Vietnam Assets

In reply to peterg, post #320

and there is clear evidence that the failure try to raise production so far above 55kbopd has nothing to do the FPSO.  

My understanding is that the bottleneck is not in the water handling tank, which is just storage and could be solved by renting a small tanker to hold the excessed processed oil, but in the capacity of the gas liquids plant. There was a debate on this subject about 6 months ago but it did not reach a conclusion. 

Also, Talisman has done us no favours. 

MD

In reply to WeeEck, post #321

WeeEck, Also bear in mind that PV are in the process of building a new larger refinery and probably do not want any increased production until that comes on line. They are playing a much longer game than SOCO.

That is another valid point which supplorts our need for regular dividend payments. On a dividend yield of 5%, a 5 year delay will add 25% to to our total return. 

Did a bit of googling and this is the latest update I can find on the current state of the new refinery.

A ground-breaking ceremony for the Nghi Son refinery was held in May 2008 but the project has suffered a number of delays.
It is still unclear when construction will start, an official from PetroVietnam told AFP, asking not to be named.

Read the full article.

http://business.inquirer.net/104585/vietnam-signs-9b-oil-refinery-deal

So a meaningful increase in production could be some way off yet.

But I've reflected and I've read what some analysts have made of things and I have come round to the view that it's more a case of poor expectation management than of failure. It seems to me that the triggers for a rerating and/or a bid are the reserves restatement, the raising of production and the resolution of the inter-connectivity question. I had expected 1 and 3 with progress on 2. What we got was really just a holding statement to the effect that all 3 remain work in progress. That's disappointing. But it's not failure.

Hi T,  please don't feel I'm having a go at you,  I'm not,  just adding my slightly less optimistic view.

Well we can all rationalise anyway we like, but it was a disappointment, analysts don't seem to have been disappointed, but that's because they had a very much less optimistic view coming into this than the average person on this board I would suggest. Which leads us to conclude that the analysts had it right, and I (dare I saw we, include yourself if you will), had expectations that have as yet to be fulfilled. Some of this is the talk at the agm, of reserves upgrades in the fall, increases of fpso capacity and connectivity, none of which have been met. So we thought the market had got it wrong, so far, the market seems to have been closer than I at least.

In fact the review of reserves provides support for Soco's views of OOIP and extractable reserves. Particularly if you consider the fact that the views expressed were effectively based on work completed tp date. For me that's the crux of the thing.

yes true, work completed to date, where as management gave us the expectation that the work would be completed last fall, now it's turned into ongoing work, who knows when they'll get some kind of validation to their views.  But really all we are saying here,  is the the competant people here,  (paid by soco),  many months after the deadline soco have set themselves have raised the possible oil in place to the level soco were predicting.  Not the same as certifying that this amount of oil is likely to be there. (which I presume is what they were hoping for)

Unfortunately, in my mind, all this has probably closed off another exit path, in that there was the suggestion of spinning of and floating a production company for tgt, which would produce income for 20 years, and pay divis,
I would have thought without some kind of certified reserves, it will be very difficult to get a good price for this company. So that's an avenue that is on the back burner for now.

The way I see it I guess the way forward now is to progress,  do the H5 and other drilling on tgt and cnv (if we can get the extra cnv well through).  this should narrow the band of oip,  hopefully up if H5 is a success.  Start some kind of divi,  And then in Q3,  annouce that the asset is for sale, and see what offers they can get for it. 

If other opportunities come along then they need to be looked at on their own merits.  But we surely are coming to the end of what we can add on these projects in vietnam.  Even if other projects came up in vietnam,  then it would be wise to do these in another company structure,  so as to give flexibility of potential exit routes. 

cheers K

That is another valid point which supplorts our need for regular dividend payments. On a dividend yield of 5%, a 5 year delay will add 25% to to our total return.

Well I think it's hard to argue that that is the case unless you think the management will throw away the money !  The share price will usually fall by the amount of a divi,  however having a divi my lead to a re rating (unlikely to effect the final sale price though! unless its a full company sale including the cash) However it does mean that this % of the total pie can be paid out in advance which has obvious benefits for the holders.  The other think to consider is that it's not such a big deal paying a divi, they could call it a vietnam divi or tgt divi so that it's clear that it is only in place as long as the asset is owned by the company.  There have been hints about a divi,  I know the convertible needs to be paid back,  but hopefully the management will consider it possible to pay a divi too. 

K

There seems to be a lot of guess work going on regarding the inability to produce & sell more oil at TGT.

I once heard it said that if you dont ask the right questions you dont get the right answer.
So far  suggestions have been:
Insurance on the FPSO
Reservoir testing of layers
PV dragging its heels due to some agenda
Vietnam building its new refinery,but dont see how this is connected as cargoes are open market sold via tanker
Water handling constraints
FPSO hardware constraints-I show these below

There was comment earlier about the value of AGM's. Its an opportunity to ask the right question,but unfortunately one often needs to ask several questions to get to the bottom of things and thats often not possible,so one could say that the way an AGM is run could be changed and broken out to allow shareholders to get to the bottom of things if management dont care to really explain. WIll we see that happening--I dont expect so. I have seen first hand that often management try to think of all the questions that might be asked at at meeting of shareholders and come up in advance with the answers. So you can see what happens-a single question might be asked thats possibly the wrong question and a one liner answer ,pre prepared is given--nothing really is found out.

Looking at the FPSO capacities,and that cargoes can be sold on the open market,the oil storage capacity of 620,000bbls is only 12 days storage. The tanker cargoes are 300,000bbls and thats  6 days production Tanker unloading likley occurs during daylight and may take half a day,so you can see that a bottle neck there could quickly occur. Again its a guess based on data available. We hear of an aquifer,therefore something has to be done with the produced water-is it reinjected,is it cleaned up & dumped overboard & if so whats that capacity? It may be that injectors are not needed for recovery,but they may be required for water disposal. Again guessing as we dont really know the issue.

For what its worth this was given in the 2011 annual results presentation:
Vessel Name: FPSO TGT 1
Date of Build: September 1996
Type of Vessel: Double Hull Crude Oil Tanker
Main Functionality:
Receipt of fluids from WHP’s wells and processing of the incoming fluids,
Control of the WHP’s wells,
Storage of the stabilised crude oil and offloading of crude into “tandem moored” shuttle
tankers,
Treatment of effluent for discharge of water to the sea.
Storage Capacity:
620,000 BBLS at current mooring and riser design configuration
Processing Capacities:
Liquid rate 130,000 BLPD
Crude oil rate 55,000 BOPD
Produced water rate 75,000 BWPD
Water Injection System:
Water injection rate 85,000 BWPD
Gas Lift System:
Gas lift rate 60 MMSCFD

In reply to MadDutch, post #327

Also, Talisman has done us no favours.

What does that mean?

In reply to kenobi, post #330

Hi Kenobi,

yes true, work completed to date, where as management gave us the expectation that the work would be completed last fall, now it's turned into ongoing work, who knows when they'll get some kind of validation to their views

I don't think you've understood what T was saying here. The work I assume he refers to that is not completed is not work on the RPS report, but the work on development of TGT, which was never going to be finished by last autumn, or in 2013, but is ongoing. The RPS report, and in particular, the recovery factors, are based on what could be recovered with the wells already drilled, or planned for 2013. Since more wells and injectors will be drilled over time that can only have the effect of increasing the recovery factor above the base case given by RPS, and towards the company's own view.

ok peter, I was refering to the report, which we were told would be ready in sept, and has now turned into an ongoing work with no definitive target date. apologies if I've misunderstood, but there is a certain amount of overlap between the work needed on tgt and work needed to be done to get the cpr that we were all hoping for. I appreciate your point re recovery factors, but I do feel that the info we have had so far doesn't match up to the expectations set at the agm. Its easy to fall in the trap now of saying, "oh well, it was always going to take longer". If that's the case, perhaps management might set expectations appropriately,

K

In reply to flyinghorse, post #332

You suggest that "we don't really know the issue" - and it is certainly true that the issues will be more complex than often presented. However, I have a clear understanding that the main issue is the mix between produced water handling (75k bopd) and crude handling (55k bopd) - and there is a view in some quarters that it may be possible to (roughly) reverse these, as there has been less water produced than expected.

Undoubtedly this is more complex a call than it might seem - but the principle seems to be the the FPSO hasn't yet been optimised. Whether they go that route or some alternative (such as producing via spare capacity in Bach Ho) I don't know - or care that much.....but I'd sure like them to be able to push the JV into deciding!

ee

In reply to emptyend, post #336

ee,
Thats the issue for me,not much has been presented by the company on the issue. The 2011 AR states "There remain allignment issues in the JV with the rapidity of increasing production" and no more.

The rest of us have filled in the gaps,some will be noise,incorrect and others will be closer to the truth. You were the first to state in feb 2012 with post #179 the issues as you saw them.
I think I counted 13 differing theories going back through posts.
Again you said (dont recall post) till an agreed plan is in place and being actioned ,all of which takes time-not much will happen on rate increase.

That follows to the  cash generating ability being  constrained for potentially quite some time.
 I hope we see  the issue expanded upon in the 2012 AR.
FH

In reply to flyinghorse, post #337

Fair comment re the lack of background on the matter. It is always difficult to be explicit what is happening if partners don't do what they say they will do - as I suspect has happened in the past.

I'm not that interested in an explanation myself - I'm interested in a final resolution to the matter. And I'd hope that all the parameters for production have been fully scoped by the time that the H5 well outcome is known - and then a final decision can be taken quickly. That might be as early as June (though we have yet to know the planned well schedule - which is certainly something else that will emerge with the prelims).

ee

You do have to sympathise with the company / JV that until they find out what they have in H5 and probably testing more wells and infill drilling it is hard to plan for capacity that might or might not exist. Add to that, you then have to convince partners who aren't that interested in spending money to increase production an the situation is doubly difficult. So it's understandable that no decision on linking in to Bach ho has been taken. It is more disappointing that the work to increase fpso capacity hasn't been agreed/started, since the costs in this seem relatively minor. I think unwise posted on the fool that this issue with this is getting agreement from the lease company, the insurance company and the company that put up the money for the fpso in the first place. I have no confirmation of whether this is the case, but it sounds plausible. As ee says I'm more interested in the solution to the problem, but we do need to understand something of the problem to understand what the possible solutions might be.

All in all, I can't see anything happening before the summer, and then assuming H5 works out we'll have to bring it into production, and then we'll need some production history, so while anything could happen, conservative planning would suggest we're looking into 2014 before the Vietnamese assets will be sold, and that assumes the partners play along. In the meantime, I hope the management do start paying back some of the cash pile to the shareholders, although I'm not adverse to them investing in more exploration acarage, I would prefer them buying into something which was a discovery and providing the capital to bring it on line. Something they have proved excellent at in recent years.

cheers K

Hi kenobi,

>>>>> although I'm not adverse to them investing in more exploration acarage, I would prefer them buying into something which was a discovery and providing the capital to bring it on line. Something they have proved excellent at in recent years.>>>>>>>>

I wonder whether Soco is amongst the oilco's to have had a look at Aminex's data room ?

Their Tanzanian acreage appears to meet your bill, having had discoveries that need money to develop; the acreage appears quite prospective, being ontrend/onshore the world class gas discoveries adjacent Mozambique; it would tie in with the Son of Soco theory (Africa - focussed); in RC(exChair DPL) and the Portuguese exAmbassador the BoD already has what may be considered 'relevant' East Africa experience; and the 'price is right' (probably) in terms of affordability......

I'd rather see cash-back at this stage, myself, but if they do feel the need (tactical/ego or otherwise) to go down the acquisition trail, I think a full buyout (not just a farm-in) of AEX might be an acceptable way forward........

ATB

could someone remind me of the dates of final results and AGM and any other significant events?

thanks

In reply to tournesol, post #341

Am away at present but the prelims are on 11/3 and IIRC the AGM date is 13/6

There may be other significant events - but you all know I don't know the dates of those! 

rgds

>>There may be other significant events - but you all know I don't know the dates of those!

shame !

In reply to kenobi, post #339

All in all, I can't see anything happening before the summer, and then assuming H5 works out we'll have to bring it into production, and then we'll need some production history, so while anything could happen, conservative planning would suggest we're looking into 2014 before the Vietnamese assets will be sold

That's a possible time line, but I certainly wouldn't want to make the assumption that proving up H5 production would be essential before a sale. That's a very different situation to the proving up of phases 1 and 2. The basic characteristics of the field are now well established, question marks over unexpected gottchas have been removed, and the development is proven. H5 may add to that, and, as you say, will allow final planning for increasing production to take place, but proving production from H5 itself doesn't seem likely to be a stumbling block to a sale.

In reply to extrader, post #340

>>I wonder whether Soco is amongst the oilco's to have had a look at Aminex's data room ?

yes I must admit that its the one that came into my head as I wrote it, my guess is that they'd be interested in something that was more oil than gas, which I think isn't the case in Aminex.

To be honest whenever I've discussed it with the management they haven't been interested in buying discoveries, they have said to me, anyone who has a good discovery, has no problems getting cash, and anyone with a bad discovery is welcome to keep it. Not sure it's this cut and dry, but I see their point. However, never say never, I can see them doing a deal of this kind with people they've worked with before perhaps ?

K

apologies, duplicate with other thread