Incidental stuff

" We expect this to be completed by the end of the year."

I've been assuming not before Q1/2013 for some time now based on the reason suggested previously - simply that these things always take longer than expected.

Frustrating but realistic.

Redhill

Indeed Redhill, ee's comments about whether they might not publish the results until after some negotiations because of some confidentiality agreement has got me thinking.

We don't know what else is going on, what current tgt production is, whether they are talking to anyone about any deals ?

I recall some time back discussing the earliest times we though a deal might take place, 6 months from start of phase 2 was a significant date for me as 6 months production data is reasonable for a buyer, whether it is in this case or not I'm not so sure. As perhaps you'd need 6 months from ramp up ? I guess all that depends on the buyer. Without knowing the details of which zones are open and producing it's hard to say, but It is concievable that they have enough data to make a convincing case, perhaps part of the hold up has been producing from different zones to assess the reserves ?

so many questions, so few answers,

hopefully we won't be having these discussions this time next year !

cheers K

In reply to kenobi, post #1103

We don't know what else is going on, what current tgt production is, whether they are talking to anyone about any deals ?

I recall some time back discussing the earliest times we though a deal might take place, 6 months from start of phase 2 was a significant date for me as 6 months production data is reasonable for a buyer, whether it is in this case or not I'm not so sure. As perhaps you'd need 6 months from ramp up ? I guess all that depends on the buyer. Without knowing the details of which zones are open and producing it's hard to say, but It is concievable that they have enough data to make a convincing case, perhaps part of the hold up has been producing from different zones to assess the reserves ?

so many questions, so few answers,

Well indeed we don't know what is going on - quite correctly! And indeed there are few answers available - and a lot of questions that would be nice to know the answer to but, realistically, we will never know until everything can be disclosed.

TGT production and perhaps future plans will likely be clarified in next week's IMS....but the key questions about the adequacy of production data in relation to a) proving connectivity and b) satisfying a buyer are completely impossible to answer....and yet are very material. Only the independent assessment (and perhaps a willing buyer) can provide the answer on those matters!

People will have to form their own judgement on these things. The chances are that there will be no useful spoonfeeding that the company can possibly provide, until/unless they publish the reserves report.

I agree with spurticus above, incidentally. Those who hope for much pre-deal enlightenment will be disappointed.....and I would be entirely happy if this were to be the case!

ee

ee

Ignoring the potential for something completely unforeseen and negative, and assuming there is none of the hoped for connectivity, what would be your bottom-end figure for a valuation of SIA? Presumably well above the current SP but well below the £6-£8 that has been discussed here at times.

I remember davjo has mentioned a figure nearer £5/share albeit that may be based on fairly conservative assumptions.

My apologies if, based on earlier discussions, you feel this is a superfluous question.

Regards, Martin

In reply to shanklin100, post #1105

Martin,
Davjo has a bet with ee, re takeout price,

http://www.stockopedia.co.uk/content/soco-end-game-timings-and-price-targets-67759/

Indeed! Just for the record, I don't go along with ee's £6-£8/sh sale value for the company but I most certainly don't rule it out. The scope is there but I always take a conservative view based on actual asset disposals made in the past, which as often as not, didn't quite live up to PI expectations. I do recognise however that Soco VN could be very different. It will need a very cool political hand played by Soco to extricate maximum value but I don't see any reason to alter my bet of a pint with him right now, which IIRC, is based on him winning on a SV sale over £5/sh and me winning if it's under....as things stand that is, before any reserves upgrade.

So davjo (whom I have great respect for and has called previous sales like Thailand accurately) ,  is saying below £5,  but based on what we know now in terms of reserves.   Realistically anyone making an estimate based on higher reserves figures is just guestimating what the reserves upgrade might be,  perhaps with a steer from the management bodylanguage.  They certainly seemed bullish about it at the agm,  although I'm not sure they gave an estimate (unless anyone remembers otherwise ?). 

So frustrating though it is,  and with all the if's and buts,  we have to wait for the reserves update before we can more firmly predict this.   Surely even without the connectivity proof,  there is still the potential of a 20% upgrade in reserves,  so it's not all pinned on the connectivity story,  though if this is proven,  then perhaps this leads to a step change in the possible magnitude of any revision.  

Its just frustrating to see the date drift off,  but of course,  always better to get the right result later, than the wrong result bang on time !

cheers K

In reply to kenobi, post #1106

kenobi

Thank you for your post. Interestingly IMHO, it is not necessarily the case that davjo expects £5.00 to be achievable. Hence my question as to what bottom-end number one could be confident in assuming no connectivity,,, ,,, and no disasters.

Cheers, Martin

Martin,

I do feel that is a superflous question. I gave the £6-8 range a long time back, well before the connectivity thesis emerged. At the depths of the financial crisis in 2009 I acknowledged that a deal might only realise c.550p per share for Vietnam, but the buy-backs and the sweep-up of the minority restored my floor to £6.

To repeat a calculation process I've given several times before, if you back-calculate from £6 a share and ignore everything outside Vietnam (and ignoring cash...even though it is substantial - though you can repeat the process and net cash off if you wish!) then that is fractionally under £2bn. Take £2bn, convert to USD at a conservative 1.60 and then divide by a conservative $20 per 2P bbl (per Perenco)....and you get to 160mn bbls of 2P in Vietnam as the number that is implied by £6 per share...compared to 121mn bbls reported at last year-end.....

That would be a 32% increase in 2P since the last revision in 2008. You'll have to make your own assessment of whether that a reasonable expectation in the light of:

• greater areal extent of TGT, following 2009 PSDM reprocessing, since validated by multi-well drilling
• indications that recovery rates could be 45-50% rather than the 30-35% assumption embedded in the 2008 analysis (according to dj)
• 15 months production history from TGT H1 and 4 months production history from H4
• apparent indications of connectivity within the TGT reservoir that have been evident over the last 9 months
• finally getting credit (soon, honest...;-)) for CNV liquids production

I really can't be any clearer about my views and I think they are sufficiently conservative in the light of all the above - but the proof of the pudding will be revealed in the coming weeks by one means or another.  I'd simply note the comments of Ed Story in the RNS relating to the sweeping up of the minority.....

The Acquisition will be significantly value accretive, generating substantial future return for SOCO shareholders.

Couldn't be any clearer, IMO.

And, despite the pop on the day the sweeping up was announced - and the mathematical impact of the elimination of the 20% minority on asset values - I see that the shares have done precisely nothing since then in relation to the wider market:

....so go figure, as they say!

ee

Many thanks ee

I've only just noticed that this was the "incidental" thread - which hardly applies to the posts above!

Turning to the more incidental matter of PTTEP's results today, I see

The Vietnam 16-1 project has successfully started production of the second wellhead platform of Te Giac Trang field. As a result, the project increased its production of crude oil from 41,000 BPD to approximately 55,000 BPD.

Not really news, of course - but a confirmation.

From Talisman's Q3 results:

http://cnrp.marketwire.com/cnrp_files/20121029-1030tlm_pr.pdf

In Vietnam, production has remained steady at an average of 2,000 bbls/d. The HST/HSD
development is progressing on schedule and on budget, with two jackets now installed and the
drilling rig on location. Pipeline tie-ins and development drilling are in progress. First production
is planned for the second half of 2013.

Dare I mention that Soco is at a 52 week high having broken the dreaded 350 ceiling at least for now anyway?

yes log, interesting movement lately, hope it continues to the point that the share price reflects the underlying value,

perhaps the end game is looking closer and this is getting people buying in looking for a takeout premium ?

K

Or people anticipating a return to investors announcement in December. Would be interesting if this run takes the share price over £4, even a 50-60% premium would then get us into realistic territory for a bid. Timing is everything !

In reply to kenobi, post #1113

I imagine that today's movement is also related to the action over at Coastal Coastal Energy Co (LON:CEO)
http://www.investegate.co.uk/coastal-energy-co.-(ceo)/rns/response-to-trading-activity/201211070700074965Q/

Cheers, Richard.

Coastal in talks revealed last night too will help the region no doubt. Perhaps same bidder Pertamina who have some pretty big aspirations might be looking at Soco too - no doubt one of many. Obama in means more chance of the printing presses running which should support oil price too and commodity sector in general. Gold up quite strongly on the news. Lots of reasons to be cheerful and maybe the contents of the much anticipated reserves report might be leaking out a bit.

Log

comment from Roger:

http://www.businessweek.com/news/2012-11-07/soco-rises-to-14-month-high-after-pertamina-bid-for-coastal

“I certainly know that many of those national companies have been in many data rooms in the very recent past,” Soco’s Chief Financial Officer Roger Cagle said today in a phone interview. “They are hungry for ensuring sovereign supply resources and I am kind of surprised more hasn’t happened on that front.”

He declined to say whether Soco has received any approaches.

“Many people in the analyst community always say that we are the target,” Cagle said. These “proxies for sovereign companies” may face hurdles in overseas expansion and “would prefer to stay close at home.”

OK.....hands up at the back all those who remember when I tried to interest Maynard Payton at TMF in the attractions of SOCO International (LON:SIA) !

Its a while ago now, when he was apparently running "Qualiport" so you can be excused for not remembering - but this is the exchange back in mid-2000 and this is what he has to say now in a slightly spooky TMF video........apparently he thinks "it is cheap".

Oddly enough, the accounting metrics are pretty similar to when I first drew SOCO to his attention 12 years ago, when he said in response to my puzzlement at his lack of interest:

...the circle of competence factor comes into play, and also the message it sends out the Foolish audience. I may be able to understand eventually the ins and outs of Oil E+P, but the decision may alienate readers who, after reading the UK Investment Guide and many other publications, are always told "not to touch oil prospectors in far away lands". We want to invest in and write about straightforward stuff that everyone can understand. If Oil E+P is, then fine. If not, then we won't.

[ee comment quoted] The case for SOCO, as I thought I had made clear, is essentially a value case for the medium/long term. It is not, IMHO, the sort of thing one should buy for a short-term flip (mainly because it doesn't move in line with the oil price but on a rather longer-term basis). I had thought that this was what Qualiport was about, rather than looking for short-term opportunities. [/ee comment]

If this is the case, then it would seem a few weeks/months delay isn't going to do much harm. We missed the absolute bottom anyway, and I've noticed the share price rising since you've posted. If it's a value case for the med/long term then waiting for the interim results due in September, to ensure things turn out as proposed, may be prudent. I'd rather be sure of a good result rather than rushing in the hope of a great one. Assuming I get to grips with SOCO in the mean time.

Still....perhaps better late than never?  Of course the shares have returned about 25% pa compound since the year 2000.....but then no doubt the short 12 year delay hasn't done much harm - especially as the shares apparently look more attractive now than they did back then  ;-)

http://www.bloomberg.com/news/2012-11-07/soco-rises-to-14-month-high-after-pertamina-bid-for-coastal.html

soco rises to 14 month high, after coastal bid,

“I certainly know that many of those national companies have been in many data rooms in the very recent past,” Soco’s Chief Financial Officer Roger Cagle said today in a phone interview. “They are hungry for ensuring sovereign supply resources and I am kind of surprised more hasn’t happened on that front.”

He declined to say whether Soco has received any approaches.

“Many people in the analyst community always say that we are the target,” Cagle said. These “proxies for sovereign companies” may face hurdles in overseas expansion and “would prefer to stay close at home.”

I would say it would be wise not to say if they've had any approaches,  whether they have or not, 

Cheers K

http://boards.fool.co.uk/remember-when-dennis-was-a-gleam-in-their-eye-6173073.aspx?sort=username

In reply to adam, post #1120

I thought this was the Soco thread, Adam? I'm not sure what relevance your link is?

Ahh ... it's a shot at EE, how original! Sadly, I no longer have a price chart of Mayflower, but of course you are no doubt thinking that it went bust a few years later. I'm not quite sure what is so interesting about EE's post that you find it worth linking to? The fact that he clearly was invested in a company that went bust 4 years later, or the fact that he was clearly concerned at the fall in 2000 and unsure of the reason behind it?

My personal history in Mayflower is that EE's posts got me interested, and following on from that I did end up investing in Aug 2000, just before the post you link to, exiting a year later for a small profit, and then again in late 2002/early 2003, exiting for a profit again in Feb 2004 - so I have to add that I found EE's posts on the subject useful, otherwise I would probably have never invested (certainly not one of my best investments, and it's quite true I could easily have ended up with a loss - but a banked profit is a profit)!

Of course, as we now know the final demise was due to fraud with the accounts, and while we should all be on the look out for that, I doubt any of us could put our hands on our hearts and say we would have spotted it?

Peter