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

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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.

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Anticipated questions?

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About the Author

Murakami

Premium Member

109 comments

Groundhog

3rd Jul '11

Approaching retirement and looking at present asset allocation and calculations. So, barring a sudden splurge of oil in the next year, what sort of range of share price options are folk here calculating; without, I emphasise, rosey specs on?

At present, one could hazard a 30% chance of SP £5.50, a 40% chance of £3.70??

So, what sort of feeling do folk realistically expect?

emptyend

3rd Jul '11

in the next year, what sort of range of share price options are folk here calculating; without, I emphasise, rosey specs on?

No rosey specs (but certainly expecting a deal that will validate these figures):

40% £6-7

30% £5-6

10% £4-5

20% £7-8

...since you asked.

AnonymousUser858

3rd Jul '11

IMHO

with time horizon = 12 months

my expected outcome is 100% gain from here - my perceived probability > 50%

losing money from here - probability
T

Groundhog

3rd Jul '11

No rosey specs (but certainly expecting a deal that will validate these figures):
40% £6-7
30% £5-6
10% £4-5
20% £7-8
...since you asked.
ee

Interesting; thanks....

How much do you allocate to NAV calculations, and how much to a bid premium?

emptyend

4th Jul '11

How much do you allocate to NAV calculations, and how much to a bid premium?

I can't really answer that properly. RBC's NAV (for example) is roughly £6 currently, however it is my belief that any deal will be based on different (rather higher) numbers for reserves than have currently been booked (there have been several recent discussions on that topic). It is a guess how much higher the actual position will be compared to the current booked reserves - and the ultimate determinant is going to be what the deal gets done at, rather than a NAV estimate based on outdated (and conservative) assumptions.

My guess as to gross recoverable reserves which could be booked at TGT is in the vicinity of 550-600mn bbls (once phase 2 drilling has been completed and production started on phase 1).....and currently booked reserves are about half that. The big unknown is what proportion of that increase can be monetised in a deal (and when!). RBC's NAV is based on current booked reserves.

extrader

4th Jul '11

This comment is under review

Groundhog

4th Jul '11

My guess as to gross recoverable reserves which could be booked at TGT is in the vicinity of 550-600mn bbls (once phase 2 drilling has been completed and production started on phase 1).

Thank you for your thoughts. I know timescales with SOC have been problematic, but when do you think phase 2 drilling will have been completed, and phase 1 production is likely to start?

extrader

4th Jul '11

Hi all,

I'll try again re my self-reported 75......

AIUI, the final take-out price for Soco (are we taliking VN or wholeco ?) seems largely - per previous posts - dependent on TGT recovery rates, a 'conservative' 30-35% vs. a bullish 50%......

Mongolia included a contingent element, perhaps reflecting materiality/prospectivity and paucity of counterbidders, whereas Yemen was a 'clean break'.

How do people rate the likelihood of a contingent element forming part of the above target/potential prices ? I can see how this might suit people (incl. management ?) wanting to cash in their chips but surely an extra 12 months' production experience would be more compelling to a prospective buyer ?

I'd hope to 'recycle' some of my eventual proceeds into a place in N California (where prices are still easing), so not in any hurry personally !

ATB to all LTBHers

emptyend

4th Jul '11

AIUI, the final take-out price for Soco (are we taliking VN or wholeco ?) seems largely - per previous posts - dependent on TGT recovery rates, a 'conservative' 30-35% vs. a bullish 50%......

I'd take slight issue with that point - which is over the implication that a deal is depending upon some sort of "proof positive" about recoverability of OOIP.

There is no such thing as "proof positive" about recovery - unless you want to wait for a few decades until the last well is P&A'd and you can see the actual outcome. If follows that any buyer must, at some point, make a "leap of faith" about reservoir quality. Some may wish to see months/years of production data before reaching a judgement - but others may be prepared to reach that view much more quickly.....perhaps without any actual extended production data at all?

I wouldn't rule out a contingent element, in the event that a) there is a material difference of opinion on fundamentals and b) SOCO International (LON:SIA) continues as a material business (though I'd expect that management would strongly prefer a clean deal).

For Groundhog: Phase 1 production is scheduled to start on 12th August, ramping up to plateau production by year-end. Phase 2 drilling will be completed in Q2 next year. This is per the AGM presentation - freely available on the company website!

ohisay

4th Jul '11

There is no such thing as "proof positive" about recovery - unless you want to wait for a few decades until the last well is P&A'd and you can see the actual outcome.

True but what you wouldn't want is the kind of problems which became evident very early on in the Chinguetti development in 2006 .

After 6 months ,production had halved and a few months later Woodside had reduced the size of the field from 120m barrels to just over 50m.

http://www.offshore247.com/news/art.aspx?id=5844

Simon Potter, chief executive of Hardman stated: “We have been disappointed by the production performance of the Chinguetti field. Production has averaged 46,600 bopd (gross) since first oil but showed an unexpected sharp decline through to June, before stabilising at rates of around 35,000 bopd, well below the predicted 60-70 mbopd,

http://www.theaustralian.com.au/business/mining-energy/woodside-abandons-mauritania-at-a-loss/story-e6frg9df-1111114519896

After acquiring acreage from Perth-headquartered Hardman Resources (now part of the Tullow Group), Woodside conducted an extensive exploration program that resulted in a decision to spend, with its partners, $US700 million on developing Chinguetti.

But the oil field never reached its designed daily output of 75,000 barrels and, in the latest quarter, production was recorded at about 12,000 barrels a day.

Woodside in November slashed Chinguetti recoverable reserves by 57 per cent to 53 million barrels.

Thats the horror story of course - fingers crossed the geology's a lot simpler than Chingetti!

emptyend

4th Jul '11

True but what you wouldn't want is the kind of problems which became evident very early on in the Chinguetti development in 2006 .

Fair general point of course - though it can cut both ways. I have (somewhere in my piles) a list of oilfields in the North Sea together with their expected reserves. The list was published in a newspaper in the early 1970s - and it is very instructive to see how outcomes have compared with expectations.

Most fields fell below expectations - though some (notably the Forties field, IIRC) substantially exceeeded expected recovery volumes.

Technically things have advanced greatly since those days - but it is still a risk that can cut both ways.

There is no comparison IMO between the lacustrine sands at TGT and the thin channel sands at Chinguetti....and there are also plenty of analogues in the immediate vicinity (unlike Chinguetti!)

AnonymousUser858

4th Jul '11

EE

"....I have (somewhere in my piles) a list of oilfields in the North Sea..."

Too much information.

emptyend

4th Jul '11

:-)

I should of course have said "files" - but my wife might have died laughing..... ;-)

kenobi

4th Jul '11

No rosey specs (but certainly expecting a deal that will validate these figures):
40% £6-7
30% £5-6
10% £4-5
20% £7-8
...since you asked.
ee

Balls of Steel ee ! not many would be so brave as to make this kind of prediction on soco,
good for you,

cheers K

Spurticus

5th Jul '11

"not many would be so brave as to make this kind of prediction on soco"

..so that's somewhere between £4 and £8, some time over the next 12 months?

Balls of steel indeed :)

kenobi

17th Aug '11

yes only a 10% chance that the price will be below 5 pounds next July,

not looking so obvious with the share price around 3 pounds is it ?

K

emptyend

17th Aug '11

It is to me....

kenobi

17th Aug '11

If no deal gets done,
who is to say what value the market will put on SOCO ?

the current valuation is clearly a bargain, oil flows due any day now,
even with analyst reports saying how cheap it is, and still, the price is languishing !

Still world economy permitting, surely there will be deals of some sort, which realise value in the
next 12 months ?

cheers K

Isaac

17th Aug '11

yes only a 10% chance that the price will be below 5 pounds next July,

not looking so obvious with the share price around 3 pounds is it ?

It is to me....

Just as obvious as close to £5 by the AGM?

extrader

17th Aug '11

Hi Isaac,

Would this be the AGM that you attended incognito and at which you didn't challenge the management remuneration , despite a lot of prior (and subsequent) complaint about their poor value ?

I was always advised that the best thing to do when in a hole, is stop digging......

ATB

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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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