Analysts reports

In reply to swiper, post #471

Management confirmation about reservoir capability.

See the slide 10 in the recent MacQuarie presentation, showing the phased perfing plan, which makes plain that there is substantial unperfed capacity.

ee

I could be wrong but one possibility is that the delay in comingling the 2 zones is for confirming reserves volumes in each separate system. However there is no statement saying this is what they are doing.
Could a potential buyer have requested this information,or it may be reserves auditors working on bookings?
Reserves booking these days under PRMS are certainly very strict when stating a 90% liklihood of being produced(P90) so getting data is no bad thing(as long as its supportive!)

Once production is comingled this will be difficult to achieve with compelling certainty.

At the moment the volumetric's are based on geology (AREA/Thickness/Porosity etc) and limited DST,and longer term production & pressure connected volumetric calculations will (hopefully ) corroberate or improve on the earlier volumetric work.

Single zone production will allow material balance (Production vs pressure drop) to quantify the tank size,compartments and lead to reserves bookings.

In reply to flyinghorse, post #473

I could be wrong but one possibility is that the delay in comingling the 2 zones is for confirming reserves volumes in each separate system. However there is no statement saying this is what they are doing.
Could a potential buyer have requested this information,or it may be reserevs auditors working on bookings?
Reserves booking these days under PRMS are certainly very strict when stating a 90% liklihood of being produced(P90) so getting data is no bad thing(as long as its supportive!)

Once production is comingled this will be difficult to achieve with compelling certainty.

Yes - that is certainly a possibility. As you say, getting the data is no bad thing - though on balance I'd rather have had earlier production. I expect there to be a lot of detail on the data in the upcoming results.

I suspect that once the PV target was clearly met for last year, there was always a risk that they wouldn't bust a gut to add - but, as you say, better data on each productive horizon may not only lead to better production planning for the future but it might also lead to greater confidence in reserves estimates....which is obviously "quite important" in the context of a disposal.

ee

That would tie in with Ed Story's "information gain" comment back in November

"We can get to 55,000 bopd. It's a very simple process but it really is a factor of the information gain," Chief Executive Ed Story said in an interview with Reuters on Tuesday

Two new analyst notes out this morning from Cit and Boa ML

BoA ML rate as BUY with 498p objective.

Citi rate as BUY with 377p target

Both focus on the Perenco deal to buy Conoco Philips' VN business yesterday and the read through for SIA's VN assets.

In reply to djpreston, post #476

BoAML note starts:

Time to revalue Vietnamese barrels - BUY
The market seems to under-appreciate the value of Soco's Vietnam portfolio. The
acquisition of Conoco's Vietnam portfolio (stakes in Blocks 15-1, 15-2. – just North
of Soco's TGT field - and Nan Con Son pipeline) for US$1.29bn by Perenco
announced yesterday fully supports our view. Based on Wood Mackenzie data,
and assuming US$0.2-0.5bn for the pipe stake/working capital, the deal values 2P
reserves at US$14-19/boe. This is 40-90% above the US$10/boe of 2P reserves
that Soco is trading on and should help the market reassess the value of Soco’s
portfolio. BUY, PO/NAV 498p/sh.

.......and even Citi reach the same "Buy" conclusion (calculating an $18-19 per barrel number on the Conoco/Perenco reserves), with a 371p core NAV (471p total NAV).

Neither have anything in the valuation for TGD and both are obviously working from the reported 123mn bbls 2P (which compares to the 58mn 2P in the Perenco purchase).

Assuming this view is shared, I would certainly hope/expect to see a pretty swift rerating.....given the limited supply of stock.....followed by a further re-assessment after the results (and, I hope, a significant reserves uplift).

ee

Nice to see the analysts coming round to seeing the same sorts of $/bbl prices we have been talking about here for TGT. I've not seen the notes but assuming they are both using $18-19/bbl read-across from Conoco/Perenoco deal and neither are assuming value for TGD why do they come to such a different target e.g. 377 vs 498?

I suppose this just re-enforces ee's point that the analysts estimates are all over the place and this should improve when we get more data in a month or so.

Log

In reply to loglorry, post #478

Hi Log

assuming they are both using $18-19/bbl read-across from Conoco/Perenoco deal and neither are assuming value for TGD why do they come to such a different target e.g. 377 vs 498? 

They both use similar values for core VN plus cash. The main difference is that Citi adds nothing for anything else - risked reserves upside, explo etc

Peter

In reply to peterg, post #479

In fact total NAVs are as close as they have ever been, at just under £5

Citi's note says:

We calculate a base case NAV of £4.71, which assumes US$110/bbl in 2012,
US$120/bbl in 2013 and then long-term US$90/bbl (real, 2012 money) and GBP/USD exchange rate of £1:$1.58. We have assumed a discount rate of 10% for our field models.This comprises a core value of £3.71 (£3.76 for core reserves minus £0.05/share for financial items), £0.94 of development/appraisal upside and £0.5/share of risked exploration. We set our target price at 20% discount to our base case NAV at £3.77, in line with the long-run average sector discount.

As Peter indicates, Citi's note includes nothing for TGD......so it will be interesting to see what all their numbers look like  when we get updated details on production and reserves - and find out more about the outlook for TGD! And the discount rate and the long-term real oil price assumption both look extremely conservative, IMO.

£6-8 remains my deal target range, depending on the assets included.

ee

Today's FT ( market report) discusses the Perenco purchase, the disparity in Soco's valuation and the likelihood of much increased production in 2H 2012.

I don't recall ever seeing the FT give Soco such a strong push

Let's see what Monday brings.

In reply to highgate55, post #481

They were just reporting ML's comments - but you are right.....several inches in the market report isn't the usual (mainly because Bryce doesn't understand E&P very well). No doubt the Bowleven bid situation reminded him.... ;-)

In reply to emptyend, post #482

Good morning ee. I cannot find the FT article, any chance of the URL, please?

In reply to MadDutch, post #483

MD

It is in the stockmarket report section towards the end

In reply to rhomboid1, post #484

Which stockmarket report?

I searched stockopedia but nothing there. Can I have the URL please?

Mike

In reply to MadDutch, post #485

Sorry MD

I have a paper version and am not a subscriber to FT.com, it is on p19 in the article headed "CRH spearheads advance as footsie heads higher"

http://www.ft.com/cms/s/0/e1d4b22c-5942-11e1-9153-00144feabdc0.html#axzz1mou2UFAb

In reply to salty64, post #487

The print edition also highlights the SOCO International (LON:SIA) price chart for the last year as the only graphic in the column. First time I've seen them do that. Anyone would think that Bryce is, for some reason, thinking that they might be the next bid target  ;-)

In reply to emptyend, post #448

Further on the earnings front, there is this article on iii looking forward to earnings from, inter alia, SOCO International (LON:SIA) and Tullow Oil (LON:TLW):

Easily the most spectacular set of results in March will come from Tullow Oil (TLW). Analysts forecast that pre-tax profits will surge from £97 million to £752 million......

Dramatic profits growth is also in prospect over the next couple of years for SOCO International (SIA), the oil explorer, where profits for 2011 are expected to surge from £19.7 million to £113.7 million.

Soco's discoveries in Vietnam have set it on a growth path, and hopes are high that these will be followed by finds in the Democratic Republic of Congo.

Even more gushing results are in the pipeline for 2012 and 2013, according to City forecasters. They say profits should reach £308 million this year and £400 million next. The shares reached a peak of 400p last year and are now down below 300p, where they sell on just five times expected earnings for 2013.

338mn shares out now (say 339mn average for 2011) implies expected 2011 earnings of 53.5 cents per share (at say a 1.59 average FX, weighted by month of receipt) and the 2012 forecast is around $1.45....so kind of in the range of the numbers I reported 11 days ago.

I'm not sure that TLW's results will be "easily the most spectacular" though - lets wait and see before putting them on the winner's pedestal.

ee

In reply to emptyend, post #448

ps....just three of the data points in that range. The latest notes I have (Nov) show :

MS......EPS:  2011 22.5 cents, 2012 49.1 cents ..... Revenue: 2011 $199.1mn, 2012 $420.1mn

ML.......EPS:  2011 27 cents,    2012  57 cents........ Revenue: 2011 $249mn ,   2012 $535mn

RBC.....EPS: 2011  38 cents,    2012 147 cents.......Revenue: 2011 $200.3mn, 2012 $768.1mn

I can add another to the above list:

Cannaccord........EPS: 2011 15 cents,   2012 45 cents.......Revenue: 2011 $159mn,   2012 $395mn

As I noted in my earlier post:

"...some reputations are going to be made and lost on this one......   ;-)"

ee

Do Cannaccord even have a reputation to lose?
I certainly wouldn't place them in the same bracket as MS, ML or even RBC.