Detailed discussion of Soco's assets should take place on other threads, but this thread is to discuss the latest valuations both by ourselves and analysts, sentiment (ie will the shares go nowhere because there's not much upcoming news) and likely moves in the share price in the next six months. How should the shares be valued? How reasonable is it that any drilling without a firm commitment further than several months away is ignored by the market?
I haven't seen many recent analysts' reports on Soco, but I have one from Cazenove with a core NAV of 1370p and no doubt considerable explo NAV on top of that. I imagine that's approximately concensus, but maybe with crude rising again these concensus NAV figures will start to rise. Has anyone any other recent broker estimates?
My view, as stated elsewhere, remains that in the absence of much to get the market excited the shares will wander aimlessly for the rest of 2009. I've previously guessed that if crude were $65 at Christmas 09, then Soco's SP would be somewhere near £13 then, and I'm still very happy with that guess. What does anyone else think?
Of course unexpected bids and other events may overtake this, but these sort of events may happen to any company, and perhaps Soco (where management seem unlikely to accept bids since they believe there is considerable value not recognised by the market) is one of the less likely companies to be affected by the unexpected. The key new news for Soco might be (a) a bid (IMO unlikely), (b) some sort of presentation by management of the drilling data they claim to have that demonstrates a significant strike has been made at E, currently ignored by the mkt, or (c) possibly hitting oil off the Congo.
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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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Hi MD,
Per ee in another place, Soco could have bought back some 200K shares today based on recent trade volumes - but didn't.
He said he'd be 'surprised and disappointed' if they didn't.
He's not the only one ! Let's hope that it's because there's something afoot.....
ATB
frustrating to see the share price drift off these last couple of days, especially knowing that the company has good cashflow and the authorisation to buy back shares, perhaps its a smart move to let the share price drift and the buy back at a lower price. It really does make me wonder if I'm missing something. tgt is producing, the tgd uncertainty removed, tgt p2 moved forward to july, AGM in June, IMS soon. The only uncertainty really is the rates of production and how extra production could be handled. The company's business model has always been to sell assets when they've added value, surely this must be coming up ?? I know the oil price has drifted off a bit, ok, bad in the short term, but longer term better to have oil prices at $100 and economic growth than to have $125 causing a recession.
I'm sure I'm not the only holder disappointed, but I'm starting to wonder where the bottom is if the EZ situation turns nasty, and we might be in for a longer haul that we hoped for.
Cheers K
In reply to extrader, post #442
http://www.investegate.co.uk/article.aspx?id=201205081712509223C&fe=1
well they bought 160k today,
I can only wonder where the price would be had they not bought these shares back.
K
Hi kenobi, hi MD,
My bad - I waited until 1705 and they hadn't reported by then.
Apols to all for being a duff gen merchant ;-<
ATB
In reply to extrader, post #442
....mmmm...on a proper count up, it seems that 160k was about the most they could buy.
These limits are a huge PITA, especially the one which limits to 25% of the previous 20 days (and which therefore prevents heavy buying in the event of a day of irrationality).
ee
In reply to emptyend, post #446
Well just did the calculations for tommorow and unfortunately the max we can buy back tommorow is 159k shares based on the vol for the last 20 trading days.
The volume on the 1st of May was pitiful, a mere 127,800.
We had big volume days on the 05,10,16,17,18,20,23 Apr and 03,04 & 08 May ranging from 600k to 1.39m
I might just note that, historically (ie compared to pre 2008 and the split), those are not especially "big" volumes. Neither are they "big" in comparison to the peer group. SOCO International (LON:SIA) is relatively illiquid.
I'd also say that one shouldn't be over-precise on estimated daily capacity. There are obviously practical issues in estimating the daily trading volume when one doesn't know exactly how much will trade in the closing auction or via late reported trades.
I thought I had purchased my last Soco shares, but was mistaken!
The price is just too good, I purchased another 3000 shares below £2.60 including all dealing costs.
A small caveat for quick sell fans. We could wait another year if they discover phase 2 does not prove the edge of the reservoir, and they decide to drill more wells further out. If that happens and the board can be persuaded to heed my 2011 AGM request for a dividend; a lot more support at the 2012 AGM will sweeten the bitter disappointment of another years wait.
Finally, I would like to thank Isaac for some useful posts.Well researched and factual information is always useful, including when ee debates the post afterwards! His post 448 is an example.
MD
In reply to MadDutch, post #449
A small caveat for quick sell fans. We could wait another year if they discover phase 2 does not prove the edge of the reservoir
That could possbily delay a sale, but if I was a quick sell fan (and who isn't at the right price!) I'd be more concerned about production problems with phase 2 than events likely to lead to a reserve upgrade :-) (Not that I expect them, but you never know until you start doing it)
http://uk.advfn.com/news/UKREG/2012/article/52343414
SOCO announces that on 9 May 2012 it purchased 145,000 of its ordinary shares at an average price of 261.9983 pence per ordinary share. The highest price and the lowest price paid for these shares were 268.8 pence and 257.5 pence respectively. All the purchased shares will be held as Treasury shares.
So pretty close to the limit that Issac gave. I've bought a few more too FWIW.
Log
http://www.investegate.co.uk/article.aspx?id=201205101826311306D&fe=1
another 110k today,
I must say this might not be the time for it, but perhaps if there are limitation re how many shares they can buy in the open market, it's time to consider some kind of tender, like Encore did to mop up a lot of shares in one go, this would allow them to buy in bulk, and at the same time put a floor under the shareprice (because anyone who was thinking of selling could do at a price agreed by the company.
K
In reply to kenobi, post #452
Of course it may be absolutely nothing.....broker doing something else for the afternoon or whatever....but there were a couple of unusual aspects to today's news.
As an aside, if I were planning a pre-phase 2 tilt at the company, present circumstances would be almost the perfect scenario....decision made on TGD, IMS imminent, share price well down due to marketwide nervousness after French/Greek elections, market expectations generally dropping - including those of analysts - oil prices having had a decent pullback but now stabilised etc etc............
Alternatively, as Kenobi says:
....there is plenty of capacity within the buyback authority (27mn or so). Yes it could need £80mn to fund it, but they had $160mn on the balance sheet at year end and have probably doubled that in the first four months. Pure speculation of course - but I think opportunism is merited by market circumstances.
ee
ee, I don't recall how tender offers work, or at least how the eo. did, it weren't their different prices that were offered, a certain amount of shares to be bought at each price. I'm imagining that it would have to be at a premium to the current price, but I see you've allowed for a little premium in the 80M you quote.
This is the sort of thing that would actually make a significant difference if you are serious about adding value through buy backs, you would then have approximately 10% bought back, but even at these levels lets not get carried away. this still won't make a huge difference even if you believe the sell out price would be double the current price (or a bit more). assuming that 10% of shares are bought back at half their eventual value, presumably this is a 5% uplift in the final price, not to be sniffed at, perhaps a sale price of 630p instead of 600p, certainly significant. As discussed previously it would also be good if the premium a buyer pays isn't too big because that makes it easier to sell to your shareholders. Mind you if you're only selling soco vietnam the premium over the shareprice is less important.
It's certainly worth several million quid to the directors so I'm sure they'd consider that the idea has merit !
cheers K
Kenobi, perhaps a factor would be that the hypothetical 10% of shares bought back would (presumably) not include any sold by directors or the larger shareholders (Pontoil, L&G, etc) so would come from the remainder, thereby reducing the liquidity and consequently having an upwards effect on share price? It would have no different impact on eventual NAV per share which would be as you suggest but might have a disproportionate positive impact on the sp in the meantime. Just a thought.
redhill.
In reply to emptyend, post #453
Wouldn't a tender offer be exactly the kind of thing extrader was suggesting a little earlier? It seemed to me he got fairly short shrift for the idea!
In reply to swanvesta, post #456
No - nothing like it at all!
He was suggesting that management launch an MBO, under which they would retain the benefit of any uplift in the share price. Kenobi is suggesting effectively an acceleration of the buyback - which would be to the benefit of ALL shareholders equally.
I'm certainly in favour of the latter (if it is practical) but I am utterly opposed to the thought that a large slug of shareholder value should be creamed off by a small subset of shareholders.
In reply to emptyend, post #457
It didn't seem to me he was talking of a full MBO, when he said:
I guess the language can be confusing when the BoD, and associated insiders, have such a large shareholding.
In reply to swanvesta, post #458
Well you very clearly failed to read his original post then, which made it completely clear.
No wonder I got so much flak and he appeared to have so much support for his half-arsed idea (sorry ET - don't take that personally!), if people don't actually bother to read the proposal and think about it.
I'm all in favour of ideas that increase the potential upside for shareholders as a whole - but I'm completely opposed to the idea that my interests are damaged in order to provide some short-term traders with a short-term opportunity for gain! And I would think that any shareholder who has held for more than a few weeks would be too!
ee
We need to keep in mind what the objective is, is it 1, to maximise the return for shareholders who stay in, or 2 to bolster the share price and allow people to exit at a slightly higher price without damaging the share price ?
If it's the first, then 80M would be best spent on a buy back, if it's the second perhaps it would be better spent on a divi, which would bolster the share price 80M could represent a 7 or 8 % divi. It seems to me from the last agm that the management did not commit to pay a divi, but they did suggest that they would if they couldn't find suitable opportunities to invest. As MD has suggested in the past it might focus the minds of potential buyers if they saw some of the cash flowing out of SOCO to the shareholders.
I guess the truth is that unless they really have other plans needing capex, they could afford to do both, though they'd probably be best advised not to speak of a divi if they are trying to buyback shares in bulk. I would suggest that if they did manage to buy back 10% of the stock, and then paid a 7% divi, the share price would respond very favourably. Especially if the tgt p1 production issues are resolved and p2 comes on line, and there is a plan for handling the capacity upto 90k as originally envisaged for tgt p1 & 2.
cheers K
In reply to kenobi, post #460
It is very clearly the first. There is no "massaging" objective for the buyback.
They aren't mutually exclusive. If the share price stays low and there is no VN deal then I'd expect a divi to be proposed (probably in H2) in tandem with buybacks.
However, don't start out with unrealistic ideas for the scale of the divi. Dividend policies are always looked at in terms of sustainability over the cycle (and taking account of investment opportunities). For a company like SOCO International (LON:SIA), I'd expect to see a dividend of about 6p per share per annum (so perhaps a 2% yield) and with dividend cover of 10-12x.
ee