Incidental stuff

I never see the point really comparing a single stock to an index over some arbitrary time period. You can make whatever picture you want. It usually hides the fact that if you stayed invested in a stock over a period you were exposed to all sorts of events. In the case of Soco for example that is the drilling of TGD which might have come in big.

The cost of the fall on the failure of TGD was the cost of being exposed to the material upside. History shows that to have been a value decreasing event for hodlers but on a risk return basis it was still a risk worth taking. Looking at a diversified index all these risk/return events are smoothed out and so the comparison is pointless IMV.

What's up with the share price BTW :-)

Log

In reply to loglorry, post #355

I never see the point really comparing a single stock to an index over some arbitrary time period.

>> Agreed log, the only time period that it's worth comparing against is the point at which I bought.

I guess logically you might think, I was thinkin of buying in at point x how would it have done since then ?

or what if I'd sold before the crash and bought at the bottom ? (chance would be a fine thing!)

but at the risk of sounding like gordon brown, I agree with log, you can choose dates to show whatever you like,

cheers K

I think it is a bit more than just picking dates. In a single stock particularly E&P there are certain times when if you are a holder you are exposing yourself to more risk that other times. The risk might be worth taking if a commercial oil find comes in or not if it doesn't. Compare this with holding over the same time frame but with the same ammount invested but between a whole portfolio of stocks or an index.

You don't get the same single point of exposure to drilling news with the portfolio as you do with the single stock scenario so comparing over these points is not a good comparison.

If you did the same comparisonis but sell a bit before the TGD result and buy afterwards then it is probably a fairer comparison in some ways.

Log

In reply to loglorry, post #357

The cost of the fall on the failure of TGD was the cost of being exposed to the material upside. History shows that to have been a value decreasing event for hodlers but on a risk return basis it was still a risk worth taking......

In a single stock particularly E&P there are certain times when if you are a holder you are exposing yourself to more risk that other times. The risk might be worth taking if a commercial oil find comes in or not if it doesn't.

Good points. I took the decision many years ago that I was happy to be exposed to stock-specific risk with SOCO because I liked the political risk, the potential of the assets and the quality of the management. That remains true, even though the geological Gods have been in a miserable mood of late.

Rather like the lottery, with oil exploration you have to "be in it to win it" big. Obviously there is money to be made by trading in and out from time to time (I've done a little bit of that but almost nothing compared to some) - but if you aren't holding when a big find is made (or a big deal is done) then you usually miss out on a step-change in value.

I still like the politics, the assets and the management - and I think they've given shareholders some decent shots at major value-added....even if most of the recent ones have failed to come off as hoped. I've certainly got no complaints overall.

ee

In reply to djpreston, post #352

Darron

Not really sure what was happening in your life at 4:57am this morning. But clearly you felt the need to post & get something of your chest. I don't get offended easily - We all get annoyed every now and again so it is good to get it of your chest I suppose.

If you must know I have no personal vendetta against you or ee - I did'nt mention you or ee in my post so not really sure why you felt the need to have a pop. I'm grateful to both of you for so freely sharing your knowledge and opinions. But I do think I am entitled to post my views even if they oppose yours.

I really do think you should'nt take what anyone says on a public forumn personally though. I certainly don't write with such intentions. But I do apologise if I've annoyed you as you seem to be annoyed with me in your post.

Anyway I read an article yesterday written by Cliff on TMF about the FTSE 250 come back : http://www.fool.co.uk/m.aspx?i=10579479&u=255621439

I thought I would make a comparison between the index & Soco and felt it was worth while sharing with the board.

I do think it is rather unfair though that people think it is an issue that I've made a comparison between Soco and the FTSE 250 when ee used to do it quite regularly in the TGT days over on TMF. It is a bit like writing a portfolio review during a bull market but totally avoiding writing one during a bear market. .

In reply to Isaac, post #359

May i be recommend that this thread is renamed 'Incitefully Stuffed';-)

it seems to capture the mood of the moment quite well.

repo

In reply to Isaac, post #359

I do think it is rather unfair though that people think it is an issue that I've made a comparison between Soco and the FTSE 250 when ee used to do it quite regularly in the TGT days over on TMF. It is a bit like writing a portfolio review during a bull market but totally avoiding writing one during a bear market. .

I didn't have a particular problem with your post - indeed I added a 5 year chart. However, I don't think there is a vast amount of point in comparing Soco with the FTSE250 (and I doubt I did so more than a couple of times in 10 years on TMF, though I certainly compared it to the Cairn/Tullow/Premier/Dana peer group fairly regularly).

All the "portfolio review" process tells you though is that SOCO didn't have a successful 2009/10 with the explorations drillbit....but we all knew that (and ex-post we'd all have rather been invested elsewhere). However, what the comparison certainly doesn't do is indicate that decisions to invest were wrong at the time they were made.....because any success in DRC or with TGD would have had a material impact....and because the remaining assets have yet to have their worth proven in the M&A marketplace.

ee

In reply to emptyend, post #361

ee,

I have got to agree with that. I've no regrets about my decision making with SIA. I missed a trick buying some back at around three quid because like nearly everyone else I was too pissed off with the TGD result.

It looks certain to yield at least a decent return before too long too but when.......

I've made strong money from SIA despite the disappointing results over the last couple of years. These things happen to most oil and gas companies at some stage. If there are a few exceptions to that.it's almost certainly because they get taken out fairly quickly or manage to be very 'lucky' with one or two company making plays.

The sensible thing to do at some stage is to take a decent money off the table. Again but when.....

repo

ee

Soco management have a history of exploring and developing Oil assets and then selling them on.

From looking at slide 4 of Soco's recent presentation : http://www.socointernational.co.uk/tmp_downloads/y127c79h134f115f56x68g128j90f146v146g144f55n139p97b147/11.01-january-2011.pdf

It shows all the assets Soco had and sold on since it listed on the LSE.

It is a fact that a company obtains the most amount of money when an asset has a production profile as this significantly reduces development risk and provides a better indication of what hydrocarbons are present.

Lets consider the following facts :

- UK assets sold in 1999 were producing assets Production,  net to the Company's working interest,  from  the
Weald  Basin averaged approximately 1,380 barrels of  oil  per day  (BOPD) http://www.investegate.co.uk/Article.aspx?id=199910140700360282Q

- Russian assets sold in 2001 were producing assets "Working interest production to the Company from its Russian interests averaged approximately 3,212 barrels of oil per day (BOPD"  http://www.investegate.co.uk/Article.aspx?id=200108200730137083I

- Tunisian assets sold in 2004 were producing assets Working interest production to the Company from its Tunisian interests averaged 1,049 barrels of oil per day http://www.investegate.co.uk/Article.aspx?id=200411181714144151F

-Mongolian assets sold in 2005 were producing assets A subsequent payment of up to US$53 million will be tied to future production from the divested interests in excess of 27.8 million barrels.http://www.investegate.co.uk/Article.aspx?id=200508180809552303Q

-Yemen assets sold in 2008 were producing assets http://www.investegate.co.uk/Article.aspx?id=200804220700038142S

Why would Soco management not wait until TGT comes into production in about 6 months from now before they sell Vietnam? Especially when most analysts are saying the Oil price is likely to go higher later this year. They have a history of selling assets once they come into production, so you could argue that taking TGT from development phase into production is still adding value to Soco.

To put this further into context I think it is worth looking at Ed Story's shareholding.

Ed has 2,874,459 shares which at £5  = £14,372,295 & at £5.50 = £15,809,524.5 & at £6 = £17,246,754

So at £5:50 Ed will earn an extra £1,437,230 compared to a sale of £5 & at £6 he would earn £2,874,459 compared to a sale at £5

I think that is quite a material difference & Roger's stake would be a slightly less but still quite material. Taking all this into account does it not make sense for them to wait another 6-9 months to get TGT into production and then selling as it could perhaps be a difference of getting an extra 50-100p compared to selling now. 

Why would Soco management not wait until TGT comes into production in about 6 months from now before they sell Vietnam?

Of course, CNV is delivering oil to the market so Vietnam already passes the 'production test' ;-)

As to TGT, it's at the point of producing with masses of data from loads of wells to prove it, so that didn't ought to be a hindrance to a sale. However, actual production data could have a material impact on reserves and accordingly, price paid. If after a couple of months wells have over-performed, then value of the assets will likely have increased. If OTOH, the wells underperformed, the converse would be true. Essentially, this is a matter of risk assessment between buyer and seller and a meeting of minds is equally as likely before as it is after production start-up.

Hi davjo,

Share your views re risk assessment.

I wonder whether one factor holding things up is the outcome of TGD extension ?

If Soco could add that to the mix, a NOC or other major would then have 2 potential upsides (TGT over-production and TGD "the one that got away") and might be minded to make a more aggressive bid......

In reply to davjo, post #364

Essentially, this is a matter of risk assessment between buyer and seller and a meeting of minds is equally as likely before as it is after production start-up.

This is precisely the right point.

Isaac posts a good summary of the past deals. But you have only to look back at the Yemen deal (done in market circumstances extremely similar to today's) and ask yourself: "what if they'd hung on for another 6 months?"

Of course we all make our own risk assessments on exactly the same issue.......do we sell or do we hold? I'm very clear that the risks lie in being out at the wrong time (and have therefore held whilst others have traded profitably.......but one day I'll still be holding and others will be rueing having sold).

ee

ps...good post repo

In reply to emptyend, post #366

ee,

Bedankt voor het complimentje.

On the risk assessment issue that's not too much of a problem for the sellers, who wll trade certainty for a lower profit. However if the buyers are most likely to be Asian, my overwhelming feeling is that they are very cautious and that they won't be rushed in taking a view on things, like your typical Anglo Saxon might do just about every day of the week.

On that basis and SIA's track record, which I was well aware of before his neat summary, I think the deal will most likely be post production start on TGT. When will that be exactly?

Perhaps someone with a deeper insight into the Asian business mentality would like to comment. Well that's about 85% of you I reckon;-)

Of course you have to be in it to win it and I might be correct in having a very limited position for the next 80 days, say, and then bang suddenly Soco goes from being one of the dullest E&P stocks to the most interesting, but by then it's too late. I guess that's what I love about this game.

repo

In reply to repobear, post #367

On the risk assessment issue that's not too much of a problem for the sellers, who wll trade certainty for a lower profit. However if the buyers are most likely to be Asian, my overwhelming feeling is that they are very cautious and that they won't be rushed in taking a view on things, like your typical Anglo Saxon might do just about every day of the week.

Obviously right re the sellers and, IF we were dealing with a single potential buyer, then you'd be right on that side too. But it is undoubtedly a competitive market.....there are many resource-short countries in the region and this is a large resource right on their doorstep. They cannot afford to be uninterested, though of course all but one will eventually fall by the wayside as they judge the price too high for them. Hence I pay little regard to the Chinese stories of a few weeks back - they aren't relevant.

On that basis and SIA's track record, which I was well aware of before his neat summary, I think the deal will most likely be post production start on TGT. When will that be exactly?

Production start-up will be in August. I expect that will be clarified in the next couple of weeks when they announce the results of the drilling of the last four wells (and perhaps comment on reserves).

ee

From Isaac's post. "-Mongolian assets sold in 2005 were producing assets A subsequent payment of up to US$53 million will be tied to future production from the divested interests in excess of 27.8 million barrels."

Does anyone know whether theconditions for the "subsequent payment of up to $53million" have been met or if/when the payment might become due. Would be a nice little nest egg for Son of Soco.

S

In reply to Samurai, post #369

Does anyone know whether theconditions for the "subsequent payment of up to $53million" have been met or if/when the payment might become due. Would be a nice little nest egg for Son of Soco.

No they haven't. It is a production royalty that only cuts in when the first 27.8mn bbls have been produced.

The Chinese have spent close to $1bn developing the field though, so I'd guess the threshold will be crossed in the next 3-4 years. Certainly the discount on the financial asset has continued to be unwound at a steady rate.

Most likely as you say it will end up in "son of SOCO" - though of course it is also a potential small value element for any buyer of the whole company.

ee

I'm very clear that the risks lie in being out at the wrong time (and have therefore held whilst others have traded profitably.......but one day I'll still be holding and others will be rueing having sold).

I totally agree with this point which has been my main reason for continuing to hold although I could have traded & made money elsewhere. In 2010 & the last few months I've seen a range of opportunities which offered 10-20% upside in a few months which I could have taken.

Quite a few people have sold because they don't think a deal is likely to be done soon. Based on Soco's history involving all asset sales it shows Soco tends to sell its assets once they are producing. Why should it be any different on this occasion? Especially when their is every incentive for the management to hold on which is a higher oil price is likely in 9 months and they would have had a few more pokes in Africa.

My preference is for a sale sooner rather then later, I'd rather take £5 for Vietnam now rather then £5.50 in 9 months as I have confidence i can make 10% from the markets & I have the option to spread my money a bit more.

I think the reason a lot of people are sceptical of a deal being done in the next few weeks is because you have'nt really given a valid reason as to why that may be. Whereas my summary of RNS's from asset sales clearly demonstrate why a deal is unlikely to happen soon & that Soco is very likely to wait until TGT is producing.

All you have said a deal is likely in Jan & then you said it was more likely in Feb & then you said late Feb/Early March. No disrespect but you have been calling the end game since May 2007 :http://www.advfn.com/cmn/fbb/thread.php3?id=14382883 

And like a Technical Analyst I suppose you will eventually be right.

You seem in a quandary Isaac.

You are afraid of missing out, so you stay in; yet the thrust of your last post indicates you are convinced that Vn won't be sold until at least the summer. ???

Buffy

In reply to Isaac, post #371

Based on Soco's history involving all asset sales it shows Soco tends to sell its assets once they are producing. Why should it be any different on this occasion?

It won't be. As was pointed out to you, there is production at CNV.

All you have said a deal is likely in Jan & then you said it was more likely in Feb & then you said late Feb/Early March.

Nope. I never suggested "January". February is still favourite for me but when it became clear that the TGD licence issue wasn't actually going to be completely resolved by year-end (as I had expected), some minor slippage became more likely.

As to the May 2007 thread header, let me quote you the relevant bits, because time is never independent of events:

At the time of writing, we are awaiting news of two wells in Vietnam: TGC-1X [aka the first well on Prospect S] and the first well on Prospect E [TGD-1X]. The results of these wells will substantially reduce the valuation gap between management's estimation of the worth of the company and what the wider market can see......

I should also add that the final exit from Vietnam will, IMO, take place within the next 9-12 months. It could happen sooner, as I'd expect that substantive negotiations will become possible as soon at the results of the two current wells are known....both will probably be known by July.

If only drilling had actually followed the predicted timescale, you woudn't be making your cheap point.....but, as you know, it took well over a year to actually get the results from TGD-1X......and they turned out to be inconclusive. A deal may still have happened after the approach in October 2008.....but, as that was under discussion, SOCO's post-drill analysis of the TGD-1X result turned up the possibility of the huge fan - and so the valuation gap grew again (and the financial crisis simultaneously widened it further).

Now we are once again at the point of quite a narrow valuation gap. The only major outstanding issue is the TGD licence. TGD-2X has proven lots of oil in place and continues to be supportive of the fan concept - but it does look likely to be a technical challenge to move the oil that is there. It is worth something, for sure, but probably not as much as we once hoped.....and, more particularly, it doesn't look capable of being proven up within a reasonable timeframe.

The bottom line IMO is that SOCO's ability to add value to the Vietnam assets is more or less at an end. Some input into TGD may add a bit more value but that isn't worth hanging on to everything for, given that it won't be resolved without further drilling (and may not be then, to judge from the previous two wells). It is that simple! Assets are always sold once the company's capability to add value begins to diminish. And that was always going to be closely linked to TGD, in the case of Vietnam.

Still, there's little point in debating. Lets just wait and see.

ee

VN govt seems worried about its trade deficit: http://www.bloomberg.com/news/2011-02-11/vietnam-devalues-dong-by-record-7-seeking-to-spur-growth-narrow-deficit.html

Vietnam devalued the dong by about 7 percent, the most since at least 1993, seeking to curb the nation’s trade deficit...

...“I’m quite surprised by the size as it’s very steep,” Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong said in a telephone interview. “It seems the authorities are trying to support exports and to support growth, rather than to fight inflation. That’s very surprising because inflation in Vietnam is a major problem.”...

Oil production would clearly help that problem...

Cheers,

Mark