Analysts reports

In reply to flyinghorse, post #351

Yes - good point re the decline rate being important. The recent interims said:

The TGT field development and product characteristics differ considerably from the Ca Ngu Vang field (“CNV”), also offshore Vietnam, which has been producing for the past two years.  CNV produces a highly volatile oil from Basement with a high gas to oil ratio (“GOR”) via the facilities at the Bach Ho oilfield.  Field exploitation depends on fracture interconnectivity to efficiently deplete the reservoir.  TGT by contrast has a significantly lower GOR and produces from a much shallower Clastics sandstone reservoir, with a series of sand/shale intervals.  Oil is produced into a dedicated Floating Production Storage and Offloading Vessel (“FPSO”).  Gas will be sold via the same Bach Ho interconnection as that which handles gas from CNV.....

Phase I development drilling continued on TGT and was concluded with the completion of the four “batch” drilled development wells, TGT-4P to -7P, and the start and completion of the eighth development well, TGT-8P. The resulting petrophysical analysis has indicated that the wells confirm the reservoir model.

I believe it is solution gas driven - certainly I'm not aware of any water injectors (unlike at CNV)......but obviously the devil will be in the detail - and the above is pretty general.

You will be aware, I expect, that management's pre-PSDM analysis was that ultimately there would be 500mn bbls recoverable from the field and only about half of that has currently been booked. That may well change by year-end but all the analysts' models are based on what has actually been booked and they are all (unsurprisingly) cautious about pricing in upside potential. A serious buyer, however, would not only have access to all the detailed field data but would also be able to make their own technical assessment about the likely decline pattern........and I'd suggest that having 6/8/10/12 months of production data won't add very much to the knowledge that will be obtainable from 3-4 months data (which will be preceded by detailed well-by-well testing).

Being right next to Bach Ho probably doesn't hurt, as Bach Ho has already produced far more than it was originally expected to (AFAICR).

ee

In reply to flyinghorse, post #351

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

From various presentations :-

H1/H2 WHP
4 x 10” Multiphase pipelines
1 x 10” WI pipeline
1 x 8” Gas-lift supply pipeline

H3/H4 WHP
1 x 16” / 20” Pipe-in-Pipe Multiphase pipeline
1 x 8” WI pipeline
1 x 6” Gas-lift supply pipeline

10 Oct. Morgan Stanley downgrades SOCO International from overweight to equal weight, target price cut from 435p to 350p.

http://www.stockmarketwire.com/article/4236969/Broker-News-Views.html

Me?
I'm staying overweight :-)

They wouldn't be trying to pick up a few on the cheap?

In reply to wessexmario, post #354

I wonder if the sale of eo. is making MS reconsider the market for takeovers or asset purchases.

I accept that its a totally different kettle of fish in that eo, couldn't get funded,
and soco have plenty of cash, the difference they could be looking at is what companies might
be willing to pay,

K

In reply to kenobi, post #356

Completely different to Encore in every way.

If the wall of cash that's coming isn't enough to make them understand then nothing will.

In reply to wessexmario, post #354

10 Oct. Morgan Stanley downgrades SOCO International from overweight to equal weight, target price cut from 435p to 350p.

MS's view is predicated on the thought that a deal won't happen for a few months, given that no-one seems to have bid prior to TGT start-up. It is also a reflection of the underperformance of many other sector stocks in recent weeks, which makes others more attractive than they were in relative terms.

But IMO that still doesn't mean that equal weight is justified. As I've pointed out many times, you won't necessarily get any warning at all of a deal......there was no prior warning when they sold out of Yemen (4th Feb 2008) or Mongolia (1st April 2005) or Tunisia (18th November 2004) or Russia (20th August 2001) and there was none when they did the deal with Gazprom re Odex (10th April 2003).

The oil industry in general is extremely good at doing deals without giving the street prior notice. They do deals all the time re farm-ins, farm-outs, asset swaps etc. I don't think one should make ANY assumptions at all about deal timing.....the only thing that matters is where one thinks value lies for a bidder - and the rest will fall into place. We just don't know when.

ee

In reply to nigelpm, post #357

They will understand it better if they see it being paid to the shareholders.

In reply to MadDutch, post #359

Like I've said already.

The catalyst will be one of the two :

1) an RNS announcing an agreed bid

2) an RNS announcing the first results with cash flow numbers from TGT

i'm hoping an RNS with one of the above still gives a chance to buy more before the market wakes up.

There is a new sector note out by RBC today, raising NAVs for all UK-based E&Ps as a result of recent FX moves.

For SOCO they have raised their NAV to 569p (of which 511p is core) and forecast 2012 cash flow of $1.92 per share and an EPS of $1.59. This puts SOCO at present on 2012 multiples of 2.9x cashflow and a 3.5 P/E ratio.

Our favourites larger names include:
SOCO International - The stock is trading well below our revised core NAV
of 511p/share, the continued ramp-up in production from TGT should help
unwind this discount.

...as would a deal, of course ;-)

ee

In reply to wessexmario, post #354

That MS note was nearly as funny as the HSBC sector piece and their view on SIA.

IMS out today. Disappointing in the Congo with MIM-1, though with some interesting data re the Vandji. Also they are slower than planned to perforate some of the Miocene intervals in the TGT wells, due to continuing to assess the Oligocene sweep potential from existing wells (ie trying to answer the question of whether another oligocene well would be needed in due course, due to the underperformance of one of the three wells in the oligocene).

Overall production rates are unlikely to be affected by that, because the Miocene (which hasn't yet been perforated in three wells) is very much more productive than the Oligocene (see the flow data on the explo well tests). Still expecting at 55,000bopd plateau production, but will be a few months later.....

...which RBC say will trim their H2 2011 cashflow forecast and the outcome of the oligocene reservoir assessment (ie if an extra well is needed) could trim their 511p core NAV estimate. The MIM-1 well takes their risked total NAV estimate down by 8p to 561p.

Needless to say, the market has over-reacted initially, as I expect will become clear.

ee

The management need to step down, the continual drilling of dusters is unacceptable wastage of shareholder funds IMO.

4 years and no commercial find, please resign.

Oh give it a break will you?

I'm surprised you haven't called for an assault on Soco Towers with a pitchfork weilding, torch carrying mob for the (temporary) problems with the tgt production.

One minute you laud them, next you're setting up the gallows.

No.

This is not an environment to be spending millions on wells & coming back with dusters.

I don't lose sleep over a few bad wells, but a string of consistently bad wells over 4 years is unacceptable.

Shareholders should look to recruit one or two directors with deep extensive experience of drilling HPHT wells to replace Cagle and Story so we can extract the oil from TGD.

I have 0 confidence in Cagle/Story's ability to extract the value from TGD - Quite frankly I think they are out of their depth.

They need to step down so shareholders can extract the value IMO.

shame about MIM-1, but hey these things happen, I'm more concerned about TGT production figures and the change in emphasis, its not clear to me if we plan to be producing 55k per day any more by the end of the year, or if we plan to have a plan to get to 55k per day in q1 2012 as quoted by chris on the fool,

http://boards.fool.co.uk/and-regarding-tgt-production-quot-12397590.aspx

going beyond 55k as was predicted at the agm, feels further away this morning,

K

What's the difference between "by year end" and "by 1Q12"? If anything, 1 month, 2 months? I.e. nothing significant in the grand scheme of things, meanwhile the oil in the ground ain't gonna get bored and go somewhere else.

Overreaction IMV, probably more to do with Greece/EU related sentiment rather than anything else. Probably a decent top up opportunity actually.

Isaac proposes that Soco should stop drilling dusters. The logic of his suggestion, is that they should stop exploring and restrict themselves to drilling in places where oil is already known to be present. That would leave them with several alternatives:

1) they could acquire unappraised discoveries made by successful explorers and start their own work at the appraisal stage (like XEL?)

2) they could acquire discoveries which had already been appraised and tackle the development (like DEO?)

3) they could acquire developed oil producing assets and just produce them (like ENQ?)

All of which could well serve as the basis for a successful business. But it would not be a full cycle Exploration & Production business would it? Nothing wrong with businesses like XEL, DEO and ENQ. But if that's what you want to invest in, why not do so? Why invest in a self confessed E&P and then complain because it does the E part? It's like investing in Tescos and complaining because they sell groceries. Of course they do. That's what they are in business for.

And as for suggesting that the board of an E&P should resign en masse because of a dry hole......

The time a business needs top class management is when it experiences set backs. Any modestly competent professional can run a successful business where everthing has already fallen into place. It takes a higher order of competence to overcome obstacles and difficulties, to drive through transformative projects and to create a real success in the first place. I'm afraid that Isaac's approach of mercilessly criticising management at every opportunity whilst failing to recognise their tremendous achivements over a long period is the exact reverse of intelligent interaction between investors and managers.

Isaac, for goodness sake, back 'em or sell 'em is clearly the only investment strategy that works. Slagging off the teams responsible for your holdings makes no sense at all.

T

In reply to kenobi, post #368

going beyond 55k as was predicted at the agm, feels further away this morning,