2012 Final results

May be of interest to some:

The Directors are not recommending a payment of a dividend in respect of 2012 (2011 - nil). However, the Board expects to recommend a sustainable return of capital to shareholders during 2013, the level of which will be determined pending Hoang Long and Hoan Vu Joint Operating Companies' (HLHVJOC) approvals of a 2013 Work Programme and Budget for CNV and TGT and incorporating results of the upcoming capacity test of the floating production, storage and offloading vessel (FPSO).

The non-payment re 2012 doesn't bother me, but the mention of sustainable return of capital during 2013 suggests no disposal re VN or whole company is imminent.

In reply to redhill, post #3

The non-payment re 2012 doesn't bother me, but the mention of sustainable return of capital during 2013 suggests no disposal re VN or whole company is imminent.

Re dvidend, that extract was in the thread header - and I also highlighted the word "sustainable".  I might also have highlighted the phrase "during 2013"....which to me reads as if they expect to be indicating the commencement of an ongoing dividend at the time of the interims (by which point the uncertainties they list will have been clarified).

I would expect the analysts meeting later to be pressing them hard for an indication of the likely range of payouts - and I'd expect this to be quite high.....probably getting on for 30p per share per year (around $150mn pa).  For those especially interested in the dividend prospects, it will be important to check what the analysts are told!

I'd expect the presentation to be put on the website later.

ps....I don't think one can draw any conclusions at all re the disposal timeline, irrespective of what is said about future dividend plans.

In reply to emptyend, post #4

which to me reads as if they expect to be indicating the commencement of an ongoing dividend at the time of the interims (by which point the uncertainties they list will have been clarified).

That's how I read it too - 30p would certainly appear to be readily affordable, depending of course on what is hidden in the following re new ventures:

We seek to build shareholder value first and foremost through the portfolio. We expect to add multiple new ventures to our portfolio in 2013, including at least one more high profile exploration project in an area where we already have a footprint.

I expect the market to like these results once digested, perhaps subject to some hesitancy over cost of the new ventures.

In reply to redhill, post #5

I suspect that the analysts will come out with a good picture of:

1) likely range of capex for 2013, including new projects

2) likely range of free cashflow, given current production and prices

3) likely range of dividend payout

I'm encouraged by this reiteration of the Directors views on TGT recovery.

We believe we can achieve recovery factors of 45-50%, as has already been demonstrated in several producing intervals and in line with similar producing horizons in other producing fields within the same basin.

I shall not be pleased if Soco expects to pay a large dividend that is material to the SP but that information is first told to analysts, not to us in an RNS.

Usual jam tomorrow story for most of it but there are some bright spots.

The bottleneck of the FPSO seems to be the real sticking point. They also seem to be coming clean on that one now and have backed off the idea of gross production getting much further than 60K/bpd until they have a resolution. It's not new news that management think recovery factors much higher than RPS and hence the difference but they make this more explicit.

A sustainable divi would be welcome but anyone expecting 10% of current share price p/a is living in dreamland. I can't think of a single example of a maiden divi from a mid-cap O&G company which is anything like that sort of dividend yield. I suspect a token 1-2% more likely with a buy back in place and accumulation of cash which may or may not be spent further down the road.

H5 and connectivity looks promising but until its further along I can't see the market giving it much recognition. I didn't see any mention of CNV.

No mention of putting assets on the block but as ee says it could still happen overnight however I suspect until production can be handled at higher rates and the H5 question is resolved I can't see a sale happening.

So probably another 6-12 months before anything really happens but at least a token dividend to look forward to.

GLA

Log

In reply to MrContrarian, post #8

I shall not be pleased if Soco expects to pay a large dividend that is material to the SP but that information is first told to analysts, not to us in an RNS.

Well I don't think you will have grounds for any complaint, given that they have clearly flagged their intention to pay one in today's RNS. It is only the exact size that is being considered and, given the relationship between free cash flow ($500mn+) and typical capex ($150mn-) [which is also confirmed by the $61.5mn addition to net cash balances in the first 66 days of 2013], it is pretty clear that they are considering pretty substantial cash returns!

given the relationship between free cash flow ($500mn+) and typical capex ($150mn-)

Free cash flow means after capex

Free cash flow, on your figures, would be $350m

A 30p divi sounds good.

I'm impressed that still very bullish on reserves as must have enough production data now to make it more credible.

In reply to loglorry, post #9

I can't think of a single example of a maiden divi from a mid-cap O&G company which is anything like that sort of dividend yield.

So what?

If they were only going to pay a 2% dividend then they would most certainly have said so. That would be less than two weeks net income ($11.5mn ish). The precise capex etc would be irrelevant.

I didn't see any mention of CNV.

Really?

Ca Ngu Vang (CNV), Block 9-2

The CNV field is located in the western part of Block 9-2, offshore Vietnam and is operated by the HVJOC. The field has been on stream since 2008 and has been producing at stable rates with CNV production net to the Company's working interest averaging approximately 2,139 BOEPD in 2012 (2011 - 2,283 BOEPD). In contrast to TGT, the CNV field is a fractured granitic Basement field which produces highly volatile oil from fractured Basement reservoir with a high gas to oil ratio and exploitation is dependent on the fracture interconnectivity to efficiently deplete the reservoir. Accordingly, traditional reservoir properties and STOIIP calculations are not straightforward and a further well will be required to allow assessment of the revised full reserve potential of this field.

Hydrocarbons produced from CNV are transported via subsea pipeline to the Bach Ho central processing platform (BHCPP) where the wet gas is separated from crude oil and transported via pipeline to an onshore gas facility for further distribution. The crude oil is stored on a floating storage and offloading vessel prior to sale. At the BHCPP, dedicated test separation and metering facilities have been installed and commissioned. A long term production test to validate the newly installed system has been completed and analysis is near complete, which together will allow more accurate measurement of liquid and gas production entering the BHCPP and ensure the more accurate allocation of produced hydrocarbons from the CNV Field within the Bach Ho system.

Although the draft 2013 Work Programme and Budget includes a CNV-7P well, at this point HVJOC's final 2013 Work Programme and Budget remains to be formally approved while updates to the CNV Full Field Development Plan proceed through the formal Government approval process. Thus, once clarity on this issue has been reached, the independent reserves review of CNV can be completed.

Also note this comment on H5:

Operationally in 2013 we will continue appraising the TGT field, with the most significant undrilled fault block, the southern-most H5 fault block, to be drilled as soon as the winter monsoon season ends in Vietnam, likely at the beginning of the second quarter.

.....ie.....starting in a very few weeks.

In reply to adam, post #11

Yes -sorry. Meant to write operating cash flow.

Incidentally, ML's note of three weeks ago said:

Cash at YE12 was US$211mn and is set to rise to US$620mn
by YE13. We believe a dividend is the most likely use of the majority of proceeds.

I mean much new news on CNV. In other words some sort of resolution on measuring the liquids produced and what Soco get paid for them. It seems nearer conclusion yes but we have been for ages now. Pity they didn't say something a bit more substantial IMHO. Partners dragging their feet I suspect.

Not sure how a few weeks is beginning of second quarter as that is June 1st which is 10 weeks away and then another month to drill and time for testing but depends how you define "few" I suppose.

We'll have to see who is right on the level of dividend and I hope I'm wrong for holders here as a nice payout would be great. It won't matter a great deal anyway since the market will give credit to cash accumulated on the b/s as long as it is prodigious.

Log

In reply to loglorry, post #14

Not sure how a few weeks is beginning of second quarter as that is June 1st which is 10 weeks away and then another month to drill and time for testing but depends how you define "few" I suppose.

??????

Q1 = Jan-Mar

Q2= Apr-Jun

...except on log-abnormal time, apparently.

In reply to loglorry, post #14

Log, I think 2nd quarter begins 1st April, not 1st June.

Regards

Impvesta

Doh sorry not enough coffee yet - apologies my bad.

Log
Ps Yes Logarithmic time is different at least that is what Mrs. Log often says!

If they were only going to pay a 2% dividend then they would most certainly have said so. That would be less than two weeks net income ($11.5mn ish). The precise capex etc would be irrelevant.

With that in mind, shame they didn't manage that kind of divi for this year, would have seemed less jam tomorrow and could still have indicated what the longer term level might have been.  Will be interesting to see if any of the hinted at deals close any time soon.  Perhaps they are looking at some projects that require significant funding ?

Explo results have been very poor in Africa,  hopefully we're due a bit of luck there !  That would be more likely to give the shareprice a boost than a divi. 

K

In reply to kenobi, post #18

Having got the disappointment of not having a reserves upgrade out of the way, this update seems a whole lot more positive. I still wonder what the real total potential output of tgt field is and whether regardless of fpso, it is as high as the 90 or 110k (I can't remember which was quoted from memory), but the good thing is that the H5 well is being drilled shortly, which will give us some idea of additional reserves (or not ), and no doubt they're progressing fpso, whether the bottleneck be getting permission for upgrades or actually doing them. So in a few months this whole thing will be clearer, we might find that the bach ho option is more attractive, (though I recall our old friend davjo had his doubts),

K

The argument that a 2% divi would be way to stingy applies now too though doesn't it and yet the current dividend is 0%. The problem with a large dividend is it's a hostage to fortune that no board ever wants to commit to. Dividends should be maintained or increased and so setting off with a large chunk of cash flow is never a good way to manage expectations.

My argument still stands if 2% is a piffling amount why didn't they declare that today and increase it later? I think the reason is that they want to get the convertible put to bed, sort out production on FPSO or other route, work out H5 connectivity before they are confident to commit to it. So more work to do IMHO.

A bid still seems like the most likely outcome here rather than sweating the asset for dividends.

Log

In reply to kenobi, post #19

The presentation is now on the website.

I still wonder what the real total potential output of tgt field is and whether regardless of fpso, it is as high as the 90 or 110k

This is indeed a very important question that I continue to ponder!

With H5 getting drilled up soon, we may well find that the question becomes capable of being answered, because they will likely have to address how to best raise total production rates.

re capex, the presentation shows a 2013 budget of $165mn, including $36mn on New Ventures, $62mn in VN and $66mn on other explo.....so that should illuminate the cash pile remaining.

In reply to loglorry, post #20

>> My argument still stands if 2% is a piffling amount why didn't they declare that today and increase it later?

For me the main arguement for a divi is that it could open the share up to be more attractive to funds seeking income. Even a small divi with the promise of higher divi later is more likely to lead so some kind of re rating than just a promise of a divi next year. Still, we know the management are conservative financially, and this has advantages too, I don't want to see the company hitting a snag and ending up needing to issue shares to fund solutions to the problem, and I would like to think that if the market crashes for some non oil or soco related reason , soco will have the funds to take advantage of the situation with buy backs.

K