Vietnam Assets

In reply to emptyend, post #146

Cross-posting from ADVFN for reference:

It is worth noting, for those who care about fundamentals, that the USD has moved from c. $1.65 to under $1.55 over the last month.....which is a shift of 6% or so. In contrast, Brent has gone down by only around 3%.

Incidentally - this seems a useful source of very recent prices for Minas in the Far East...confirming that Minas was at $112.75 yesterday for November delivery in Tokyo (I guess it would be c. $3 lower today)

On the basis of yesterday's numbers I guess that TGT crude would be c $115-116 (Brent-Minas spreads having apparently narrowed recently, assuming data sources are comparable)......

....but because of the USD/GBP FX move there is probably little change in GBP terms.

ee

KNOC in buying mood?

http://af.reuters.com/article/energyOilNews/idAFL3E7LR0CT20111027

"PV Oil, Petrovietnam's trading arm, has not offered any spot Su Tu Den cargoes for December after production hit a sharp natural decline this year.

Joeng also said KNOC had made no decision yet about whether or not to consider buying ConocoPhillips' 23.25 percent stake in a complex of five oil fields in Cuu Long basin block 15-1"

EG

Just to cut and paste a couple of my comments on ADVFN, following yesterday's IMS:

A number of people seem to have misread the RNS and leapt to the wrong conclusion over timing. This is partly because of the phrase "The Phase II development will continue though 2012 with additional production complementing Phase I volumes from mid-2012.” which some have wrongly read as indicating that plateau production from phase 1 won't occur until mid 2012 [nb...the "some" includes Merrill Lynch, Reuters and Upstream]
I would point out that Q1 starts in January. And I'd suggest that the plans will be prepared for an OpCom sometime in February. And I'd further suggest that (since it only requires them to perforate the Miocene interval in three wells) reaching plateau is likely to be accomplished 2-3 weeks after them taking the decision to perforate.
90% of the reserves are in the Miocene, not the Oligocene. The delays in the ramp up are IMO completely down to the (natural) preference of PV to ensure they understand the Oligocene reservoir well enough that even that few % doesn't get left behind.

and

It is worth pointing out that four of these development wells are planned to be drilled from the H1 location that is the production centre for phase 1.....as the RNS says: A revised reservoir management plan, reviewing amendments to the current 2012 development drilling programme, which includes four wells from the H1 well head platform, and individual well management plans to achieve plateau production of 55,000 BOPD is to be reviewed and agreed by the first quarter of 2012

...those four wells are undoubtedly intended to drain the areas to the east and the north-west which show up on the reprocessed PSDM 2009 seismic as substantially increasing the size of the field (see slide 7 in the interims presentation). It is highly likely that there would be a possibility of changing the planned design of one or two of them - but they need a bit more Oligocene reservoir data to determine whether that is worthwhile or not (and they didn't have quite enough by the time of the October OpCom).

ee

From yesterdays RNS:

Work is underway to install additional dedicated test separation and metering facilities on the Bach Ho central processing platform complex in order to more accurately measure liquid and gas production from the CNV production stream entering the Bach Ho facilities. The separator is currently being installed with the metering equipment expected to be installed in the first quarter of 2012. The benefit to the Company will be a more accurate allocation of CNV oil, gas and gas liquids production within the Bach Ho production system, which is expected to add approximately 2,000 BOPD to the liquids stream.

I believe once the gas and condensate can be measured and a price agreed it will result in further 2P reserves booked at CNV. Does anyone know an estimate of the upgrade this will provide?

In reply to unwise2, post #150

I believe once the gas and condensate can be measured and a price agreed it will result in further 2P reserves booked at CNV. Does anyone know an estimate of the upgrade this will provide?

In the order of 50mn boe I believe. And a final gas sales agreement should enable them to get backdated payments for 18 months of production, as they've only been getting a modest payment "on account", whereas the dry gas price agreed could be c.$2 higher (with the liquids on top of that). Could be getting on for $30-40mn in backpayments if I've got my numbers roughly right (though no guarantees on that!!!!)

ee

In reply to emptyend, post #151

Thanks for the info ee, I guess that is a gross 2P number, so Soco could get an uplift of 12.5mn boe?

In reply to unwise2, post #152

Yup.

Lest we forget, drilling of the various development wells at TGT is continuing. From the IMS:

The TGT Phase II development drilling operations commenced offshore Vietnam in October with the spudding of the first well at the H4 wellhead platform by the PetroVietnam Drilling PVD-1 jack up drilling rig.  Batch drilling of the five wells is ongoing with all surface casing set. The wells are expected to be completed for production start up in August 2012....

....the current 2012 development drilling programme, which includes four wells from the H1 well head platform

.....so: five wells are being drilled from the H4 platform (should finish around the end of February) and then 4 wells (or perhaps more) will be drilled from the H1. IMO they will finish designing the reservoir management plan re H1 by February - and will perf the Miocene on the existing wells by February too, enabling them to move up to plateau.

I'd guess they are now starting to acquire some useful data on the H4 reservoirs - which should give a good guide on eventual total production rates for TGT and enable the field economics and reserves to be well pinned-down....by any buyer.

ee

In reply to emptyend, post #154

I'd guess they are now starting to acquire some useful data on the H4 reservoirs

If they are "batch drilling", i.e. drilling down to say the first casing point on well No.1 and then repeating the operation on wells 2 to 5, I doubt they're anywhere near reservoir surely?

Just saying ;-)

In reply to davjo, post #155

I doubt they're anywhere near reservoir surely?

Dunno about that. They should be about halfway through the drilling of all five wells, according to the interims presentation as updated by the IMS. Can't be that far off drilling into reservoir on the first of five? 10 weeks to the end of Feb would only be two weeks per well, if they stay on schedule.....

....hence "now starting".

Somewhat academic for now, but the important point is that a lack of RNS news doesn't mean a lack of meaningful activity. At some point there will be news of all five together - but they might, for example, give an update on the first 2-3 sometime in Jan?

cheers

ee

TGT target achieved ...

http://www.hlhvjoc.com.vn/hoanglong/en/news/content/365/te-giac-trang-field-fulfilled-2011-production-target.html

Anyone know what the target was ?

StepOne

In reply to stepone, post #157

Good find.

No, I don't know what the target was, and I've failed to find it on a quick search.

However, it's clearly and encouraging statement, since, even if the initial target was cautious, it does suggest that the delays in achieving peak flow rates have not had a massive impact on overall production, and that the decreases were well within the margins initially expected.

No great surprise there to my mind, but it will hopefully provide some reassurance to those who felt otherwise.

Peter

In reply to stepone, post #157

Anyone know what the target was ?

No - but it isn' t really that material since it was clearly couched in terms of total production by year-end. However, as Peter says:

it's clearly an encouraging statement, since, even if the initial target was cautious, it does suggest that the delays in achieving peak flow rates have not had a massive impact on overall production, and that the decreases were well within the margins initially expected.

...though of course they weren't really "decreases" as such - just fiddling around with the wells.

ee

Thanks for the replies. Would have been good to be told the actual figure - it must be more or less out there anyway as a result of cargoes sold. The fact they didn't mention it actually makes me more nervous than if there hadn't been a story at all !!

StepOne

21 days ahead of a 132 day target = 16% faster. Given that this is during the 'bedding-down' period, unless the initial target was overly cautious, the news strikes me as being positive...which explains why the SP has been so bullish since August 22 :o(

In reply to snaj, post #161

unless the initial target was overly cautious, the news strikes me as being positive

I suspect that one should view the target being quoted as having been pretty conservative. I imagine that any forecasts by the HLJOC would feed straight through into PV production estimates and budgets for the year - and like any other "organs of state" they wouldn't want to miss such targets!

It is worth noting that the companion piece reporting on CNV's achievements states:

At 10:10 AM – 10 October 2011, the Ca Ngu Vang Field operating by Hoan Vu Joint Operating Company (HVJOC) reached 100 per cent for oil and 106.7 per cent for gas in 2011 production output target. This achievement surpassed 75 days ahead of schedule.

 HVJOC strives for achieving a stretch target about 120 per cent for the oil and gas produced from Ca Ngu Vang Field for this year.

....which of course would also be non-negative news!! ;-)

And the report of the Christmas party seems to confirm success with CNV's 120% aim.

ee

In reply to emptyend, post #162

"non-negative" indeed!

Am I right to think that with these production targets being met (& exceeded), that a reserves update is just around the corner and if so, would those paying more attention to such important matters care to hazard a guess as to what might be booked?

It seems to me that Mr Market is either not paying attention or doesn't believe that an update will equal a material upgrade - irrespective of the absence of either an asset sale or a company bid, I don't understand how the SP can be where it is right now.

Returns to head-scratching...

Am I right to think that with these production targets being met (& exceeded), that a reserves update is just around the corner and if so, would those paying more attention to such important matters care to hazard a guess as to what might be booked?

I wouldn't set any special store by the production targets. They would really have been PV-driven.

I do think that a reserves upgrade is firmly on the cards, though, and I have hazarded guesses on a number of previous occasions - most notably here, here and here. There has been nothing to change those views. Exactly what can be booked prior to the results of  the drilling programme currently under way is a matter of judgement, but IMO the company has been very deliberately keeping its cards close to its chest in relation to reserves upgrades - and I am definitely expecting a positive "surprise" at some point in the next few months.

It seems to me that Mr Market is either not paying attention or doesn't believe that an update will equal a material upgrade - irrespective of the absence of either an asset sale or a company bid, I don't understand how the SP can be where it is right now.

I'm afraid we are back in the pattern of some years ago where the research published on SOCO was of negligible quality. There is perhaps more excuse now than there used to be, because one has to dig pretty hard (see above links) in order to reach what I think are the right conclusions - but there is certainly both a lack of attention and a lack of belief that there would be anything material to report. So be it, as I keep saying..... ;-)

ee

In reply to emptyend, post #164

From that thread, taking Davjo's range and the lack of 'negative' production news if Vietnam is worth at least 420p per SOCO share and say c. $130m of net cash in the bank being worth c. 22p per share and assigning nil values to TGD & Africa, there is some 52% upside from the current SP with the downside risk covered to Vietnam being worth 36% less than the bottom of Davjo's range (268p from 420p).

To put it another way, that's a 12% per annum return over just under 4 years if no value is added and if there is a sale only then and at only 442p, with what I would call minimal risk in the meantime.

I wish I could say "So be it,..." with such equanimity - how is this not a 'no-brainer' for all fund managers that have UK mid to large cap or natural resources / energy / O&G remits? Even if sell-side analysts are rubbish, there are plenty of bright sparks on the buy-side who should be arguing for SIA with their portfolio managers (although given the lack of fight over Dana, perhaps not).

p.s. edited above figures as I hadn't converted $ to £ for the net cash

p.p.s. I'm also guessing that if production averages 70,000bopd over the next year and 90,000 for each of the next 3 years, at a net profit of $60 per barrel (to allow for both extraction and corporate costs) then £1.4bn in proft only (ignoring the stuff remaining in the ground!) could be achieved against a current mkt cap. of just over £1bn (assuming constant exchange rate of $1.6:£1). Is my arithmetic wrong or my reasoning unrealistic?

I wish I could say "So be it,..." with such equanimity

Years of practice, old boy  ;-)

- how is this not a 'no-brainer' for all fund managers that have UK mid to large cap or natural resources / energy / O&G remits? Even if sell-side analysts are rubbish, there are plenty of bright sparks on the buy-side who should be arguing for SIA with their portfolio managers (although given the lack of fight over Dana, perhaps not).

Even the sell-side analysts will mostly have it as one of their sector picks for 2012 IMO. However, most of them are probably still writing those pieces, in between the parties and mince pies. Fund managers will long ago have written off 2011 and battened down the hatches - but 2012 is a fresh start, for both their performance stats and their bonus potential (which is why I had hoped to see the company hoovering up more stock this year....though they have been reasonably close to their limits on most days).

If I were running SOCO International (LON:SIA) I'd be planning my New Year newsflow quite carefully (eg update on drilling from H4 and perhaps a pre-close statement - though that would be a break with past practice).

ee

ps....don't forget tax in your numbers! And the long-term production costs for TGT (including both opex and DD&A) are reckoned to be around $13 per barrel.......so you are being overly cautious in terms of gross margins!