The results are due on 22nd August, FYI.
I've started this thread to centralise comment on expectations and the eventual outcomes.
These might be the most pivotal results in the company's history, though IMO much hangs on whether they include a reserves update with or before the results. They certainly COULD make such an update IMO....but whether they will do so may be a slightly different question, depending on the expected future path of proving up reserves (and perhaps on whether a sale of the Vietnam assets is actually in the offing).
Another matter which surely WILL be addressed at these interims is the prospect of some form of dividend.
I remain of the view that a deal to monetise Vietnam is closer than many seem to expect though, with the emergence (at the AGM) of the connectivity potential at TGT , there is a credible case for delay. I'm also of the view that the price tag on VN will have increased since the AGM, with the start-up of H4 (as indicated by the buy-out of the Vietnam minority, IMO).
Disclaimer:
As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.
SOCO International plc is an international oil and gas exploration and production company. The Company has oil and gas interests in Vietnam, which includes Block 9-2 and Block 16-1; Republic of Congo (Brazzaville), which includes Marine XI Block and Marine XIV Block, the Democratic Republic of Congo (Kinshasa), consists of Nganzi block and Block V and Angola, which include Cabinda Onshore North Block. The Company's operations are located in South East Asia and Africa. It holds its interests in the Republic of Congo (Brazzaville), through its 85%-owned subsidiary, SOCO Exploration and Production Congo SA (SOCO EPC). It holds its interests in the Democratic Republic of Congo (Kinshasa) through its 85%-owned subsidiary SOCO Exploration and Production DRC Sprl. Te Giac Trang (TGT) field’s Phase I production began on August 22, 2011. Total production net to its working interest from continuing operations, during the year ended December 31, 2011, were 5,437 barrels of oil equivalent per day. more »
72 Posts on this Thread show/hide all
In reply to fuiseog, post #12
Personally I won't be glued. No news is no news....yet.
I won't be glued tomorrow either, as I am unavoidably engaged on other matters. However, it will be interesting to see the scope of the comments that accompany the results - and I'll be very interested to look through the details and add my comments in due course.
Only if we get a clear and comprehensive updated reserves assessment will there be little to debate - and whilst I'd hope to see one, it is quite possible that it remains work in progress for the moment.
I'll also be interested to see what analysts have to say after the 10.00 conference call tomorrow........ ;-)
Well the price action has been very interesting over the last 10 days, a slow daily appreciation and the stock is no longer tracking the FTSE. Chart also suggesting possible break out is on and if the numbers come in as expected then we could be in for a nice rally here and maybe a re-rating altogether! I expect these interims to be the catalyst for this to happen and I remember not so long ago DGO confirmed their production and profit numbers and the stock re-rated by 20% within days.
Hopefully an indication about when the reserves assessment is out and an indication of dividend policy would be an added bonus! Im expecting the stock to reach 400p soon at the very least, but we shall see with interest what happens.
.......the stock is no longer tracking the FTSE
Why would Soco ever be expected to track the FTSE? If it does so surely it is coincidence.
I play tennis with a senior bunny in an oil company and over a beer I quiz him gently for his views. He has expressed a healthy disrespect for (other companies) reserve estimates - "just one persons opinion".
My reading is that the market was 'spooked' by the slow production ramp up and I find the explanations in the public domain of (a) "cultural issues on target setting", and (b) "miss-understanding of the field geology" less than satisfactory. In a field of this importance for Vn I would expect them to get it right. The catalyst for a recovery of the sp IMHO is increased production volumes and a coherent plan to increase production further.
My view is that until SIA commits to paying Dividends the market view is that the cash generated will be invested in more exploration with no immediate benefit to shareholders.
The presence of high stake players increasing their stakes in SIA gives me some comfort but when I read of Soros investing in Facebook and Groupon I realise that such confirmation cannot always be relied upon. The major advantage of the concentration of ownership in SIA is that it should prevent a cheap sale of the company.
In reply to TomKe, post #16
Whilst I have no trouble with the specific point that reserves estimates are basically a matter of opinion (though rarely just of "one person""!!), I would observe that across the industry there is a great willingness to disparage competitors and their assets. I therefore take any such comment (especially from "senior bunnies") with a bucketful of salt, irrespective of the source.
For example, I am aware that virtually all the negative comment from "senior bunnies" in SE Asia regarding SOCO's VN assets can be traced back to a particular competitor company which (coincidentally ;-)) also has assets in VN (regarding which there has recently been some disappointing news). I therefore use two buckets of salt in such cases.
Regarding TomKe's own substantive points :
I think the market was looking for reasons to justify scepticism and that the slower than expected production ramp-up added credibility to that view. I assume that the above comment should have had the phrase "in the end" appended to it, otherwise it makes little sense. It is in the nature of partnerships in oil and gas that partners frequently have different opinions, interpretations and preferences and, unlike TomKe it seems, I don't find it in the least surprising that differences emerged - though there is every reason (from AGM comments etc) to believe that everyone was singing from the same hymnsheet after some 6-9 months of production experience....and to think that this should be starting now to show through in the figures (though probably only from sometime in Q2).
I think the main catalyst will prove to be reserves not production, though raising production will certainly follow on from raising reserves estimates. I would also say that SOCO have demonstrated plenty of conservatism in their exploration budget in the last year or two - so much so that many analysts complain about a "lack of catalysts" - so I really don't agree at all that there is any concern about investing in more exploration, whether or not any indication is given about a dividend (remember that the company have explicitly said that they will be expecting to "return cash to shareholders" in some form or another, whether or not a dividend as such is ever paid).
ee
In reply to emptyend, post #17
Hi ee,
Good spot re: recent Vn news, something for me to discuss with my bunny over a beer :-)
I appreciate reserve upgrades are not a single person's view but the substantive point is that they are just numbers until plans are made and implemented to exploit them. The requirement to undertake substantial capex to exploit reserves is a very good measure of a companies belief in the accuracy of the reserves. Your observation that production increases are dependent on a reserves upgrade I accept.
I appreciate that my post was a little simplistic but there must be some driver causing the low valuation of SIA and my suggestion that the market is concerned the cash will be spent on exploration is just that, a suggestion.
I am quite indifferent as to whether SIA pay a dividend or not but I am not indifferent to a low sp and I suspect neither are the major players.
TomKe
In reply to TomKe, post #18
Hi TomKe,
Not quite. They always are "just numbers" until they have all actually been produced. And it doesn't matter whether Company X has funded plans or not if Company Y is prepared to buy them and implement its own development plan.
I'd also take nit-picking issue with this point:
If a company is prepared to spend real money to exploit reserves then it is a good indication that they have enough confidence in the reserves assessment - it says nothing at all about their accuracy!
I don't think that ANY holders are indifferent to the low sp - but I don't think you are right that there is a "driver" for the low sp. The shares fell after the TGD disappointment (justifiably - if a rather bigger fall than might seem to be properly justified) and the market has SO FAR seen no reason to re-rate them again. I think that will change.
The low sp is down to a perceived lack of newsflow - nothing more, IMO.
ee
The results are EXCELLENT! What is more intriguing is they will make even more money in 2H if the Oil price continues at current levels....nice surprise on the increase in Block V to 85% too!
http://www.investegate.co.uk/Article.aspx?id=201208220700075062K
No dividend btw...
This is a cash machine - We will probably NEVER see £3 again in Soco's history IMO.
Had been hoping for some information on reserves or the mooted "distribution" that had been discussed at the AGM. They are generating a lot of money though, yes.
ES did say in response to Tournseol's direct question that an update was due in September - although perhaps someone else who was there might like to confirm my recollection?
EDIT: And also, I'm not at all sure I view it as a positive that Ophir have walked away from Block V in light of their and Soco's heavily contrasted success rates in Africa!
Brilliant results, time to get the space suits on and blast off on this rocket!
Superb income statement, just what the doctor ordered. Management deserve all the praise they can get as clearly they know what they are doing.
Sorry yo pee on the party but the results were inline with expectations. They were not excellent and not much in there, if anything, was new.
Cashflow/earnings as expected but net entitlement oil was inline and the ramp up still slow and most likely constrained by fpso capacity as discussed. Still further delay with cnv separation facilities.
The point is log - everything as expected and going along nicely.
Thus whilst I agree the results weren't "excellent" in the sense that they didn't surprise on the upside the cashflow was "excellent" and should lead to a market revaluation once people wake up over the next 12 months.
No one expected anything more or less really
Well if any suitor is waiting in the wings, its all there in black and white. This could be the statement that finally results in an approach…and for this they will have to pay a greater premium too!! All imho.
Yes cashflow is ok but it is where we expected it wrt current production. As you pointed out on TMFa p/e of about 10. This will dtop a bit as productoon rises a bit but for an asset with finite lifespan that isnt amazing. Compare with melrose today fir example? Cost recovery also not as raoid as some forecast.
Hopefully the conf call will be more interesting. Anyone got a link for it?
Log the call is for ii’s only. Expect to see some buy notes coming out from them over the next few days and hopefully they will be more realistic and fair with their projections as this company is on course to equal its current market cap within a matter of a few years!
In reply to loglorry, post #28
Log, these results are for tgt production of 33k bopd, on which basis per is <10. H2 production will be nearer 55k bopd, and full year eps maybe 46p for a per of 7.6. Annualised eps at current 55k - 60k would be > 56p, per 6.25. BUT we're anticipating a chunky reserves upgrade and plans to increase production capacity, to make best use of h4. Is this just hope? We've been told the current wells could support > 90k.
In reply to jseth123, post #23
jseth,
Sept / the fall was my expectation based on comments, that is just weeks away of course so maybe just missed out. Having said that perhaps it will take longer, definitely in the pipeline,
we wait just a bit longer !
G
We've debated the production increase here already. The FPSO can maybe be tweaked but this might cause downside. The pipeline also possible but this requires extra cappex and would be longer term. In the short/medium term it looks like 60-70k/day is the limiting factor. The wells could support 90K but the infrastructure as it is now can't IMV.
p/e's are not a good measure of value here because the replacement cost is not built into that model i.e. does not account for field depletion. The point though surely is that with TGT the only really valuable asset the market is not going to push the share price much higher without some sort of catalyst. Perhaps the reserves will be upgraded but there was no hint of that in today's announcement.
I wouldn't hold your breath for a huge upgrade in numbers from the analysts right now.
Yes the company will repay its market cap in cashflow over the next few years but there are plenty of companies who will do this. When compared to Coastal for example I don't think Soco is looking such good value although perhaps has better downside protection.
Log