Soco Share Discussion Threads

[stemis] 13/2/2018 19:28

Kev0856153's analysis may not be perfect but at least he's offering quantitative arguments.

"not perfect" - that's an incredible understatement.

Everything he's written has been factually incorrect.

Anyway, I'm done to death with pointless discussion - going to go into sleep mode for a while.

It's fine just saying they're rubbish but then you offer nothing in its place whilst proclaiming SOCO is the most undervalued shares you've ever seen (I'm paraphrasing lol). Shouldn't be too hard to quantitatively justify value then.

The problem is that 33.3 mmboe at $10 + cash gives a share price of about 102p. Yeah, maybe there's value in the African assets written off and yeah maybe some reserves written off will be written back. But that's hardly the basis for it being a no brainer cos maybe they won't...

[mrwaite] 13/2/2018 15:18

Increases in oil demand from India are going to outstrip increases in US production.

[emptyend] 13/2/2018 13:44

....and in other news the bloke who used to walk up and down Oxford Street for decades with a placard proclaiming "The End is Nigh" is now actually dead - so that proves it! .......

[kenobi] 13/2/2018 12:41

stockopedia preditcs 7.3p this year and 6.3p divi for next year,

K

[joestalin] 13/2/2018 12:36

Is there nothing good about this share?

What about the dividend?

[kenobi] 13/2/2018 12:34

Kev, are you attributing zero value to the african assets ?

Not an unreasonable cautious view, but longer term, there should be some value at least the Marine XI assets on the doorstep of ENI, Cabinda might be worth something, whether that's significant is another matter,


K

[jotoha2] 13/2/2018 12:23

You have to take your hat of to the MM here , they have screwed everyone here with ease , and the usual culprits are still in la lal land trying their best to spin this pile of poo.

[flyinghorse1] 13/2/2018 11:44

Kev,
My 2P value is based on what the market (M&A) is paying for 2P reserves.
You cant calculate the NAV $/bbl value of the 2P (or any other production) unless you have access to the forward, oil prices, production profiles and capex and opex.

The current 2P carried as reserves (TGT & CNV) is 33.3mmboe YE2016.

[kev0856153] 13/2/2018 11:42

thankyou fh the numbers are welcome. However I'm still coming to more or less the same conclusion valuing the 2P at $10. 2P for both the vietnam fields was 33Mmb for 2016 and they've produced another 3mmb since then so 30mmb * 10 + $100M balance sheet is $400M which is an 86p share price and I'd be looking to buy in at well under that price.

[flyinghorse1] 13/2/2018 11:28

Kev,
1P by definition means 90% likelihood of being produced. SOCO will still be producing when by definition your 3mm/yr over 5 yrs has used up the 1P, so what does that say about just using the 1P number.(A lot of the 2P/2C by definition and capital spend move to 1P/1C over time)
Its also unrealistic to keep producing at 8330bopd (2016 YE AR) so the field production life will be pushed out beyond 5 years so the cash generation is more dependant on forward price then, not now.
CNV is missing from your calculations (1553boepd 4.8mmboe 1P YE2016 AR)

Hence using 2P numbers makes far more sense to me in getting a realistic valuation.

I think we need the 2017YE numbers to see what revisions are given the forward strip price changes, benefits of work-program,bottleneck, assumptions on licence length and extensions etc)

[kev0856153] 13/2/2018 11:00

flyinghorse113 Feb '18 - 09:33 - 20620 of 20626
0 8 0
Kevs use of 1P+1C in the valuation is not correct. 2P would have presidence over 1C ,It should be valued on 2P ( all its peers are - tullow, premier etc) and at about $10/bbl when looking at whats been paid.


Last year Soco made nothing like $10 per barrel. It was about $2 if you include the capex, which you have to considering it's an ever present and will rise to $40M next year.

[kev0856153] 13/2/2018 10:50

flyinghorse113 Feb '18 - 09:58 - 20622 of 20625
0 1 0
Also,
Can Kev tell us what the licence lengths are or where he gets his 5 years from?
FH


1P reserves were 15mmboe to Soco at 2016 and Soco are producing 3mmboe per year.

I know this is not an exact science but it seems obvious to me that Soco are working hard, and spending a lot of money, just to keep production at 8500 bopd. Do you honestly see this changing. I can see it getting worse in that they have to increase capital expenditure as the 1P reserves dwindle down towards nothing. The last update is worrying.

[kenmitch] 13/2/2018 10:20

Note that I said not all the LEX article was negative. i.e I can see some plus points.
"utter drivel" is more of your nonsense ee and applies to "Soco buybacks ...were heavily advantageous," and it's pointless debating with you on any topic as you are always so certain you are right and so dismissive of some who disagree with you.

Otherwise some fair and very interesting replies.

One big plus for buybacks is that there is a ready buyer (e.g Soco) for any looking to get out. One problem with that is that it tends to reward those who want out and not those who stay.

e.g Next have bought back massively and more than half their shares. That means higher dividend pay outs can be afforded which is an obvious plus. BUT those buybacks were often at £60 and more even though Next, unlike too many companies, will only buy back when believing the shares are cheap.

The NEXT share price fell to just £36 after those buybacks. I bought at £38 and along with special dividends (which NEXT pay if not confident enough to buy back) so have been far better rewarded now that the share is nearer £50 than those rewarded by their buybacks at £60+.

My main gripe is simply the huge sums spent on them and that would apply even if the evidence that shareholders benefited a lot was very strong.e.g one US company alone spending more than the entire NHS I year £122 BILLION budget!!

[emptyend] 13/2/2018 10:04

More utter drivel re buybacks. It is simple. If you are buying £1 for 50p then they make sense. If you are doing buybacks for any other purpose then they don't (eg massaging EPS).SOCO's buybacks were of the "£1 for 50p" variety and for a while were heavily advantagous, especially as they have saved 81p per share in dividends so far. And you'll note that they didn't pay anywhere near the highest prices.I would add that, if they were out of the present closed period, I would have the slightest problem with them buying back shares at current levels - the fact they can't do so is, IMO, one reason the shares are down at this level.

[flyinghorse1] 13/2/2018 09:58

Also,
Can Kev tell us what the licence lengths are or where he gets his 5 years from?
FH

[nigelpm] 13/2/2018 09:41

Kev0856153's analysis may not be perfect but at least he's offering quantitative arguments.

"not perfect" - that's an incredible understatement.

Everything he's written has been factually incorrect.

Anyway, I'm done to death with pointless discussion - going to go into sleep mode for a while.

[flyinghorse1] 13/2/2018 09:33

Kevs use of 1P+1C in the valuation is not correct. 2P would have presidence over 1C ,It should be valued on 2P ( all its peers are - tullow, premier etc) and at about $10/bbl when looking at whats been paid.
For what its worth the peer group also use a very bullish forward strip price.
SOCO are very conservative in both forward oil price assumptions and in stating reserves.
He also asks whats 2P worth.
2P by SPE Prms definition includes the 1P. Ie (1P+2P is the 2P). Theres a basic misunderstanding of the terminology and so the valuation IMHO.
There is also the return of reserves from 2C to P that were reclassified due to oil price / work program.

The recent hither to unknown posters seem keen or intent to try to manipulate the valuation for their own purposes. A read back over the numerous posts made by longer term holders ( not bulls) will show we are far from happy about SOCO performance, but see future value, not devaluation.
FH

[greyingsurfer] 13/2/2018 09:18

The conclusion to your link, Ken

Guilty on three out of five charges, executives who propose to spend money on expensive shares will be condemned to the enduring suspicion of shareholders.

One I would agree with, and I'm sure most would. However, what about cheap shares? I'm quite happy to agree that buybacks should be viewed with caution and scepticism, and that in Soco's case - though the case for them seemed strong at the time - the wonders of hindsight tell us that it wasn't the best route. But unfortunately not even the Soco BoD has the ability to see hindsight in advance. At the time the shares were cheap on available information. Yes, of course there were risks, and no guarantees of what the future will hold, but that is true of nearly all investment decisions.

One or two here have totally closed minds both on Soco and also on buybacks.

One thing history has taught me is that in most cases where people complain about others having "closed minds" what they actually mean is that the problem is that they will insist on disagreeing with the person who says it!

Peter

[invisage] 13/2/2018 09:16

Whose lost money from e+p investing the last couple of years?Ee and nigelpm

[stemis] 13/2/2018 09:13

Have the bulls got any numbers to support a higher valuation? Kev0856153's analysis may not be perfect but at least he's offering quantitative arguments. Just saying cashflow, reserves, management stake etc. doesn't justify a particular valuation. You can say them when the share price is anything...

[nigelpm] 13/2/2018 08:55

One or two here have totally closed minds both on Soco and also on buybacks.

The only person I would note who has a completely closed mind on share buybacks is you - you seem to think they are bad in all situations.

Fundamentally this is wrong - I agree with the FT article that there are situations where they aren't good at all - particularly when management base their targets on EPS - not even mentioned by the FT - but there are also situations where they work very well indeed.

[kenmitch] 13/2/2018 08:12

Nonsense ee. That reply shows your very limited understanding of buybacks, and also that you either haven't read or couldn't understand the brilliant LEX article. Not everything in that article showed them in a negative light.

The link in my previous post comes up as subscription only but I found if googling
"Lex article on share buybacks" the full article appears. It really is eye opening for all with open minds. One or two here have totally closed minds both on Soco and also on buybacks.

[nigelpm] 13/2/2018 07:49

nigelpm, A few days ago you claimed these shares were phenomenally cheap and that's when the price was 100p. Why?.

If you look back about 10 posts you'll see why. I outlined pretty clearly in bullet points.