Analysts reports

Hi all,

As posted earlier on advfn, faintly surprised that there's no comment at Al's apparent suggestion that the transformation of Soco (per Scotsman) starts early next month.....

Has there been some un RNS'd type SW 10 slippage ? I'd understood guidance to be wef 12th to 15th August, meself.

ATB, GLA etc

In reply to extrader, post #332

.....had just replied to you on ADVFN:

I noticed that timeframe and checked it this morning. He is wrong - it will be earlier (but I didn't press for a precise date). Sometime next week therefore seems most likely, given that there are few other feasible dates ;-)

The original target date had been the 12th but I was aware of fairly late slippage to 17th/18th.

ee

Well I guess its not too surprising to see that theres been no analyst comment on the news today - guess theyre all still on Hols and waiting for the results...

Hi DJP

Do you think the analyst revisions to their notes will make much difference when they do come? SIA is big enough and today`s news has been flagged enough that i would have thought any professional investor who invests in this sector would have a fair idea of the figures already. Or am i giving the industry too much credit?

The valuation of SIA doesnt make much sense to me compared to many other E&P companies out there. I can explain why most other companies i hold are cheap currently but i cant explain SIA`s current market cap. Dont you think we will just drift around down here until we all get up one day to an RNS and !00% profit?

Leek

In reply to Leekgo, post #335

i would have thought any professional investor who invests in this sector would have a fair idea of the figures already. Or am i giving the industry too much credit?

Yes you would have thought so. But most analysts haven't written a note on SOCO since the AGM presentation which gave some indications of cashflow. And many will also have been unaware that the oil was likely to sell (as it since has) at a $5+ premium to Brent ($113 or so at today's prices - compared to the $90 assumed in most of their models).

Dont you think we will just drift around down here until we all get up one day to an RNS and !00% profit?

Certainly that is a possibility - and one I'm entirely relaxed about. I'm certainly not going to waste much time restating the obvious for those who are a bit slow on the uptake.

ee

SIA is a classic example of the value that is available in the FTSE 350, if you can get a doubler or an almost doubler in the FTSE 350 then why bother with small caps?

Another more recent example is the 70% premium Autonomy was taken out at....

I am sure there are others for those that are prepared to do the research...

No new information, but the FT includes this from Credit Suisse:

Soco International added 4.9 per cent to 325¼p. Credit Suisse revisited theories that the group may be a potential takeover target now its main TGT oilfield in Vietnam has started production. While a Vietnamese acquisition may be too contentious for China, KNOC of South Korea or US-based Talisman Energy could bid for Soco once it proves production rates from TGT, the broker said.

http://www.ft.com/cms/s/0/b0caf7c8-d8ae-11e0-9089-00144feabdc0.html#axzz1XCvbyLyJ

In reply to ExTownie, post #338

Same story but different source....quoting JP Morgan's view.

None of which is any surprise at all.

Another story of little consequence, but it might help explain the underperformance from the last day or two:

http://www.thisislondon.co.uk/standard-business/article-23986832-market-report-soco-slips-as-takeover-talk-is-sunk.do

In reply to ExTownie, post #340

Actually I wonder whether it IS "of little consequence".

Don't you think it is odd, ET, that the Standard choose to headline their London market report about a second-line share based only on the RBS comments, especially given that there was virtually no movement in SIA's share price today despite high volume? Someone somewhere thought it was a good idea and in some way relevant - but the facts as observable don't bear out the claim that "talk is sunk" or that "Investors hungry for a takeover can be an impatient bunch".

One might perhaps think that talk of a takeover is premature - but IMO that would be an extremely cavalier view, given the background, the clear strategy and the track record of management. .......all of which leaves me wondering "who put up whom to publish that idea?"

rgds

ee

In reply to emptyend, post #341

It's an interesting point ee but nonetheless I think it's a step too far.

It's an interesting point ee but nonetheless I think it's a step too far.

Why?

Someone chose to lead with that story and not, for example, why Lloyds (LON:LLOY) was up 5% today (something of far more interest to the average Standard reader, I'd suggest). These things don't happen just by chance...someone somewhere had an axe to grind in promoting that opinion rather than the many contrary views in other analysts reports.

And then there was the over-the-top headline and sub-heading.

All on a day when there was a high volume of trading.

I'm a suspicious sod on things like this, though of course it may simply look like a case of Slickers.

ee

Well that is the 2nd time in about 6 months that Soco have had headline grabbing page in the Standard.

In reply to Isaac, post #344

True - previous leads this year were here and here. Three lead mentions in 9 months - though a different journo this time. Curiously obsessive (almost as bad as on here ;-))....

Standard business pages are more akin to a gossip column these days. As long term shareholders we know as long the oil keeps flowing, the money will flow into SIA's bank account.

ArtN

ee - I just assumed it was a journalist needing to fill column inches with something. I imagine they wouldn't be that embarrassed if a takeover happened next week. Tomorrow's chip paper as they say... It just needs not to be the same day as the article!

ET

In reply to ExTownie, post #347

Maybe - OTOH the journalist concerned has only written for the Standard in the last two days and his near-identical column in The Independent today appears under a headline about banks. Feels like someone's PR at work to me....

Art is right though - the Standard goes more with gossip (witness the articles earlier in the year) - and it makes little difference in the wider scheme of things.  Nevertheless,  one perhaps needs to be aware more than ever of the need  to be sceptical of what one reads  - on either side of the value argument.

ee

According to Guardian journalist Nick Davis in his book Flat Earth News, 80% of what we read in the media has a PR origin nowadays. Journalists are overworked, underpaid and don't have the time to research and investigate, so PR enables the media to fill the gap.

Having read his book, I've noticed countless examples where stories in rival papers, while edited to adapt to the culture of the particular paper, have too much in common with those in other media to be the product of a particular journalist. And this even within the BBC!

It's a PR mans dream. And if governments employ Alistair Campbell types to ensure their political slant (right or wrong) will influence the populace, and if the Met do it, why should we not expect entities with financial agendas to do the same?

Now who'd be trying to benefit from keeping the SIA SP down? Answers on a postcard please to the FSA......

fuiseog

Small mention in Alphaville today, quoting RBS:

An analysis of historical corporate transactions in the UK E&P space suggests predators desire a combination of material, preferably operated, stakes in proven producing assets. In the past, we believe acquired E&Ps were valued at a relative discount to exploration focussed peers given an ongoing obsession with exploration as a way to drive significant share price upside. We believe that this has left the door open for predators to offer an attractive price (while retaining some upside for themselves). Hedging a couple of years of production also offers buyers some downside protection for deals.

Unfortunately, most of the companies in our coverage universe don’t easily fit into this category – the only one that realistically fulfills the criteria is SOCO, where the stake in the recently onstream TGT field offshore Vietnam (could produce c30kbopd net once fully developed) is the primary asset. Factoring in the futures strip for three years, a US$70/bbl LT oil price and a 7.5% discount rate (to try and mimic an M&A price deck) increases our core NAV closer to 400p (from 324p currently). The TGT upside case could add further value to the point where a 425-450p take-out price could be entertained (but whether that would be a knock-out bid would be debatable). This argument has not escaped the attention of the market, with SOCO frequently touted as one of the more likely M&A targets in the sector. Where we perhaps differ is that we think the industry will need at least 6-12 months of production history from TGT in order to become comfortable with reservoir performance. Against the backdrop of current markets, that’s a long time and its questionable whether M&A speculation can support share prices over that long a period.

Have to disagree with the last bit...... M&A speculation has been a support for the last three years  ;-)

Also have to disagree with his view of the timeline. If the production figures indicated by the JV last week (42,800bopd) are accurate, then I'd guess that if anything the TGT reservoir is performing better than plan and expectations - and IMO that raises the chance of an early bid, because that would be yet another potential uncertainty that has been removed!

And I'd say the price idea is highly suspect, being apparently based on $70 long-term oil and including only 25-50p per share for the TGT upside case (and obv nothing for TGD). I'm still confident of £6+......

ee

I would caution that its the decline rate for the reservoir thats important and not headline production rates (impressive though they appear to be)so that will take a bit longer to get a handle on.

I dont know if the field is pressure suported (aquifer or injection) or if its solution gas drive?

FH