given today's update. I know blasphemous as it might seem.

I just can't see how if reserves are so underestimated at TGT they wouldn't have managed to get a bit more of a positive noise from RPS. Looks to me that RPS are unconvinced and so Soco have had to publish some very wide figures they came up with them along side their own much rosier ones. As highgate55 points out taking the average numbers you get a reserves downgrade!

At the end of the day there are better companies out there with similar risk profiles now IMV.


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GasolineAli 13th Feb '13 273 of 476

In reply to djpreston, post #269


You mention doubts about Soco's future exploration activities, and in this regard, their exploration record in recent years has been poor.

They relinquished the TGD licence, following analysis of seismic. However, they spent a huge amount of money in drilling TGD and I have never understood why they did not shoot the appropriate seismic before commencing drilling.

Are you able to clarify this point?



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rhomboid1 13th Feb '13 274 of 476

In reply to loglorry, post #272

Cross post from TMF

I'm out and about at the moment but crunching the numbers gives ;

1 an agreed RPS worst case reserves at TGT figure of c. 49m at a c. 30 % recovery factor on 466m plus 53m of STOIP. At $20 dollars a barrel that gives a lowest possible value on TGT alone of circa 1 billion USD

2 an upper case on RPS numbers of c. 122 m barrels recoverable at 35% recovery rates across 958m + 152m STOIP, worth c €2.5 billion

3 using management guidance of at least 50% recovery rates gives c. 175m barrels , at $20 per barrel that gives a $3.5 billion valuation

...all this for TGT alone!

CNV has always been discussed as circa 50 percent of the size of TGT , though further upside at the latter may skew this relativity going forward.

From memory the whole of Vietnam had booked reserves of c 120m barrels?

My money is on a substantial reserves upgrade this year.

I hold and view a deal is likely this year at a major premium to today's share price.



I'm not seeing anything other here than a reservoir analyst playing it safe and suggesting that more data is required re production to support bigger numbers , I can live with a range of 1 to 3.5 billion USD for now pending that additional data. Shame they weren't prepared to take a stronger view but that's life.

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emptyend 13th Feb '13 275 of 476

In reply to extrader, post #238

I'm now back and working through a rush of 40 posts.

1) I agree that the flagging of end 2013 for reserves changes is a very relevant point - consistent with my expectation all along that the reserves won't be upgraded before a deal is done in VN

2) Re dividend comment, I would expect that on 11th March

3) the issue re the CPR appears to be one of judgement over recovery rates. The independent expert would plainly prefer to see more of the reserves actually recovered before venturing an opinion. Ideally all of them, I imagine...... ;-)

4) deal timing? who knows? It only takes one etc etc - and there is now a decent slab of data. Any serious buyer would make their own assessment of the technical data - and not rely on the CPR.

5) production testing of the FPSO would seem to remain to be undertaken. This is key IMO to the whole process.

6) cash levels and rate of generation are an important part of the picture (well-remembered jseth123)


Re KMcK:

Looks like a horrible day, and too late to sell I think (now 363p)

...hope you bought there then, given the 381p finish  ;-)


Too busy to consider much more at present.


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loglorry 13th Feb '13 276 of 476

The road to ruin is paved with people ignoring 3rd party valuations and trusting what the company says. Cashflow is good no question though but it's not knock it out the park good either. 

By why o why put out a statement on reserves that could be anywhere between 59mmbbls to 175mmbls net for TGT. It is just meaningless. Can we trust manamgent and assume it is the much higher number? Maybe but maybe not as well. Furthermore, trusting managment doesn't really get you anywhere because there is no dividend to rely on so you have to just wait for a buy out and buyers trust reserve reports not what the seller is telling them what its worth. 

Sure it might go higher and todays close was pretty strong so that's comforting but I can't see a buyer emerging that quickly based on todays report and I'm sure plenty have run the numbers already.

Meanwhile we have press reports that Cagle is looking for further explo in Africa. Fine and all well and good but most holders of Soco are looking for an exit not to have the cashflow spent on drilling campaigns in Africa. 

Good luck to those who hold but far too much risk here if the numbers come in on the low side or there are any operational problems things will head much lower. Better value elsewhere.



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