Analysts reports

In reply to djpreston, post #309

First analyst note out since the rumours broke and its EVO with the title "Take me Out".

BUY and 400p target.

I wonder what their target would have been had they taken proper account of the minority interest being worth massively less than the headline 20% ?

In reply to djpreston, post #311

and how, precisely would you know what that programme was all about ee? ;-))

I confess to watching the first 5 mins the other week before turning it off when I realised it wasn't a commercial for hair dye.........I was also struck by the thought that my son would probably like it and put up with the inanities rather better  ;-)

In reply to djpreston, post #309

I should add a bit of colour to the EVO note (errors aside):

Valuation - more than 400p (but probably less than 500p)

"We believe that an offer >400p per share would be a starting point for talks between Soco and a buyer.

The 400p target is based on $80 oil btw, with sensitivities showing:

412, 427, 435 453p respectively at $85, $90, $95 and $100/bbl.

Re that EVO note...I'm sure others have the full note but this summary from DJN...

Evolution Securities raises Soco International (SIA.LN) to buy from sell, and lifts its target price to 400p from 340p. Says the group has a history of monetizing assets through disposals, but now the best way to monetize the Vietnamese assets is through a disposal of the entire company. "With net production ramping up to almost 35,000 barrels of oil per day by end 2013 and little left in the exploration tank, we believe that Soco will be firmly on the radar of national oil companies," it says. Soco has been linked with M&A of late, and Evolution adds with management highly leveraged to the share price through holdings and options, "it could be in everyone's interests for management to entertain offers in excess of 400p."

...EVO look wrong on a number of counts on just that snippet...

In reply to davjo, post #312

I wonder what their target would have been had they taken proper account of the minority interest being worth massively less than the headline 20% ?

Well yes - but that requires the sort of consideration of details that you don't get from Evo. Someone asked me over on ADVFN where I think analysts are going wrong and I omitted that one from my list:

Failure to upgrade reserves estimates (mainly TGT) due to drilling results and PSDM in 2009/10....use of discount rates that are too high.....failure to correctly assess valuation of VN barrels under the JV structure in Vietnam (some of them continue to get the government tax take wrong).....failure to correctly assess the value of the wet gas reserves at CNV and failure to acknowledge that management are positioned to extract a substantial premium for control from a NOC buyer.
That'll do for now - though I could also nit-pick if pushed..... ;-)

As you can see, I also omitted the value of accelerated cost recovery and various other things. I've long since stopped bothering to try to do my own detailed analysis, even though the market and the analysts have been so far out. I'm expecting a competitive bid situation to do the work for me in due course....

ee

In reply to djpreston, post #314

The 400p target is based on $80 oil btw, with sensitivities showing:

412, 427, 435 453p respectively at $85, $90, $95 and $100/bbl.

More proof of the GIGO principle.....garbage in, garbage out

Not just SOCO but as I don't hold any of the others seems as sensible place as any to put this...


Citigroup initiates 10 UK exploration and production plays. Says the sector has been a good performer vs the UK market benefiting from rising crude prices and exploration success. Citi slaps buy ratings on Afren (AFR.LN), BowLeven (BLVN.LN), Gulfsands Petroleum (GPX.LN), Soco International (SIA.LN) and Premier Oil (PMO.LN). It sticks hold ratings on Salamander Energy (SMDR.LN), EnQuest (ENQ.LN), Tullow Oil (TLW.LN), Valiant Petroleum (VPP.LN) and Heritage Oil (HOIL.LN). "We think fundamentals are strong and sector valuations are attractive, discounting $80/per barrel long-term on our base case net-asset-values, vs the forward curve at $106/per barrel in 2015," says Citigroup. In terms of targets, has 205p on Afren, 500p on BowLeven, 500p on Gulfsands, 441p on Soco and 2570p on Premier; 380p on Salamander, 168p on EnQuest, 1650p on Tullow, 775p on Valiant and 296p on Heritage.

 (sorry no details)

PS. Is it my imagination or is there more trading volume in SOCO at the moment - price is steadily rising.

In reply to emptyend, post #316

that requires the sort of consideration of details that you don't get from Evo.

Returning to the topic of Evolution, I noticed whilst away that The Guardian reported an updated comment from Evo:

SOCO International rose 6.6p to 340p after positive drilling news from the Te Giac Trang (TGT) field offshore Vietnam. Analysts believe the company could be a takeover target for a national oil company such as Sinochem Petroleum. David Farrell at Evolution Securities said:

Our buy recommendation for Soco is premised on the fact that we believe the company will be acquired by year end by an Asian national oil company due to its strategic oil assets of which the TGT field is central. A take-out price [could be] much in excess of our current target price of 400p.

I don't think that the phrase "much in excess of our current target"  is one that analysts bandy around willy-nilly - which suggests to me that the emergence of SOCO's results may be the last chance for analysts to have a fresh stab at a valuation and be able to credibly claim that some "new" information had led them to upgrade.

As you all know, I'm expecting a deal "much in excess" of 400p....having arrived at that view 4-5 months ago. Eventually analysts and the market will all arrive at a similar place, I suspect.

ee

Found this interesting table - wonder how today's resultsd will affect it...

Some analyst comments, all obviously pre the 9.30 analyst presentation

JPM don’t expect to make any major changes to core NAV of 348p or RENAV of 394p. More importantly, TGT remains on track for first production in Q3 2011, which will transform the company’s cash generation profile

ML re-iterate Buy rating and 489p PO.

Evo Given the ramp up in oil production SOCO is an attractive proposition for bulls of the oil price. Retain Buy recommendation and 400p target

Numis - retain hold, price target 345, see better opportunities elsewhere

db

Well after today's budget the "better opportunities elsewhere" just got fewer. Soco must have just jumped in front of a few other companies as a take out target given the hike in tax just suffered by North Sea producers.

Log

Well after today's budget the "better opportunities elsewhere" just got fewer. Soco must have just jumped in front of a few other companies as a take out target given the hike in tax just suffered by North Sea producers.

When I was first investing in SOCO some 12 years ago, people though it was a mad idea to invest in some far-off country with a communist government and a history of instability. As it has turned out, Vietnam has been a model of stability, both politically and in terms of the fscal regime.

In contrast, yesterday's is (IIRC) the third (or perhaps 4th) tax raid by a UK Government over that 12 year period on companies operating in the North Sea .......

Just a snippit:

MF Global Initiates Seven UK E&P Stocks

  0911 GMT [Dow Jones] MF Global initiates coverage on UK exploration & production, rating seven large-cap stocks: Afren (AFR.LN) and Premier Oil (PMO.LN) at conviction buy, SOCO International (SIA.LN) and Tullow Oil (TLW.LN) at buy, Cairn Energy (CNE.LN), EnQuest (ENQ.LN) and Heritage Oil (HOIL.LN) at sell. Has a positive sector stance balanced by several factors including supportive oil prices, significant event-driven news flow due 2H '11, an improvement in balance sheet strength and M&A potential. Sees the sector polarized into two groups in terms of risk; diversified, which are companies with larger portfolios and a broader spread of risk; and concentrated, companies with fewer assets and a higher concentration of risk. Prefers diversifieds overall.  

RBC comment in their latest sector note:

Our International E&P universe is currently discounting around US$71/bbl, with most of our stocks exposed to seaborne crudes this is a particularly significant discount relative to Brent (trading at $112/bbl). Those companies that are active in geo-political hotspots in North Africa and/or the Middle East may endure discounts for some time; but that said, DNO International looks good value, especially as Kurdistan is on the target list of at least one cash-rich acquirer. Less speculatively we would note that Vietnam-focused SOCO International looks under appreciated and its key TGT oilfield development is due onstream in Q3/11.

Opportunities Below Core Value

Although we accept that the market is risk averse and increasingly unwilling to pay for exploration, we would note a number of companies with "tangible assets" are trading below our core NAVs, including Soco International (33% discount); Gulfsands Petroleum (32% discount); Ithaca Energy (30% discount), JKX Oil & Gas (24% discount) and Bankers Petroleum (17% discount).

.......but of course we all knew that.

ee

Al Stanton of RBC, reacting to yesterday's AGM presentation in The Scotsman:

SOCO International's business is set to be transformed in the third quarter by the development of its TGT oilfield, offshore Vietnam; yet the stock continues to trade at a 40 per cent discount to our 595p-a-share net asset value, which makes it one of the least expensive stocks in our international universe.......

We forecast that the TGT development will help lift Soco's production, from 2,500b/d in early 2011, to more than 20,000b/d in 2012. And, under the terms of its production sharing contract (PSC), the company could be allocated 45 per cent of the field's revenue. As a result we calculate Soco's post-tax cash flow should leap 20-fold.

Soco International
354.3p -10.7p
Scotsman says BUY

 

's obvious really....

ee

Al Stanton and The Scotsman this morning...

SOCO'S business is set to be transformed early next month by the development of its TGT oilfield, offshore Vietnam; yet the stock continues to trade at a substantial discount to our estimated 597p-a-share net asset value.

http://www.scotsman.com/economicindicators/One-to-watch-Soco-International.6821165.jp

In reply to ArtNouveau, post #327

yes - just beat me to it, Art.....only just opened my emails ;-)

Must be a bit dispiriting for Al Stanton to have to keep on giving that message but, like myself, he obviously thinks he'll be proven more or less right in due time.

Incidentally, I've just made a post in relation to another topic which I think is enormously important for those who have an interest in SOCO International (LON:SIA). I have repeatedly said that I don't think there will be any prior warning when a deal gets done, so it is important to keep an eye firmly on the real value of the assets, even though it is tempting to get mesmerised by the stock market.

ee

I bought some more yesterday at £2.84 and this morning apart from Autonomy they were the only stock going up for the first 10 minutes. Now they're down 10p and I WILL NOT be buying any more. Crazy market and it's tempting to pick up other stock but SOCO looks the best bounce back in the market short term to me.

Wouldn't be surprised to see the authorities banning short selling in banking stocks similar to the Europe wide ban this morning in the UK or at least on Monday, but that's another thread...

ArtN (48,900 SIA shares and that's enough to be sure to be sure)

In reply to ArtNouveau, post #329

I wonder if there will be news about tgt start before the results on 24th august ?

if it's close enough presumably it'll get announced there ?

will be a shame if for the sake of a few days they are unable to announce start with the results,

K

Also added a small top-up on Thursday to my fairly chunky holding in SIA. Like everyone else waiting for TGT production first oil news to kick SP back above 400p levels and once 450p is broken then a major top-slice will take place.Will roll the remainder for the Vietnam/full company sale.

JPGH