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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I guess the design of the fpso was the best guess that the company could manage considering costs when it went to tender. At the time there was talk of tgd, so it seemed obvious that on fpso wouldn't be enough.
I recall seeing various configurations shown at the presentations, showing another fpso and links to bach ho, there may have been others, it seemed so uncertain and far away at the time I was pleased they were planning for it but not concerned in the least. We are in a tricky situation now that we have the fpso, and capacity to fill it but does the extra productive capacity justify the expenditure ? how long will productive capacity be above fpso capacity ? and then how quick with the drop off be ?
Even if there is a case, how long would it take the jv to agree on a course of action that involves spending big bucks ? I'm assuming it's going to be wait and see for a while, lets see how much extra capacity we have, lets see how much we can do to fpso tgt1, and then we'll look at the case. Until we know what the results of H5 is, is there really a case for investing in extra capacity ?
I think they should focus on getting phase 2 up for the next couple of months, ramp up production, lets see what we can do with the fpso, and drill some more wells, while, at the same time , gently seeding ideas of what we might do to the JV.
cheers K
Kenobi - I agree nobody is going to spend $500m on a new FPSO if it is going to take 10 years to pay for it and even if they did presumably there are a lot of lead times etc. for this sort of thing. batch ho hookup seems the most obvious if they do get beyond 55K or whatever the tweaked FPSO can take.
However I'm just a little surprised that this "small detail" wasn't picked up earlier since there was certainly a lot of talk about the amazing cash flow potential of production numbers like 90K+ only a few months ago. I was ignorant to the bottleneck and played no part in uncovering it so I really can't grumble.
Log
I assume that PV feel less pressure than the other partners to maximise production over the remaining 18 years, being a state owned company, since whatever remains at the end is theirs to exploit? I suppose we are depending on Vietnam having a rapidly increasing demand for oil or money in order to bring their interests into line with the rest of us. The current FPSO capacity is going to seem quite limiting if reserves get upgraded in line with the suggestions on this board.
ET
To clarfiy what I meant...
"I beleieve though, that the longer out a sale is, the better - leaves more time to add as one earns"
... from one's day job earnings
However I'm just a little surprised that this "small detail" wasn't picked up
What do you mean ? Picked up by who ? It was discussed at last years AGM, I'm pretty sure that most people here knew about it, I've discussed on this very issue in the last month with ee on this very site.
http://www.stockopedia.co.uk/content/vietnam-assets-31043/?comment=212#212
and yes the lead time for the last fpso was 2 years,
I think the companies will need to see what the eventual production possibilities are, and costs of raising,
the other issue is you might get the fpso to say, 75k,
when production potential is say 95 , but how long would it be 95 ? maybe 3-4 years ? how much are you going to spend to scoop up that oil just a few years early ?
you might find you're paying more to extract faster in extraction facilities, more in water injecting earlier,
and it's just not worth it.
I wouldn't worry that any of this is coming as any kind of surprise to the company, they've just spent a year convincing the JC to up production to here, lets get up to whatever they can with the fpso at the moment perhaps they'll even tweak it to 80k somehow too soon to know, and surely too soon to make huge comitments in expenditure before you even know how much xs productive capacity you have, and how long it might last.
They are on the case. This is what they do, the parameters aren't all yet known. But remember they only have 30% of the asset so they can only progress expenditure with consent by persuasion.
I have no doubt they are on the look out for an fpso that might be availble to lease , perhaps for a short period for example, another possible option.
cheers K
In reply to kenobi, post #666
Well sentiment seems to have improved somewhat with today's price action, I can't recall seeing an uncrossing trade of this magnitude so far above the prevailing price and I certainly can't recall the last 5m plus trades in a day!
..v. curious
In reply to rhomboid1, post #667
Indeed, seems a surprising jump, on a friday just before greek elections,
someone not worried about the results there,
maybe I missed a news item, did vietnamese oil producers get a bailout too ??
(we're up more than RBS)
K
Incident in Virunga:
http://savevirunga.com/2012/06/15/latest-news-park-ranger-stabbed-after-soco-enters-virunga-national-park/
The company have responded (see comments)
We could really do without this bad press!
In reply to Isaac, post #669
Hmm I've seen a lot of 'spin' over the years but this takes some beating, nice to see the company on top of it with the facts so quickly.
As a side issue I'm being a lot more searching in my own charitable giving and am now concentrating on small local charities rather than the larger Oxfam type lobbying groups.
Cheers
Just re theFPSO issue (which has been much discussed at various points), people seem to gloss over the point that the present FPSO is leased (7 year term with an option to extend IIRC). That capacity will be increased further isn't in doubt, IMO.....but they won't have the full info to correctly size/design the best way of increasing until phase 2 starts up. I also think it won't be an issue for SOCO International (LON:SIA).....
Note also the flexibility implicit in this morning's announcement.....all progresing nicely.
ee
Morning ee,
Good to hear from you, I hope all is well. I admit I didn't know that the lease was so short term, I guess the real issue is the lead time to a conversion. But having said that if these are normal terms for an fpso, I would guess that the management are keeping an ear to the ground re any fpso's that might become free in the near term to consider a short term lease ? As you say we will know more about the requirements as phase 2 comes on stream.
One concern I have, is whether the licence provides enough time to produce the as yet unknow reserves. This may well be someone elses problem if there is a sale, but in trying to put figures to what SV might be worth to a buyer. I'm sure you've looked into this, it seems consensus that there are 18 years left on the licences for cnv and tgt, ( tgt has a possible 2 yr extension, but would any buyer pay for this time if it's not certain ?),
what are your thoughts ee ?
thanks in advance
K
In reply to rhomboid1, post #670
rhomboid:
I know it's off topic - but wtf.
You wouldn't believe how much a lot of so called charities spend on "administration". I did some research and ended up giving nearly all my charity "budget" to Medecins Sans Frontieres (MSF - http://www.msf.org.uk) - a great organisation.
Another thing I ended up doing was funding a few dollars to kiva (www.kiva.org) - a micro finance outfit that funds small businesses in the third world. Your money gets paid back and you can lend it again and again. IMO the best kind of charity is a leg up - and that's what kiva does.
No axe grinding. Just Info.
Back to lurking
We have been debating a second FPSO, especially the 2 year lead time and the cost.
But there a cheaper alternative and available in months, because we do not need another FSPO, I think an ordinary small tanker will do the job. It could even provide a second offloading point if needed.
Why do we need another specialist and custom made vessel which costs half a billion dollars? What is different?
• Floating. They both do that.
• Storage. They both do that too.
• Production. What are they producing? We know about separating the water. Ours is probably also capable of separating and storing gas. But the original does that and it does not need to be done twice; We don’t need another FPSO vessel.
• Offloading. Presumably tankers have their own pumps, so get a ship that has one that is big enough for the job.
The world economy is in decline as the Euro problem becomes worse, and that means less demand for tankers.
A lease or purchase should be possible at a fire sale price. If I was buying, getting a super deal would be fun!
Sometimes in life, the simple solution is too obvious. Is this a viable idea?
MD
In reply to MadDutch, post #674
You write:
But there a cheaper alternative and available in months, because we do not need another FSPO, I think an ordinary small tanker will do the job. It could even provide a second offloading point if needed.
I'm sorry but do you honest think they won't have considered this?
An incredible post if you don't.
In reply to nigelpm, post #675
Nigel, we could know the answer soon, I am sending my post to Ed, Roger and Rui.
Fair enough - I'll be utterly stunned if you're right!
In reply to nigelpm, post #675
They probably have considered it, I would put the odds in favour at 100 to 1. But writing a post takes a few minutes and if it could save hundreds of millions of dollars plus a load of extra oil; it is worth making the effort.
Well... it's a question I'll be asking at Coastal Energy Co (LON:CEO) 's AGM tomorrow. They have acquired capacity to process/store/offload over 20,000bopd at Bua-Ban North for very little CAPEX, comparatively, and got it installed and producing within months, rather than years. They're using a MOPU (mobile offshore processing unit) rather than an FPSO. They're planning to install a second MOPU later this year, which will allow the company to develop Bua Ban South.
Must admit, I'm puzzled how they're managing to do so quickly & cheaply what seems to be so much more difficult for Soco. Maybe it's to do with shallow wells? Or maybe because Bua Ban seems to be oil only and doesn't require gas processing capability? Another obvious difference, I suppose is that the ~20,000bopd is gross, as Coastal have a 100% W.I., whereas Soco have a share in a rather larger development. It could be a question of scale: moving from 20kbopd to 70kbopd may not simply be a matter of scaling up but may require a more substantial infrastructure overall.
Aha... this is interesting:
The MOPU is a converted jackup rig, whereas the TGT FPSO is a much larger converted tanker (I recommend the excellent video kenobi has posted to understand the latter).
Cheers,
Mark
In reply to MadDutch, post #678
Hi Mike,
I take it that you are aware that the FPSO is a converted oil tanker? [do have a look at the video I linked to in my last post to understand what's involved in the conversion process - including 5,000,000 man-hours of work].
Cheers,
Mark
In reply to marben100, post #680
Yes Mark, I am aware it is a converted tanker, and I looked at several you-tube videos. Very interesting! I have faxed my suggestion to Ed, Rui and Roger and am expecting a "Nah! it will not work because .....!"
We will see.