Soco AGM - June 23rd 2011: Attendance, Questions And Views?

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9th Jun '11 by Murakami

109 comments 18593 reads

By popular demand, an event thread for the forthcoming Soco AGM at The Lincoln Centre, 18 Lincoln’s Inn Fields, London WC2A 3ED on 23 June 2011 at 10 a.m.

Who's going?

Anticipated questions?

Thoughts arising?

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About the Author

Murakami

Premium Member

109 comments

Isaac

17th Aug '11

emptyend - 1 Jun'11 - 13:54 - 6662 of 6916

Oh the traders will always try to squeeze people out when a big round number appears, partly because some will sell short at round numbers. When they give up, the TA crowd will usually pile in and take it up quickly. It is now nearly 3 weeks to the AGM - not impossible that the shares will be nearer £5 than £4 by then......

http://www.advfn.com/cmn/fbb/thread.php3?id=14382883&from=6662

repobear

17th Aug '11

Hi Isaac,

I have a feeling that your days of shoving ee's less than good calls on SIA timing back in his face may be edging towards an end and no doubt we'll all breathe a sigh of relief on that.

None more so than ee himself who having set on a big pile of SIA shares for around a decade will finally proved right in the only thing that really matters.........he made shedloads of money.

FWIW, I believe the price/risk reward and fairly rapid profit possibilities in SIA were exceptionally good of late.

The quote above is pretty lame in any event, as Soco has done far better than most other oil companies over the last few months, or quarters, come to that.

If you can't do a whole lot better than that I'd leave it.

repo

emptyend

17th Aug '11

"not impossible" means exactly what it says.

kenobi's commented related to expectations for next July - those haven't changed one iota.

I've never pretended to be a market-timer....and I would make exactly the same calls all over again - because nobody but nobody can predict with any certainty when M&A events will take place (until they are looking at the past through a rear-view mirror).

Equally I do not see why people should complain if I have accepted a particular risk/reward/timescale relationship (which in effect I did in 2007/8) simply because ex-post one can see that a better one has arrived. It is fortunate for those who put the cash aside to take advantage - and I have no complaints myself...

Isaac

17th Aug '11

But you seem to consistently state price predictions and when a takeover is likely to happen. And your now talking about July 2012 price target when it was in Q4 last year that you indicated a sale will happen in Feb 2011 etc

We have been here many times.

Anyway I am actually venting my frustration at management more then anything.

Soco is my largest holding in my portfolio, it has been for a long time.

The company is worth £1bn so there is a lot of money at stake here.

The price of Brent is around $111/bbl (historically a high price) and we are producing from TGT.

Why not take some risk of the table!?

If they want to have fun with exploring in Africa then so be it, I promise to be on that journey with them in a smaller Soco......I just don't want to risk a large amount of money in the process!!

At a time when Oil prices are high and major oil companies are divesting assets I think it is only prudent they sell TGT especially since we are now in production......................

I just don't see much more value being added to TGT so see little point in taking the multipe risks that are present by holding on.........

The management should actively market the assets and sell to the highest bidder.....

Spurticus

17th Aug '11

we are producing from TGT

only just...we hope...

The management should actively market the assets

how do you know they're not already doing this? Would you prefer an Ebay listing?

...and sell to the highest bidder.....

Let's just pray they're reading this... those low bids can be tempting

Anyway I am actually venting my frustration

A pretty good summary of your last few posts. Unfortunately, they're a little pointless/misguided.

- If you can't stand the waiting, and waiting, and waiting, and.... waiting then it's probably best to sell? In fact, probably best to sell all small/mid-cap E&P stocks? Buy some Glaxo/Vodafone.

Yours in boredom,

Spurti

extrader

17th Aug '11

Hi Isaac,

I was told (by my mum of all people) that "The more chaste a girl is, the more she's chased".

When you opine that 'management should actively market the assets', what exactly do you have in mind ? A 'For sale" sign ?

Any potential buyer worth their salt will already be aware of the state of play (should that be : 'in play'?) of SIA - and any overt 'marketing' would smack of keennness/desperation, with a consequent weakening of Soco's negotiating hand

Let the facts (eg startup/flowrates from TGT) speak for themselves.

This is a case, if ever there was one (perhaps prescient , given likely buyers !) of 'softly , softly , catchee monkey' !

As to keenness to invest in Son of Soco : I'm (in principle) keen to do the same - but am happy to await events to see if shares become available as part of the eventual sale. If you're not, why not sell out now ; set aside whatever %age of sale proceeds you mentally earmark for SoS; and - in the meantime - move on with the remainder to more satisfying/'rewarding' prospects ?

Good luck - whatever you decide to do.

emptyend

17th Aug '11

I've never pretended to be a market-timer....and I would make exactly the same calls all over again - because nobody but nobody can predict with any certainty when M&A events will take place (until they are looking at the past through a rear-view mirror).

But you seem to consistently state price predictions and when a takeover is likely to happen. And your now talking about July 2012 price target when it was in Q4 last year that you indicated a sale will happen in Feb 2011 etc

Most of the time this is because people have asked me a direct question that they themselves have framed. Usually it is they who have set the time period, not me. I try my best to give an honest answer with my honest opinion - if I did otherwise, I would rightly be pilloried!

Back in 2008 (when this "predictions game" first arose) my expectation of an attempted deal in September/October was proven right, as evidenced by the October 2008 RNS of an approach. As you know, this was in the middle of quite a serious financial collapse - and the deal was never done (hardly surprising, especially in retrospect!). But my general stance has always been (and remains) that a deal could literally be done at any time. It needs only one buyer with the resources available and the willingness to meet SOCO management's expectations.

For all we know, a deal could be 99% done as we sit here....

We have been here many times.

Anyway I am actually venting my frustration at management more then anything.

You are certainly venting - at anything and everything. However, the person you are REALLY annoyed with is yourself. I don't know whether that is because you had unrealistic expectations or whether you are just temperamentally unsuited to waiting for anything at all, but I'm sure you can work it out.

Meantime, my view is similar to extrader's - and so is my advice (as previously given many times before - and ignored.....) :

As to keenness to invest in Son of Soco : I'm (in principle) keen to do the same - but am happy to await events to see if shares become available as part of the eventual sale. If you're not, why not sell out now

Isaac

17th Aug '11

For all we know, a deal could be 99% done as we sit here....

Absolujtely. I have no idea as to whether discussions are taking place......I am just very hopeful that this is the case....

You are certainly venting - at anything and everything. However, the person you are REALLY annoyed with is yourself. I don't know whether that is because you had unrealistic expectations or whether you are just temperamentally unsuited to waiting for anything at all, but I'm sure you can work it out.

Well to be honest, I am scared shitless as to what happens with a) the markets over the next year and b) Oil prices both of which I cannot predict with certainty at all.

What I do know is Brent is trading at $111/bbl and TGT is producing and therefore a deal can be done on decent terms. I also know that markets and Oil prices have had a good run since 2009.

I have no problem with waiting ( I have waited and Invested in Soco for several years now) providing I can see value being added for my wait in the form of new reserves or a higher Oil price then there really is'nt an issue. Global growth is slowing as evidenced by the GDP figures published in the US/Europe/China etc so I can't really see how we will get a significantly higher Oil price from here.

So the only way I see value being added to Vietnam is via TGD but the CoS is not exactly 90%. I am actually concerned if they spend more cash to potentially find more reserves given the recent track record as were many at the Soco AGM who openly expressed concern. I would much rather they farmed down their interest to a major leaving some upside for shareholders in Son of Soco.

I have to admit that I was disappointed Soco waved their right to cost recovery from TGD as part of negotiations to extend the licence.....

What I clearly pointed out a few days ago was Soco spent $225.7mn in 2009 & 2010 but did'nt add any new reserves.

Sure it is reasonable to expect a reserves upgrade once TGT development wells are comple but I don't expect these reserve upgrades to be worth in the region of $225.7mn+ that has been spent on Capex the last few years.

So I feel we are at a stage where management's ability to add value has diminished and they should sell the assets and release cash to shareholders IMO.

emptyend

17th Aug '11

Well to be honest, I am scared shitless as to what happens with a) the markets over the next year and b) Oil prices both of which I cannot predict with certainty at all.

Well I wouldn't say I'm completely relaxed about either aspect - but neither do I think management are idiots....and they have a lot more at stake than both of us, so I'm happy they will be doing their best to achieve an optimal outcome.

What I do know is Brent is trading at $111/bbl and TGT is producing and therefore a deal can be done on decent terms. I also know that markets and Oil prices have had a good run since 2009.

I have no problem with waiting

I don't have a problem with waiting either - but my analysis is similar to yours re the macro environment, which is why I think a deal is firmly on the cards (and indeed could already have been agreed in principle, subject to milestones being hit, of which first oil at TGT would certainly be one!)

I just don't see the point in continuing to repeat myself.......

...either one has patience or one doesn't.

What I clearly pointed out a few days ago was Soco spent $225.7mn in 2009 & 2010 but did'nt add any new reserves.

Lets just examine that for a sec:

In 2009 SOCO added $53mn to intangible assets (explo spending) and also transferred $313mn from intangible assets to property plant and equipment re 16-1 expenditure (which will all be cost-recoverable). They also spent a further $40mn on property, plant and equipment. (notes 15 & 16)

In 2010 SOCO added $41mn to intangible assets (which was explicitly all in Africa...taking the total African spend to $144mn, as shown under intangible assets). They also spent a further $120mn (net of the Thai disposals) on property plant and equipment (mostly in Vietnam one can assume) (notes 15& 16 again)

So...worst case it would seem that potentially-unrecoverable explo spending in Africa has been $94mn over the two years. AFAIAA the spending so far in Vietnam has been under the banner of the same 16-1 PSA agreement (or within 9-2) , under which 2009-10 capex costs should be recoverable, even for TGD....and indeed (unless this has changed in 2011) this is confirmed on p23 of the 2010 AR which says:

Property, plant and equipment increased by $120.2 million mainly associated with the Group's South East Asia segment where capital expenditure included the Te Giac Trang development and the appraisal well on the Te Giac Den prospect, both considered to be part of the same cash-generating unit in Block 16-1, Vietnam.

So AFAIAA it isn't true to say that Soco waved their right to cost recovery from TGD as part of negotiations to extend the licence..... though of course the situation may well change (or have changed) in respect of future expenditure. [Though I do note there was some discussion of this point at the AGM and there appears to be some confusion and I wasn't well enough at the time to follow the precise nuances of the situation]

kenobi

17th Aug '11

And now we all see why it takes balls of steel even to predict (here) that there is only a 10% chance that
the price will be less than 5 pounds in 12 months time, it was a tongue in cheek coment,
sorry ee, I'll keep my mouth shut next time,

K

nigelpm

18th Aug '11

For all we know, a deal could be 99% done as we sit here....

And given the lack of an RNS re: first oil I do wonder if management are doing just that...

ArtNouveau

18th Aug '11

Possible someone sneaked a bid in during market turbulence for sure. ArtN

nigelpm

18th Aug '11

Indeed, could mean the price is "more negotiable" though. Anyway it's only speculation on my part. Probably wrong.

emptyend

18th Aug '11

Sigh. People seem to think that several years work on a project aiming at a specific target date that events will always go like clockwork re timings. It doesn't matter what the project is, short delays can occur for a vast array of trivial reasons. It isn't material.

Of course a deal could be being done, but there is no way in the world that I would think that any more likely simply because an expected RNS re operations has or hasn't appeared.....though if anyone should happen to spot management having a riotous post-signing drinking session in some Vietnam resort, I might take a different view ;-)

ps....and of course it is true that someone might have made an opportunistic approach - but there would be no connection between that and the delay of an operational RNSable event! PV and PTTEP would also wish to notify start of production.

kenobi

18th Aug '11

I can't see that soco's view of the value of soco vietnam would be that infulenced by the recent turbulance to be honest, if someone was looking for an opportunistic buy, I would think they would look elsewhere all else being the same,

Looking forward to news, k,

emptyend

18th Aug '11

I would think they would look elsewhere all else being the same

Possibly - but it never is, is it?

I can't think of another substantial field which is due to start producing light oil in large volumes any day now....

kenobi

18th Aug '11

My point is if you're looking for a bargain, because of market weakness,
you don't go to a well funded company where the management have a very
strong position and can pretty much block an opportunistic deal,

There are other reasons to go for SOCO, I'm not sure some market weakness,
has much effect on when/whether to approach SOCO re a takeover,

K

emptyend

18th Aug '11

...well yes. But that is an argument that IMO applies only to stock market operators, not to oil companies.

Oil companies are interested in the actual assets, first and foremost - and price is secondary (though not irrelevant).

You don't switch from having an interest in oil assets in Asia to buying oil assets in West Africa, simply because the latter has become 10% cheaper relative to the former. But you might well see if you could chisel on the price a bit.....

kenobi

18th Aug '11

Agreed EE.

by the same note, you don't really believe soco management will sell for much less, just because the markets wobble. The assets are good solid assets, the share price today, based on a market wobble won't overly influence what price the board would take. As you pointed out at the time DANA wasn't in the same position, a lot of the stock was owned by others ready to make a quick turn.

the price of other assets relative to SOCO has fallen. I'm not saying that means people will buy other assets, I'm just saying that, this wobble won't be a driver to someone rushing in to buy (because the price the board will take won't be significantly different, regardless of a share price fall),

Cheers K

emptyend

18th Aug '11

by the same note, you don't really believe soco management will sell for much less, just because the markets wobble. The assets are good solid assets, the share price today, based on a market wobble won't overly influence what price the board would take.

No I don't....but OTOH I wouldn't count on it making no difference at all. For example, 10% lower than expected would still be a deal worth doing if the price of everything else has dropped by 20%.....and a few % here or there might be worth having for a buyer (and less material to the seller than in a stable/rising market).

Anyway - pointless to keep arguing the toss. With the FTSE off 240 points and the Dow down around 400, we are back to babies being slung out with the bathwater.....though the less than 150,000 shares traded (in "old money") suggests that it is mainly driven by macro-trading of baskets of stocks and by market-makers who don't want to hold positions

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Soco AGM - June 23rd 2011: Attendance, Questions and Views?

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About the Author

Murakami

109 comments

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