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.
Moderation note: posts will only be deleted from this thread by the site admins or by agreement from at least three of sirlurkalot, emptyend, djpreston and doverbeach. If three of this list agree to delete a post, the names of those three and the reason for deletion will be noted in a post on this thread so everything's completely transparent.
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 »
1121 Posts on this Thread show/hide all
http://www.investegate.co.uk/article.aspx?id=201205301734164632E
327k today , new total, 7,564,540
cheers k
£:$ is 1.548....C'mon Soco let's do a deal...... :-)
Soco can buy back max 450k shares based on the avg, Just a bit annoying that we can't seem to get the volume in the market.....
I would prefer to see a deal done sooner rather then later as opposed to buying back shares.
In reply to kenobi, post #562
K
7,127331 shares plus 327, 209 shares today = 7,454,540......:-)
MT
In reply to mangotree, post #564
>> 7,127331 shares plus 327, 209 shares today = 7,454,540......:-)
yes I wasn't questioning your figures, I even wrote new total, as in new after todays buybacks,
ticking up nicely at this rate,
K
Pleasing to see the buy back pick up pace. I had thought that the 290p ceiling was too low but it looks like the company's view was vindicated.
Who is going to the AGM this year? I'm hopeful of doing so but it's 50:50 atm.
In reply to jseth123, post #566
Yup - so did I ....and it would seem I was wrong on that. The bigger issue with the buyback process is the limit on the amount of stock that can be bought - and they have managed to do the best they can on that front and neatly line up the scaling-up with a market opportunity.
So far I must say that over the last 10 years or so the company has played a blinder on matters of financing and risk management....and there aren't many companies one could say that about in the E&P space. It would have been nice to have a continuation of the explo successes of the middle of the decade, but a good general philosophy for explo companies is to "hope for success but plan for failure".
One spin-off from these buybacks is that there is some £20m that would otherwise be exposed to ‘credit risk’ as an equivalent US Dollar deposit.
Casting an eye at credit risk exposure, the Annual Report does contain policy statements in both the Financial Review (page 34) and in the Notes (page 80) regarding this element of risk management and these offer some degree of comfort however, there are some pretty mixed signals also:
“The credit risk on liquid funds is limited as the Board only selects institutions with high credit-ratings assigned by international credit-rating agencies and endeavours to spread cash balances and liquid investments over more than one institution.”
Had it been applicable, the minimum sort of disclosure statement that I would have preferred to have seen might include:
1. The Board only selects institutions with the ‘highest’ credit-ratings.
2. No more than (5%) of total cash is invested with any one deposit-taker.
3. The majority (state %) of total cash is invested in diversified triple-A Institutional Liquidity Funds or equivalent and include;
4. a maturity analysis by deposit/investment category, rating and currency.
Wishful thinking perhaps but in these potentially contagious times investors have good reason to expect unambiguous disclosure. It should be said that the Auditors state that the Company is compliant with IFRSs and the Companies Act requirements.
FWIW some clarification has been sought from management.
In reply to gibson330, post #568
I have previously investigated the credit risk aspects of cash holdings in some considerable detail and discussed them with management. Those discussions predated the financial crash (and were around the time when I was expressing concerns elsewhere about banks).
There are severe operational problems with the sort of tight rules you suggest - not the least of which is that there aren't 20 banks in existence which have "the highest credit ratings"!!! In fact I'd guess you would struggle these days to find half that number that were better than single A!! So imposing a maximum 5% or 10% exposure is unlikely to be practical.
I have previously discussed in some detail the use of AAA money market funds (as per your point 3) and it is my recollection that such AAA money market funds are indeed used now (they weren't at the time I had those discussions - which is why I was keen to discuss the matter!). The comments on p34 support that.
I'm certain that management understand these issues extremely well and are very active in reviewing their exposures - and not afraid to move cash around accordingly. As a result, I'm not bothered in the least by the catch-all nature of the disclosure.......I have no wish to tie management's hands if decisions need to be made from time to time as matters of urgency!
You should also note that not all the cash is held in the parent company. Some of it (much of it?) will be held in the JOCs in Vietnam, at least for short periods. This is another area of complexity that would be difficult to capture with the sort of rules-based approach you suggest.
I have also investigated the term structure of deposits in the past, and have found that they generally have adopted a 3 month or 6 month maximum, depending on the interest rate environment.
I would expect them currently to be having deposits subject to a 3 month maximum (per p 34) and spread between perhaps 4-5 banks (including the JOC holdings of cash) plus maybe two money market funds....with a model split of 25-30% in each AAA money market fund and 10% max with each bank. But I have no doubt that for practical reasons it wouldn't be deliberately rebalanced very frequently. All the cash (well 98% or so, I guess) is held in USD - so from that standpoint everything is and always has been fine!
In sum, I empathise with your concerns - but I am far less bothered about the details of the disclosure, because I know that great attention is paid to the issue in practise! And it is only the practise of cash conservation that is ultimately important. Good point to raise though.....and broadly the right sort of message.
ee
Although obviously a great idea to protect company cash balances this risk is surely very minor compared for example the political risk associated with the huge assets held in Vietnam. If Vietnam were for example to undergo a military coup and Soco's oil assets seized it would have a devastating impact on the company. There is obviously not much they can do about this right now but the risk far outweighs say the credit risk of deposits with HSBC.
Having said that it always makes sense to take sensible steps where you can.
I'm not sure the share buy back helps anyway since for each share cancelled the remaining shares own more (per share) of the remaining cash balance.
All very small beer anyway compared with the big picture. £20m is neither here nor there than the NAV of TGT.
Log
In reply to loglorry, post #570
There is obviously not much they can do about this right now
Pump faster?
In reply to loglorry, post #570
All very small beer anyway compared with the big picture. £20m is neither here nor there than the NAV of TGT.
£20m is only the impact of the share buy back. The Company must be close to cash balances of US$200m or the equivalent of approaching £0.40 per share. That’s not small beer and without a dividend policy it is only set to escalate rapidly.
In reply to gibson330, post #572
Correct.
Buybacks at current volumes/levels would be consuming pretty much all the daily cashflow though, but that won't be the case from July when we finally get to 55k bopd at TGT.....which is why I'd expect a dividend policy to be announced with the interim results if we get to that point.
ee
ee - Would you still expect this dividend to be in the ballpark of 2% pa, which I believe you suggested previously? I had expected it to be significantly higher than that, perhaps 5%, given the volume of cash coming in.
Thanks,
ET
In reply to ExTownie, post #574
I don't recall having suggested any number particularly, but I'd strongly doubt it would be more than 2% over a full year. For comparison see Tullow Oil (LON:TLW) (0.9%) and BG (1.2%). Even Melrose Resources (LON:MRS) pays only 3.7%, despite having a controlling shareholder.
I'd think 2.5p per share for an interim divi would be a reasonable expectation....but it could be a good deal more, at least in theory - though maiden dividends are always prudently covered!
ee
What level of debt would the cash flows they have support currently? I am wondering why they simply do not use the cash flow to raise debt and return the current net cash on the balance sheet to-boot. Debt is more tax efficient as the interest payments come off before tax. I think they could return about £1b even before they ramp up in a few weeks time. I don't understand why they don't do that.
Thanks ee.
Given that SOCO International (LON:SIA) seems unlikely to be around two years from now, I really can't see the point of paying a very modest dividend of under 2% pa. It will do very little to reduce the cash pile and it's hardly going to attract those in search of yield when the likes of Royal Dutch Shell (LON:RDSB) are paying around 5%. I appreciate that they want to keep cash for buy backs, but I would have thought that in the absence of an expensive exploration programme, cash will still be piling up pretty quickly.
ET
Yup. Quite so :-)
Incidentally, on the buybacks I think Mangotree and others have been tracking the wrong numbers. I make it that they have bought back 5,686,084 shares since announcing the plan for a £25mn buyback on 13th January. On that basis, they still have about £9mn available (within that target figure) for the next 7 trading sessions up to the AGM date ......following which I'd expect them to announce a new objective (£75-80mn?) and to maintain the pace at around 400,000 per day if the market continues to see volumes of 1mn+ at acceptable prices. That should see us through...... ;-)
I think we can expect continuing tightening......
Also I wonder whether the increased pace of the buybacks has sucked some liquidity back to the LSE - quite possible, if the company via ML on the LSE are often the best bid on any platform?
In reply to emptyend, post #578
Hi ee, I am aware of the 13th Jan announcement but I have been tracking the repurchases since the announcement of 14th Oct 2011,
http://www.investegate.co.uk/Article.aspx?id=201110141645002418Q
It all seems to be part of the same intent.
MT
In reply to mangotree, post #579
Yes - I know what you've been tracking and that is fair enough. I'm just pointing out though that the specific figure of aiming to buy £25mn of shares before the AGM was only published after the close on 13 Jan - so that is the relevant start point in the context of how much of that aim has been accomplished to date.
It doesn't make much difference as a practical matter.
ee
In reply to emptyend, post #580
It doesn't make much difference as a practical matter.
Agreed....!