Incidental stuff

In reply to Isaac, post #741

Have you considered emailing that note to Soco?

If you really believe they're not capable of working out the likely cashflow for themselves, what on earth are you doing holding shares in the company?

peterg

Let's make no mistake, we have a very capable and shrewd management team.

What baffles me is why they don't buy back and cancel shares at the current prices?

If Readers on these boards & Analysts can work out the NAV with the average price target being £4.70 then surely the management can run the numbers as well and work out the share price is at a significant discount to the underlying value then they should be buying back shares with such a huge growing cash pile?

What would you do Peter if you was in their boat?

I find it disturbing that they keep talking about acquisitions in SE Asia when their share price is trading at a significant discount to NAV!

Acquisitions more often then not tend to be expensive and destroy shareholder value so I don't support this strategy at all.

Please note, acquiring companies and thus being a director of a much larger company should not equate to larger remuneration pots, I repeat SHOULD NOT.

Soco's strategy is to Recognise Opportunity, Capture potential & Realise the value. So I appreciate we are working on realising the value of TGT and this is work in progress but if you buy back shares at a price cheaper then the underlying asset is worth then surely the value per bbl of TGT per Share increases so why would you not carry out such a strategy when the end goal is to realise the value?

Surely this seems very logical?

I think management need to be very clear what they intend to do with the cash as in their strategy I can't see anything about building a large cash pile on the balance sheet from TGT production.

Isaac

just suppose that the Euro implodes and there is a melt down in the global economy with oil demand collapsing and oil prices going into free fall. what would you expect to happen to share prices?

just because Soco's SP is below its NAV does not mean that it cannot fall much further. Maybe that's what is in management's thoughts......

buying shares now requires the buyer to take a view that the SP has bottomed and is unlikely to fall further. I do not see it as management's job to make calls like that. Maybe that's what is in management's thoughts......

In the doomsday scenario, a large cash pile would allow Soco to acquire assets/companies very cheaply - even more cheaply than today. Maybe that's what is in management's thoughts......

Fact is that barracking from the sidelines does not help anyone - including yourself. All it does is fritter away energy.

Incidentally, I liked Encore's buy back strategy some time ago. They found themselves in a position where net cash per share was greater than the share price. They realised that in that case using cash to buy shares back resulted in an immediate increase in cash per share. So they instituted a strategy of buying back whenever cash/share > SP. That generated an immediate and unarguable benefit. Buy backs simply because management think the SP is over-sold are less reliable as a means of improving shareholder value.

In reply to ExTownie, post #740

Do we have a figure for the recoverable costs which give rise to the increased share of production - In other words after how much revenue does the 60% share of TGT revert to 30 percent

Yes. From the last AR. They transferred $313+mn of accrued expenditure and will likely have spent more by now, drilling etc this year. The actual recovery process will surely be more complex than your comment suggests(not least because a chunk of the recovery is from the minority shareholder!) but, on the face of it, it would seem that cost recovery is likely to continue until at least Q3 2012.

As for Isaac's comments, the company are well aware of my opinions. I try to offer my opinions well in advance - and then leave management to get on with their jobs. There are a million possible reasons why they don't pursue a course of action that some outside may think desirable - and it is fruitless to speculate why. For all we know they may have been unexpectedly plunged into a close period .....;-)......but, as tournesolf notes for example, there is plenty of euro turmoil to consider. They are in possession of the full facts and we are not......so why waste time wondering?

ee

In reply to emptyend, post #746

Thanks ee

In reply to Isaac, post #743

What would you do Peter if you was in their boat?

Were I in their boat then buybacks is something that might well be worth consideration. However, the overriding consideration is that I am not in their boat! Management have access to a range of data and information that I (and you) can only guess at. I believe that they are much better able than I to run an O&P company, which is why I hold Soco stock, and pay them handsomly to manage the company, rather than investing my cash in Pete's Petroleum (one slighty used oil well) Ltd. It appears from your posts that you feel better able to manage Soco than the current management, in which case I'd suggest you look seriously at the possiblity of setting up your own E&P!

Thanks Pete,

It's not really a case of me being able to run an E+P better then Soco management, as you say it is easy to criticise from the sidelines, but I think all criticism should be well recieved and should be seen as a gift. If I was running a business I would welcome what pointers my critics made rather then what positives I recieved as in effect they are helping me by telling me how I can run my business better to maximise returns.

Ofcourse the critics are not always right, but that does'nt mean they should stop criticising.

As you say I don't have the information that Soco have to hand so clearly they are in a better position then I am to decide on what course the company should take.

If I were the management and I was 67, I don't think I would want to embark on a new full cycle e+p programme which is kinda what they are trying to do in Africa and based on the results to date I would probably scrap Africa apart from Block V which I think is the only prospective acreage left in Soco's Africa portfolio.

I would aggresively buy back shares at the current price, I would then look to ramp up TGT production and in the interim I would look to farm down TGD - once that is done I would look to do a deal for the whole company but leave some upside exposure to TGD/Block V, perhaps selling the assets to a company which allow Soco shareholders to take cash and shares in the acquiror.

That is what I would do.

Right now my gut instinct tells me a deal probably won't be done for another year as Soco would want to maximise value from TGT and I think for them to be able to do that they would need production date from Phase 2 of TGT and production start up does'nt occur until August 2012 and then you need 6 months production data etc

This also makes me think it is very possible that we will have another stab at TGD, if they start drilling in March and it takes 3-4 or 5 months to complete it will be in time for TGT Phase 2 production. I just hope they intend to farm down their 65% interest as that well could become very expensive....

Basically this time next year we will have an even better idea of TGD, Phase 2 would have come online, we would have interpreted Block V Seismic data & would have decent production data from Phase 1 as well as a large cash pile. We should also have a much better idea of CNV Gas, Gas Liquids and Oil as the separator is expected to be installed in Q1 2012.

I just think this time next year we will be in a much better position to do a deal then we will be in say Feb/March 2012 as more of the unknowns would be clear, I also expect Oil prices to be higher then current levels.

If TGD came off then I think a lot of us would be retiring!

We can dream. ;)

ArtN

Hi Isaac,

I tend to concur with your suggested timeline set out in 749, tho' I'd personally prefer to get paid out earlier.....

Who knows ? Perhaps that IS Soco management's cunning plan.......in which case we can all wait quietly (and patiently ?) for them to implement - non ?

Anything that happens earlier than late 2012/early 2013 woul then be a bonus !

GLA

In reply to Isaac, post #749

If I were the management and I was 67, I don't think I would want to embark on a new full cycle e+p programme which is kinda what they are trying to do in Africa

This is the nub of your problem. There isn't the slightest chance that the exec management will be doing that. It is ALL about trying to add value to the company.

I would aggresively buy back shares at the current price, I would then look to ramp up TGT production and in the interim I would look to farm down TGD - once that is done I would look to do a deal for the whole company but leave some upside exposure to TGD/Block V, perhaps selling the assets to a company which allow Soco shareholders to take cash and shares in the acquiror.

That is what I would do.

So would I... in every detail. And I have told them that, months ago. However, it is one thing to have a clear idea where one is trying to go - and it is quite another to actually get there. It is like using a taxi.......you tell the driver where you want to go, and you leave him to get you there........you DON'T keep telling him every 5 minutes that he is going the wrong way - he has "the knowledge" and you do not! So you leave the driver to it. And if, due to unforeseen circumstances such as road repairs, gas leaks or the coronation of the Queen of Sheba, it should turn out that you can't get precisely to where you would like to be, then it is the job of the driver/management to get you as close as possible.

That is exactly what they are trying to do - even if it might look at times that they are not going the quickest route to get there. That is life - and nothing anyone on bulletin boards can say will make the slightest difference.

ee

In reply to emptyend, post #746

Yes. From the last AR. They transferred $313+mn of accrued expenditure and will likely have spent more by now, drilling etc this year. The actual recovery process will surely be more complex than your comment suggests(not least because a chunk of the recovery is from the minority shareholder!) but, on the face of it, it would seem that cost recovery is likely to continue until at least Q3 2012.

In respect of Lizeroux, I was advised some time ago that it was estimated to take 5 or 6 years to unwind their free carry, principally because their costs were being compounded annually at, I think, 9%? Of course, it might take quicker than that in a high oilprice environment.

Of the $313m accrued expenditure referred to, 20% attributed to Lizeroux, I wonder what the actual figure currently owed by them is after interest? Stab in the dark $75m? adding say $40m odd to above figure?

In reply to davjo, post #753

Yes - 9%. Must be in the order of 30% of the total (having started at 20% of total), allowing for the fact that the big money has only been spent quite recently.

AIUI the recovery from the minority partner would be included in the total booked at the group level....but, on revisiting the AR, I see that I picked the wrong number out in my haste last night......they transferred $313mn in 2009 - but then added a further $158mn in 2010 (see note 16). So, with the spending to date in 2011, I'd guess there is something like $530mn of cost recovery to come back.

I'd also think that the agreed method of cost recovery won't be the same for PV as it is for the minority - but the bulk of the costs should be recovered during 2012 IMO.

ee

Lukoil/PV tie-up...and....

Lukoil has said it was seeking to bid for more offshore blocks in Vietnam

Presumably that means bidding for explo blocks - but some of us will recall that it was Lukoil who bought SOCO's Russian interests 10 years ago.

ee

soco show an interest in myanmar ?

http://www.reuters.com/article/2011/11/24/us-myanmar-oil-idUSTRE7AN0B220111124

In reply to kenobi, post #756

"We are always looking to improve our exploration portfolio and Myanmar is a country that we think could offer opportunities," said deputy chief executive Roger Cagle.

That should make Isaac happy!

In reply to kenobi, post #756

I must say that such a move would make absolutely perfect sense! I would think that they would be looking for shallow water acreage with potential for fans, similar to Cuu Long. I wouldn't be at all surprised either if they partner with PV - and perhaps PTTEP. Note that there have been very recent improvements in the politics in Myanmar (there was a recent interview on the BBC with Aung  San Suu Kyi indicating some significant relaxations and it is clear that she and her party intend to run in the upcoming by-elections)  and there is also talk of Shell partnering in some deepwater acreage.

Structurally the way for SOCO to participate would be to interpose (if necessary) an Asian regional holding company between the main Group and SOCO Vietnam. This could then hold all Asian explo assets - including perhaps any future farm-back-in to TGD....and it would continue unaffected if SOCO International (LON:SIA) simply monetised the main SOCO Vietnam interest. I would expect the actual licence-holding entity to most likely be a new local consortium company, FWIW,similar to the Vietnam JOCs.

This would also make sense in the context of the potential Asian deals flagged earlier in the year. No way of knowing whether they would get whichever blocks were bid for - but, supposing they would be partnered with PV and/or PTTEP, I would think they have an excellent chance!

ee

Top up time, £2.76, yes please!

Would you believe, I had a SB at £1 point that`s modest, with a stop that I thought would never be reached as long as the sun shone of 275p and got stopped out, unbelievable the way this share price is performing.Where will it all end.

In reply to Isaac, post #759

By putting up more hard cash I guess that means you agree with and support managements plans - hence will stop #####ing every 5 mns!

Back to sleep for me - I'll wake up when the Chinese make thier move.