Soco Share Discussion Threads

[cielos] 11/1/2018 17:34

Are Peel Hunt being paid by Kuwait oil to keep the price lower?

[cwa1] 11/1/2018 17:12

In the usual vein of FWIW, etc. and hoping it hasn't been posted previously-but Peel Hunt have downgraded from buy to hold and moved their target price from 145p to 130p

11 Jan 18 Peel Hunt Hold 122.00 145.00 130.00 Downgrades

[emptyend] 11/1/2018 12:15

Phew. I'm not in an echo chamber ;-)I read it as all still under evaluation, so I'd guess that if remedial action requires new kit then we could be talking about Q3. The details of the technicals are beyond my pay grade when it comes to this sort of thing but hopefully fh can illuminate.The key point for me is that there is underlying capacity there to increase production once they get the compression issue sorted.....though of course it can't be quantified at present. It must also depend on which wells are onstream and what the water cut on those wells is. Optimising a system with 20-odd wells with different characteristics ..and trying to maximise both recovery AND production must be quite complex.....

[nigelpm] 11/1/2018 11:49

I didn't read the line about the non binding offers as suggesting for sure that parties other than ENI are interested. Couldn't it just mean separate offers from ENI for each of the positions?

Not for me - but at this level of semantics you can't be sure ;-)

I'd note that "offers" could mean more than two as well.

[kenobi] 11/1/2018 11:40

presumably the compressor issue is top priority if that's the case ? is there a plan or time line of when this can be addressed that you know of ? If we're talking about potentially 1000's of barrels of oil per day, I'm sure this will be seen to asap even if it means a production shut down while the issue is resolved. Hopefully this means that we'll have a over delivery on the quoted figures when this is resolved.

K

[emptyend] 11/1/2018 11:18

I'm not sure how many people read and understood this post from yesterday. But, since it is rather important for the 2018 production outlook, here it is again:[I'm confident that the leak will have come from the KE side. Look at the location of the person quoted in the initial report.The leak may have pushed the shares up a bit but the flipside is that they can't now get out and do a complete face-to-face round of briefings. That has some negatives.] For example, it is my understanding the unrelated and unfortunate compressor issues have effectively wiped out the potential production increase from the water-handling, and they are likely to be rectified as part of the 2018 work programme.......hence the point in the RNS about the 9,000 potentially being increased depending on the results of the work programme. I don't think that comes over from the RNS, as some naturally assumed that the upside potential was all drilling-dependent.

[pumph] 10/1/2018 22:20

I didn't read the line about the non binding offers as suggesting for sure that parties other than ENI are interested. Couldn't it just mean separate offers from ENI for each of the positions? Anyway who knows? Time will tell.

[emptyend] 10/1/2018 22:04

Good post fh. Why not contact Antony Maris for the details? I don't know which variety of issue it is.

[flyinghorse1] 10/1/2018 19:18

The field (TGT) is gas lifted and water injected. It would be good to have more detail on the sub-optimal performance issue for the two compressors(Lack of gas/staging step up pressure vs gas lift valve settings, gas composition etc). It does sound however like it can be fixed unless its a fundamental issue (lack of gas or a poor system design wrt the reservoir).

The reason it impacts production (for non oily people) is the water injection keeps the field pressure up (and sweep) but as the well's cut more water they will need individual gas lift to keep gross flow rates up. (a vertical water column is heavier than a oily /gassy column so the reservoir pressure has a harder job to do in lifting the fluid, so lower rates-hence the use of gas lift).

There is usually a network model that keeps an eye on water injection , water offtake, individual well gas lift performance(ie depth of injection,rate of injection,water cut), to keep it all optimised -its normal practice.

FH

[nigelpm] 10/1/2018 18:46

I agree with ee on the leak - this was the chap who reported on it:

[emptyend] 10/1/2018 18:23

I'm confident that the leak will have come from the KE side. Look at the location of the person quoted in the initial report.The leak may have pushed the shares up a bit but the flipside is that they can't now get out and do a complete face-to-face round of briefings. That has some negatives. For example, it is my understanding the unrelated and unfortunate compressor issues have effectively wiped out the potential production increase from the water-handling, and they are likely to be rectified as part of the 2018 work programme.......hence the point in the RNS about the 9,000 potentially being increased depending on the results of the work programme. I don't think that comes over from the RNS, as some naturally assumed that the upside potential was all drilling-dependent.

[kenobi] 10/1/2018 17:36

It's speculation, but the op update hasn't been too positively recieved, imagine if the KE info hadn't leaked ?
and then there is the possibility that soco might be trying to either hurry up another party, or smoke out alternatives,

does make you wonder where the leak might have come from,

all speculation of course.

K

[emptyend] 10/1/2018 16:18

Hi kenobi,I don't think there's much doubt that the African assets are worth more to ENI than some others and they certainly won't want to overpay. But neither will they want to develop their own assets inefficiently, nor pay a premium because oil prices have gone up again. Accordingly I think there will come a time in the next couple of years when a sensible deal can be done......but not any time soon, it seems.Re Malcy, Nigel, I suspect he'd be unwise to assume that just because talks have been leaked with KE that means a deal will get done. My own guess is that KE may well be second favourite in the race to set a new strategic direction for SOCO. But I don't think we'll have a very long wait to find out.

[nigelpm] 10/1/2018 16:14

I agree with ee, the assets are there and they're worth something, however, are they worth anything to anyone but ENI ??? for some of the assets, probably not,

I agree with the first part of this. My point was very much about the wording in the update and my expectation that the line in the RNS would set low expectations of price:


Further, non-binding offers have been received for both its positions in West Africa.

This suggests that they ARE worth something to a party other than ENI.

[kenobi] 10/1/2018 15:36

I agree with ee, the assets are there and they're worth something, however, are they worth anything to anyone but ENI ??? for some of the assets, probably not,
marine XI because it's so close to their infrastructure and perhaps not viable as a stand alone, and in Cabinda, because it's a small stake in something risky that ENI are going to do when it suits them.

The problem then is, what will they pay, if they know there is very little interest elsewhere ? obviously as little as possible when it suits them.

Still that's the situation we're in, we'll have to take the best deal we can negotiate, no point crying over spilt milk, also no point in spending time and money on something that is risky and time consuming when we have bigger fish to fry. Things may change,

As usual there's tension in the middle east, If something happened in Iran,
a country that Don the Con isn't too fond of, that would be a good thing for
him, Obama was president in the last protests, he said nothing, and they faded away, Don has tweeted away, insisting the people should have a say, they've been
to the security council, If there should be a revolution and a more friendly regime, that would suit him quite well, especially as a distraction to his other problems. If Iranian oil were off line for a period of time, what would that do for prices ? Even allowing for the opec cuts which would be reversed pretty sharpish, it would be good, but probably short term, certainly too short term to impact the price of undeveloped assets

K

[kenobi] 10/1/2018 15:26

Interesting article on share profits, re price of oil in 2018 and what shares to buy,

soco gets a passing mention re the talks with Kuwait,

hxxps://www.shareprophets.com/views/33695/andrew-monk-says-where-oil-is-heading-and-lists-the-5-oil-juniors-to-buy-for-2018

K

just in case the above link gets removed,

hxxps://www.shareprophets.com/views/33695/andrew-monk-says-where-oil-is-heading-and-lists-the-5-oil-juniors-to-buy-for-2018

[nigelpm] 10/1/2018 14:59

Little note from Malcy:

hxxp://www.malcysblog.com/2018/01/oil-price-savannah-tullow-soco-finally/

There is little one can judge about today’s statement from SOCO as the recently leaked potential merger with Kuwait Energy will likely change everything. Historically I have been a big fan of SOCO and indeed KE but the recent corporate bother has changed much, not least how much it is going to be valued at. I’m sure that in due course the SOCO management team will be out and about as and when that happens we will find out whether this is a wise decision or not, watch this space…

[nigelpm] 10/1/2018 13:59

Ok, that makes sense - I still wouldn't be surprised if someone offered them $10m and they accepted but time will tell.

[emptyend] 10/1/2018 13:46

You're wrong. It is:a) purely an accounting issue. The assets are still there and still have a value, albeit one that is indeterminate until a deal can be done.b) a reflection of the fact that c. zero capex or work is now being done as priorities lie elsewherec) not worth spending time on when there are other more pressing matters for management to spend time on.Basically a conscious decision, having arrived at an endpoint of the work planned on the assets. So, IMO, at some point they will be booking an "unexpected" profit of $50/100/150/200mn when a deal can eventually get done. But nobody can say when that might be.

[nigelpm] 10/1/2018 13:35

RE: Africa I was reading between the lines on this para :


Further, non-binding offers have been received for both its positions in West Africa. While there is no certainty that any transaction can be successfully concluded, in the Company's view the capital which could have been allocated to West Africa over the next three years, up to $180m before considering the cost of evacuation facilities, would be better held for investment in other opportunities; or returned to shareholders if those opportunities do not materialize.

My assumption is that those "non-binding offers" effectively negate Soco of their obligations and hence why they are a nominal amount close to zero.

If I'm completely wrong on this point that's great - it's an upside I currently value at zero.

[emptyend] 10/1/2018 13:19

Not right on the Africa position, Nigel. The issue is an accounting one. They have no plans to do any more work on the licences and no budget is allocated either. Therefore impairment is basically mandatory - the only question is then "how much" .....and in the absence of anything firm it would be prudent to impair it entirely. Basically monetisation comes down to whether ENI or other facilities owners play ball. If they don't then there is nothing that can be done in the short term. But if they do, at some point, then there is absolutely no reason why an offer shouldn't be nearer the pre-impairment number rather than zero....especially if oil prices are rising. I know they put in some effort during 2017 to try to monetise these assets - but they have also decided that divestment isn't a focal point for now and they should be trying to do acquisitions (makes sense, given the price backdrop?).On production, we've taken two steps forward (with the water handling) and two steps backward (with the unrelated compressor issue on the FPSO). When the compressor issue gets sorted I think we'll be looking at 10,000bopd+On reserves, fh makes some very good points. It might well be that an extension is a possibility - though, whether or not there is one, I doubt we'll see much news on that front until a corporate deal is presented for shareholder approval. I suspect the reserves issue is a key negotiating area in any deal, so will be kept quite tight for now.

[flyinghorse1] 10/1/2018 12:15

For what its worth i thnk the reserves position will be being worked for YE2017 so likely Q1 and at least in annual report.
Also the price deck used to determine if economic will ( currently) be getting stronger.

[flyinghorse1] 10/1/2018 12:11

I was surprised at the low rates given for the recent infill wells suggesting that, as TGT is developing stacked pay we are likely not exploiting all zones( hence rates)and also mentioned by Kenobi above.

Regarding the revision of reserves, the licence extension will prove key if unopened zones are to be opened up near to / post current cutoff date.

It would be unlikely that SOCO would invest & pay for wells that they can only produce and monetise a fraction of of the oil accessed/proven by the wells.
Its previously been stated that licences have been extended in Vietnam and if this is a likely expectation the reserves can be booked at least as 2P for a new licence extension period. Depends on your case and 3rd party auditors.
FH

[nigelpm] 10/1/2018 12:05

Africa a disaster - for all we know the offers are completely derisory.

Just on this point I think it highly likely the offer will be close to zero if not zero - judging by the wording in the update.