Fwiw I think the Soco management should resign from the board as I simply don't think they have done a good job for shareholders at all over the last 4-5 years.
As a long term shareholder I feel they have had numerous opportunities to deliver operationally but have consistently failed.
Most notable failures are
-Lack of Commercial success on TGD & millions spent on various wells.
-Several wells drilled in Africa, again millions spent but no commercial success
-TGT 55,000 bopd year end target missed when it was only late Aug 2011 they talked about such target
-Selling out Baulaung only to see months later reserves upgrade & further drilling success by Salamander
I feel the management's judgement is questionable. It is difficult for the markets to have confidence in a management team that seems to be getting it wrong consistently.
I just think a management team with 30+ years of experience should be able to provide an accurate estimate as to when production targets on a big project like TGT is likely to hit 55,000 boepd. And have the ability to achieve those targets?
Why would you set a public target if you could'nt achieve it?
I mean if you can't work out when targets are likely to be hit then why should Investors have any confidence in their judgement as to which wells should be drilled?
Soco is down 13% over the past month, there are 46 E+P stocks that are up more then 10%. Soco has significantly underperformed in a what has been a bullish market the past 4 weeks. It is clear the market has 0 confidence in Soco.
http://www.digitallook.com/cgi-bin/dlmedia/heatmap??&&country_id=1&tool_url=/cgi-bin/dlmedia/heatmap&index_security_classification_id=-1§or_security_classification_id=100148&dataplotcatergorycategory=share_performance&dataplotcatergory=price_mvt_3m&orderby_field=value1&action=tool_submit&tool_id=10&hide_extremities=undefined&remove_nas=undefined&username=Invisage&ac=208992&tc=
I don't trust the manageement team to make the right decisions for shareholders.
I would feel more comfortable if the two execs on the board resigned & the chairman indicated to the markets the company was for sale.
I think shareholders have given the management team enough chances over the past 4-5 years & feel enough is enough.
Disclaimer:
As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.
SOCO International plc is an international oil and gas exploration and production company. The Company has oil and gas interests in Vietnam, which includes Block 9-2 and Block 16-1; Republic of Congo (Brazzaville), which includes Marine XI Block and Marine XIV Block, the Democratic Republic of Congo (Kinshasa), consists of Nganzi block and Block V and Angola, which include Cabinda Onshore North Block. The Company's operations are located in South East Asia and Africa. It holds its interests in the Republic of Congo (Brazzaville), through its 85%-owned subsidiary, SOCO Exploration and Production Congo SA (SOCO EPC). It holds its interests in the Democratic Republic of Congo (Kinshasa) through its 85%-owned subsidiary SOCO Exploration and Production DRC Sprl. Te Giac Trang (TGT) field’s Phase I production began on August 22, 2011. Total production net to its working interest from continuing operations, during the year ended December 31, 2011, were 5,437 barrels of oil equivalent per day. more »
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Actually the bond wasn't a bad deal for anyone.
>> well, the company seems to have had most if not all the money on deposit somewhere
for the majority of the time.
I agree though that having the money available has put them in a much stronger position, to be able to say, well we'll develop tgt ourselves as opposed to having to do a deal like EO or others who didn't have the funding in the bag.
yes perhaps if they buy back more shares now than they issued then to cancel it's all worked out fine,
and definitely yes we're all looking to the weighing machine side of the equation here. There is this production volume issue, but if you'd told me a year ago, that TGT would come on stream on time, and that production would flow, even at 30 odd k, but we're just waiting for the other zones to be perforated, oh and the share price will be bobbing around 300p, I would have thought you were mad,
still, only a few months until TGT 2 comes on line now, hopefully there will be no reasons to delay full production there.
K
Yes and Issac for president (not of Soco but of the USA) welcome back Issac - we missed you ;-)
>> Issac:
>> I simply don't think they have done a good job for shareholders at all over the last 4-5 years.
>> As a long term shareholder I feel they have had numerous opportunities to deliver operationally but have consistently failed.
I don't often post here, but some things demand a reply...
If you're such a long term Soco shareholder Issac, and you're so convinced that the management have consistently failed, what does that say about your choice of shareholding?
In reply to emptyend, post #5
Actually the bond wasn't a bad deal for anyone.
... that's stretching things a tad.
The existence of the bondholders early redemption rights (the 'put') made this a 4-year commitment only and indeed bondholders partially exercised this option and US$165.9m were redeemed at the fourth anniversary, from the original issue of $250m. Did the Company really believe at the outset that they had a 7-year commitment?
It seems to me that there are wider implications arising from this 'put'.
One consequence of ceding this 'put' is that the Company effectively gave up control of its liquidity management. The issue of new shares in January 2010 amounting to £102m (US$166M) has been stated as an audit requirement as without that additional cash, the auditors could not have given a clean opinion on the Company's ability to finance its ongoing operations. The contingent risk was that Bondholders could have elected to redeem the entire US$250m in May 2010 in which case, there could have been a hypothetical cash shortfall at that point. As it transpired the year-end (31 December 2010) cash position after the bond redemption and after the share issue was US$260M. A very unnecessary market cash call but for that 'put'.
There is no way that I can believe that management asked for the inclusion of this 'put' in this Convertible Issue, so why was it included? Did the arranger fully discuss the implications with the Company of its inclusion (a 4-year issue is a good deal easier to sell than a 7-year issue). If there was any lack of transparency around this issue, then in my opinion, they should be history.
Management almost concede the point in the Chairman & CE's statement AR 2010 (page9)
"During 2010 the Group elminated uncertainty over its convertible bonds when 66% of bond holders exercised the one time put option in May" ... You might think that the Company had a choice!
From where I'm sitting this was a costly episode for management's credibility and for shareholders.
We'll have to differ on that then.....though of course you are right that they only had a four year deal really (despite some of it running on for the full 7). Personally I would have very strongly advised management (but they didn't ask/employ me) against conceding a put of any sort - it didn't seem to me to be necessary at the time, given market conditions.
I agree entirely with your comment about loss of control re liquidity management (which is why I would have advised against the put strongly).
It was doubtless included for the usual reason that such puts appear - which was that Merrill knew it would make the underwriting virtually risk-free. These things go in cycles - and at the time there was some recent precedent that doubtless was used to persude the company that it was essential - even if (as I suspect) it wasn't really. If they'd tried a 7 year deal with no put they would have had to work much harder to place it.....and I doubt they would have been able to upsize it as they did. They may also have wanted to see a higher coupon (which I would have advised the company to pay, if necessary).
I really don't think that is at all correct or fair comment! .......
a) nobody can know what would have happened if a 7 year deal with no put had been tried - or what the terms might have been.
b) the actual costs of borrowing have been reduced over the actual alternatives of straight debt of various sorts.
c) ex-post we can see that diluting shareholders by equity funding via a placement at £15.50 or whatever would have been even better - but it certainly wouldn't have looked that way for the two years following the issue pre-crash, because we'd all have moaned about the dilution.
d) If TGD had gone well and the markets and oil price had held up then the bonds would have ended up being converted at £22ish per share....but in fact equity had to be issued at £14.10p - which was only about 9-10% less than it would have been issued at in 2006. More than made up for by the saving in borrowing costs IMO.
So......not a bad deal at all, as I said. It could have been better if they hadn't conceded the put or (as we now can see ex-post) if they had equity-funded instead.....but then we can all see things much better in hindsight!
ee
ps....there was plenty of discussion at the time and various posts including this one made clear that there were a limited range of options available at the time - and that the deal was done "at market". The only thing I'd have changed was to have paid a bigger coupon in exchange for dropping the put.
IIRC there were a couple of other similar deals done by comparable companies in 2006 - but on worse terms.
In reply to djpreston, post #1
Darron,
Why should my view point change if the situation has deteriorated further?
The management can't seem to get TGT/TGD/Africa right but they seem to think it is perfectly logical to look for new opportunities in Burma, SE Asia/ Africa.
I think it is totally ludicrous as to why anyone would think it is sensible to acquire more acreage, i.e. spend more of SHAREHOLDER funds to explore in virgin territory when they can't seem to get right what they already have on their books.
I can assure you as an owner of this business I would'nt be prepared to inflate their salaries any further in the 'enlarged' group because they are working in a larger geography.
Kenobi,
I think you hit the nail on the head. The management team have 30+ years experience in the business. Yet, their judgement as to the people they choose to interpret the seismic and then drill the well is questionable.
It is the management team who source the people, failure or success the buck stops with them I'm afraid. I hold the management fully responsible for the failure to strike Oil/Gas in Commercial volumes on TGD, to meet targets on TGT production & for spending millions of shareholder funds drilling not one or two but numerous wells in Aftica with no commercial success.
I don't give them any credit for this at all. If anything it has had an adverse impact on what I think of the Soco management., How could this be a good thing ? We spent millions of shareholder funds drilling a few wells on TGD, there is no sign of commercial success and because they have got an extension it appears they are preparing to chuck a load more of SHAREHOLDER cash down the toilet.
Why would I give them any credit whatsoever?
I hope the TGD project fails miserably, I hope it does'nt get started at all. I seriously hope their is a force majeure in the contract preventing Soco + Co from drilling. I hope the cash is saved and returned to shareholders so WE can decide to do what WE want with OUR cash.
They did'nt have to sell Thailand. The management made a call at that point in time to sell Baulaung. The price of oil is significantly higher since the sale and so is the reserves/production on this asset.
The management yet again got it wrong, bad judgement call again. Why is the management team paid large sums of money? To destroy value? I think their should be clawbacks in their contracts that state when value is not added in a given year then they should pay back parts of their remuneration.
There have been numerous bad calls over the last 4 years, but there does'nt seem to be any claw backs in their contract?
Why is it that they get large bonuses when things go well but there are no clawbacks in their contracts when things go badly?
If Coastal can double in a year on the back of succesful wells in Thailand, then it's hard to fault the market for putting Soco on a low rating for consistently making bad calls. They have lost the respect & Confidence of the markets - it is clear as to why the price is at current levels despite the sector/markets having a good rally the past few weeks.
It has been a frustrating 4 years, indeed. Clearly the strategy is not working. I think the management should stand down. Let's bring in some new execs into the company, breath some life into it with new ideas and new ways of taking Soco forward using a different approach.
What the current management are doing is not working, I think shareholders deserve change. It is time to move on Soco Execs....Please stand down.
p.s. Prior to the next AGM I plan to call my Broker & instruct him to vote against the re-appointment of all exec/non-exec directors and vote against their remuneration packages.
Toys ...pram...pram...toys..... ..ah-hah!
Why on earth would anyone sensible (present company excluded, obviously) wish to hold shares in a company where they felt like that? And can you think of a SINGLE example where any company has ever followed such an approach?
Give it a rest for a few months at least before you get going with this sort of nonsense!
I'm sure that management have more than enough on their plate without bonkers distractions like someone pretending they give a flying ^^^^ about their salaries in comparison to the multi-millions they have tied up in the company's shares.
Shareholders like this merely dissuade anyone sensible from trying to run a public company. Much better to do without the hassle.
In reply to Isaac, post #12
p.s. Prior to the next AGM I plan to call my Broker & instruct him to vote against the re-appointment of all exec/non-exec directors and vote against their remuneration packages.
Just suppose for a moment, heaven forbid, that you were successful in this, Isaac, could you please explain to me how this would enhance the value of your shareholding (or more importantly, mine). Cutting off the head of the company with no apparent plan to replace it doesn't seem that smart to my simple way of thinking. Am I to assume that you would be putting your considerable talents at the disposal of the company as Executive Chair?
Bonkers, absolutely bonkers....
If TGD had come in, or any of the African wells, they'd be seen as geniuses. Sadly this industry can be harsh and sometimes a well doesn't work out, maybe three our Four wells don't work out, that's the nature of the game.
Sadly done shareholders don't seem to understand that. The oil business is, if not the, then amongst the harshest when it comes to failures. There's no escaping them. If management knew for certain that TGD want going too work them they wouldn't have drilled it. The had plenty of skin in the game to risk and felt the risk was justified. I'm quite happy to back that decision. Rather that than another Co where the execs aren't massive holders and are therefore more willing you risk shareholders' money.
Care in the community, good idea per bad?
I think you hit the nail on the head. The management team have 30+ years experience in the business. Yet, their judgement as to the people they choose to interpret the seismic and then drill the well is questionable.
>> of course they chose the people to do siesmic and drill cnv, and tgt 1 & 2, they didn't do too bad there did they ?
I hope the TGD project fails miserably, I hope it does'nt get started at all. I seriously hope their is a force majeure in the contract preventing Soco + Co from drilling. I hope the cash is saved and returned to shareholders so WE can decide to do what WE want with OUR cash
>> Do you ? but TGD is potentially bigger than TGT, much bigger and we hold a larger stake,
you want a something, where we know there is oil, potentially 1BN + barrels of oil and equivelents, to fail , so that the management can cash in and sell out, so you can take your chips off the table ?
Look, I really have no problem with you, I've written this before, so please don't be offended. We own a little bit of a company, we don't work there, for us it's an investment, we bought and we'll sell, for a profit. then on to the next one. that's our perspective, so as share holders we're inclined to take a quicker return.
The management have founded the company, and this is the culmination of their lifes work. They own much more of the company than I do, (I can't speak for you, your name might be mr black rock for all I know),
So it's unreasonable to expect the direction of the company to be set by a minority of shareholders, the company has objectives, we can choose to go along for the ride or not. If a majority of the shareholders wanted a change of direction, then that would be different, you vote at the next agm, that's your right, if the majority vote with you then that's fine.
Re Thailand, maybe with hindsight, it would have been better to hold at the time, but this is an expo company, they got it to production, and sold it, when it became "a plumbing job", it was clearly marked for disposal, and was sold for the best price they could get, with hindsight, perhaps they could have done better holding on to it, it was $100M so I guess they would have had to plug this cash hole somehow,
have you been away somewhere ?
welcome back, anyway,
K
I missed the last AGM. Were other AGM attendees given the impression that management believed the latest TGD failure was down to a mud (not completion fluid) reaction?. Did they cite any precedent for the mud they were using in that particular rock/hydrocarbon combination?. Were any other possible explanations put forward (other than 'lack of gas drive')?.
What information do they expect to get from the new seismic?. (sorry if somewhat off topic)
Ark,
This is not in reference to the last well, the last well had oil shows but didn't flow commercially (from memory)
This is the well before, I don't know if it was the mud or the completion fluid, but the story was that this reacted to create a plastic like substance stopping flow. I was under the impression that had this not been the case, the well would have been commercial, or at least flow enough to secure the area.
At the last agm, I asked why they didn't just drill next to the original well to get a result and secure the area, and I was told that the results would not be good enough to secure the area. I assume that means the flows would not have been commercial. Now this could be my misunderstanding on either count, but that's how I understand it.
I have never really understood why first it was high pressure, and then later the oil didn't flow, if the high pressure was only below the volcanics, why didn't they test above the volcanics on the original well by plugging the hole further down ? Perhaps they hit a pocket of high pressure, I don't really know.
I look forward to the results of the siesmic reinterpretation and hope we can get a result by drilling into one of those big coloured blobs !
K
Another 40k Shares bought today,
http://www.investegate.co.uk/article.aspx?id=201201271720393431W&fe=1
Apart of course from the obvious possibility of a sudden company sale, I struggle to see reason for share price upswing in the next half year; after which the production cash inflow will no doubt lift the price
Does anyone have a good evidence to the contrary, please?
Groundhog
And there was me thinking there'd be nothing funny to read on stockopedia after a few days away - how wrong I was.
Cheers Isaac - I particularly enjoy your rants.
On a serious note though - sell your shares!
Jerry Yang also founded Yahoo.....does'nt mean he had the right to a job for life - Peformance is paramount. I think Soco would be better of with a change of management, the company would be more succesful with a focused management team with a deep experience of drilling HPHT wells.
I think it is the single best way to maximise shareholder value. The current management are out of their depth IMO. Time to step aside I'm afraid. When you can't do the job @ hand, i.e. find Oil the solution is not to chuck a load of cash on trying to drill in Virgin territory.
I am clearly not the only one who feels like this, afterall long term shareholder BlackRock have been selling down their stake, sold 1.5m shares in the last quarter : http://markets.ft.com/research/Markets/Tearsheets/Business-profile?s=SIA:LSE
Trust me, they are no fools..
Readers can continue to be in denial but I SERIOUSLY hope the directors get a wake up call & hope one or several directors are booted of the board/non-exec & the remuneration packages are rejected. Even if the directors step down and suitable candidates are not found I think it will open the door wide open for a bid.
However, I think it is important to remind the directors that they work for the shareholders.....
Jerry Yang also founded Yahoo.....does'nt mean he had the right to a job for life
>> you're right, they should sell out their life's work to a low ball offer so that you can make a turn on the share price and move on to invest in something else which is currently cheap, how selfish of them not to do this.
I think it is the single best way to maximise shareholder value.
>> well, great then, Isaac wants out, come on management dump TGD, hawk the company around announce it's for sale, and take the best offer available now, so Isaac can move on to make a turn elsewhere. Then he'll ##### if someone else drills TGD and makes a sucess of it, just like he did with Thailand.
I am clearly not the only one who feels like this, afterall long term shareholder BlackRock have been selling down their stake, sold 1.5m shares in the last quarter : http://markets.ft.com/research/Markets/Tearsheets/Business-profile?s=SIA:LSE
Trust me, they are no fools..
>> ok , well if you give so much weight to what black rock do, clearly they can see there's no outer here, I suggest you follow them and sell out, the management are currently buying stock at below 300, and plan to until the agm, so you'll find willing buyers.
However, I think it is important to remind the directors that they work for the shareholders.....
>> yes, they do, all the shareholders, not just you. I suggest you vote down the directors and against their renumeration packages, and we'll see how many like minded people there really are.
K
Hi Isaac
I am puzzled as to why you are still invested in Soco when you have such little faith in the management...which lets face it are Soco?
Who exactly do you think would do a better job? Can you imagine the contacts and relationships the team have built up over the years?
We all want to make money here...the management included
I think various posters have been restrained in their thoughts and posts...for me I think the suggestion has no merit what so ever.
Rgds
In reply to dawnpatrol, post #24
I am puzzled as to why you are still invested in Soco when you have such little faith in the management...which lets face it are Soco?
He may well not be. I don't think his motivation for posting has much to do with wanting serious discussion of the merits or otherwise of the investment.