Vietnam Assets

I just hope that Isaac has a full medical team on standby when the results come out saying something along the lines of:

We are raking in cash faster than we can spend it on elephant polo and share buybacks. We are up to 55k bopd production on TGT, we have found a way of getting the several hundred million barrels of oil in TGD to flow and we have queues of people outside the front door wanting to make us an offer for everything!

In reply to tiswas, post #187

I just hope that Isaac has a full medical team on standby

Personally I hope that he doesn't! ;-))

Tiswas

I hope so. It is what I have been banging on about the last few years. Although I am keen to see Soco Sell, my main headache would be where to invest next as the bargains that were around 6 months ago are gone.

I guess it will be a case of waiting for an opportunity to present itself - Patience is a virtue whether you are invested or are looking to invest.

Brent is now $124 + $6 TGT prem. Soco are raking in the cash,. However the strong quick rise in the Oil price makes me sceptical as to whether it can last. It reminds me a lot about 2008 and $147 brent.

I'd rather be a seller in a strong rising market - No one can call the top - I think it is a case of knowing when you are happy with the price.

Uness there is an absolute strong case i.e. where the management is 99.99% certain of flowing TGD commercially within a reasonable time frame If I were Soco management I would calculate what Vietnam is worth based on $100 Oil (a price which I think is long term sustainable) then try and sell it.

A buyer may base their price on $110 Brent or $120brent etc & discount the reseves to come back to the same price as Soco are asking for. In such a scenario a deal being struck looks much more likely and appears more of a win-win situation.

Mind you at $124 Brent + $6 TGT prem we are talking about an almost 50% increase to the cash flow Soco suggested in their presentation at $90 Oil.

Amazing that the price is only up about 20% since it's low.

Seriously Isaac,

I can't believe you had the gall to write the following

"I guess it will be a case of waiting for an opportunity to present itself - Patience is a virtue whether you are invested or are looking to invest."

because Patience is not a virtue you've shown over the last six months with respect to Soco's management.

SIA will get sold, and it will be at a significant premium. The management know what they are doing. Just give it time. It's been a great opportunity to pick up shares on the cheap imv. :)

In reply to Fangorn, post #190

Patience is a virtue whether you are invested or are looking to invest.

I haven't laughed so much in months! I think I've strained a muscle in my side.

Fangorn

I've held Soco for several years and in the last 6 months have not sold a single share, infact I bought more over that period.

The time to sell is NOW, it has been NOW for sometime imo.

I've also held SIA for years myself, unfortunately not the ones I bought at 33p.

If you were buying more shares over the last six months in Soco Isaac why the "Time to replace Soco management" thread? Waste of time, yours and everyone else's surely.

To be frank, I enjoy your musings(High Yield thread for example) but you're as patient as a five year old on Christmas day morning when it comes to Soco. :)

SOCO: You'll come for the chances of massive capital gains - but you'll stay for the comedy . . .

In reply to Fangorn, post #193

To be frank, I enjoy your musings

And to think before that comment you were one of the posters I had a lot of time for ;-)

In reply to nigelpm, post #195

Doh - let me go get my second shovel whilst I try not spill the glass of merlot :)

Nice FT article here on the specific attractions of various sweet crudes:

Duri, Cabinda and Su Tu Den. The names are far more exotic, and less known, than Brent, the oil benchmark closely watched by investors around the world. But these crude streams are at the centre of a supply-demand struggle that is propelling oil prices higher.

The three varieties of crude oil, produced in Indonesia, Angola and Vietnam respectively, have are viscous and have a low sulphur content: in the jargon of the industry, they are “medium-heavy” and “sweet”. They are also in strong demand.......

Medium-sweet and heavy-sweet crudes account for a relatively small share of the global pool of crude supplies.

According to the World Oil and Gas Review published by Italian oil company Eni, their combined production last year reached roughly 10m b/d, or about 11 per cent of global oil supply. But the Japanese buying spree is reverberating well beyond heavy-medium and sweet crude, helping to push the whole oil market higher, traders say.

No specific reference to TGT, unfortunately, but that seems a bit of an omission - given that the article refers to Cabinda oils having a (paltry) $1.50 premium to Brent.

Shell have reportedly bought all four TGT cargoes offered for May at an average premium of c $6.70 over Brent. Even at today's lower levels, that should be close to $130.

ee

shame they didn't buy a larger volume, that is still in the ground !

but never mind, all good news,

K

In reply to kenobi, post #199

Shame they didn't cut out the middle man!

Another round of TGT cargoes was offered today for June.

Terms not yet settled.

In reply to emptyend, post #201

Terms here  - Brent + $6.50 or better

Some thoughts on why TGT phase 1 is being a tad tardy on ramping upto 55k a day.

The TGT Field is comprised of numerous separate accumulations some of Early Miocene age and others of Upper Oligocene age. The reservoirs are composed of normally pressured, vertically stacked sand layers with limited distance between production zones and oil-water contacts. Vertical well-bores through the reservoirs are designed to allow the use of technology like sliding sleeves, and the development well trajectories will avoid extremely high angle step-outs as regular wireline intervention work is expected.

Its worth reading the above a couple of times. I copied it from Hoang Long Joint Operating Company site that Spurticus brought to our attention yesterday. Go back over these boards and others this year and you will see that many posters think the Soco might have production issues by not reaching 55k production within very early days of initial flow. This immediate production at the higher end of the anticipated flows would be unusual and a couple of thoughts come to mind from the wording from that paragraph above.

I do not know of the production and completion arrangement on these particular wells. I do have experience with Shell and Exxon in other parts of the South China Sea. These two companies have drilled many hundreds of wells, probably having similar geology and completion logistics to Soco. Even with this experience bringing a multiple well completion on to production is still a challenge. One side of the company operation wants to maximise production through a fast and cheaper completion arrangement. Others will look at the multiple zones of interest and will be aware very early on in the programme that a partial production programme is the most realistic avenue to follow to provide long term steady production.

''the use of technology like sliding sleeves, and the development well trajectories will avoid extremely high angle step-outs as regular wireline intervention work is expected' This comment suggests that Soco have elected to go the last route. I would read the wireline intervention as a procedure to bring on production zones in a timely manner. In a perfect world all the zones of interest would be flowed as per the initial tests that gave rise to the 55k figure so loved by one and all. In practice (and as the management well know - and others wanting a slice of Soco will know) the production ceiling is a step route. Somedays higher and some days lower. But, as the months go by a lot of information is being captured to create a reservoir programme for long term production based on the downhole conditions and not just market expectations.

I am quite relaxed about TGT. IMO a success story.

passinthru

In reply to passinthru, post #203

Hi passinthru,

Good to hear from you :-)

You pick out an important passage here:

''the use of technology like sliding sleeves, and the development well trajectories will avoid extremely high angle step-outs as regular wireline intervention work is expected'

This comment suggests that Soco have elected to go the last route. I would read the wireline intervention as a procedure to bring on production zones in a timely manner. In a perfect world all the zones of interest would be flowed as per the initial tests that gave rise to the 55k figure

If I may offer a slight correction to the implication of the above: if ALL zones of interest were perforated and flowed then production would be considerably higher than 55k bopd.

Obviously that was never a practical consideration, but the original plan (to perf the more productive Miocene) was delayed due to a wish to obtain more data about the Oligocene (and determine whether a further well would be needed in due course to drain that reservoir)

The 55k figure is the rated capacity of the FPSO, as presently configured (with 75k bpd of water-handling capacity). Perfing the Miocene in the main wells that were planned would (guessing) give more like 70k bopd capacity if all wells were fully onstream (they would likely add around 10,000 bopd per well, judging from test flow rates).

The key decision on the route to monetisation is to determine how best to produce when H1 and H4 are both fully operational and on plateau. And, in that context, testing the wells exhaustively is quite important for assessing (for example) water-handling needs - because one option would be to convert a chunk of water-handling to oil storage. Another option would be to produce across Bach Ho....or to hire in another FPSO. Whatever the decision, we are now getting close to the point where that decision can finally be made, with H4 likely to come onstream in July. Reaching 55k will then be extremely straightforward, with underlying potential capacity of close to double that amount from all the producing wells....and we should shortly have an idea of the H1+H4 plateau capacity.

ATB

ee

I have been trying to understand where we stand on the route and the likely timing to monetisation.

My career was in the non ferrous metals mining industry where the route to monetisation would often follow the steps outlined below :

A) drill the resource ,construct a model and determinine an ore reserve
B) consider various mining methods and determine the mining reserve ( less than the ore reserve)
C) estimate the recoveries in the mining operation and the downstream processes to the final product
D) prepare a DCF model based on estimated revenues, capex and opex

I have been trying to draw analogies with the above to see where we are at present, particularly with regards to having a good estimate of the potential recoverable reserves from TGT.

I assume that the production data from the Phase I production wells has increased confidence in the reserve estimate in that portion of the reservoir.

Similarly drilling of the 5 wells in Phase II will have added to the information on the reservoir. However won't it be necessary to have production data from these wells to really define the recoverable reserves ? If so , how much time would be needed to obtain the necessary information ?

I also noted from page 15 of the Annual Report (the last para dealing with Block 16-1 ) that significant additional potential remains to be confirmed in undrilled and un-appraised fault blocks and the company is seeking to accelerate the drilling of these areas. Are these the areas that could increase the reserves to the 500 million barrels I have seen mentioned elsewhere ?

I hope my comments will not be dismissed out of hand as they come from someone without oil industry E & P experience as I would I would welcome advice on the concerns I have expressed.

In reply to highgate55, post #205

G'day highgate

Yes, you appear to be on the right track :-)

I assume that the production data from the Phase I production wells has increased confidence in the reserve estimate in that portion of the reservoir.

Similarly drilling of the 5 wells in Phase II will have added to the information on the reservoir. However won't it be necessary to have production data from these wells to really define the recoverable reserves ? If so , how much time would be needed to obtain the necessary information ?

Imo (non-tech) yes...maybe a few months

I also noted from page 15 of the Annual Report (the last para dealing with Block 16-1 ) that significant additional potential remains to be confirmed in undrilled and un-appraised fault blocks and the company is seeking to accelerate the drilling of these areas. Are these the areas that could increase the reserves to the 500 million barrels I have seen mentioned elsewhere ?

Yes. However, the recovery factor is also an important issue in determining reserves. AIUI, Soco have booked their reserve numbers at the lower end of the expected scale with early results showing something better than this. One imagines Phase 2 will come under the same productive scrutiny. As to undrilled blocks, consideration arises as to whether full field reserves can be produced before licence expiry. To this end, imo, it will be absolutely crucial to expand production facilities (or hook into Bach Ho) to fully exploit the field within the timeframe available. Although options are on the table, no decision has been made to date but I don't see Soco selling until such plan has been decided upon, one way or the other. That said, any buyer is free to make their own risked reserve assessment at any point in time and put an offer on the table.