Soco Share Discussion Threads

[emptyend] 14/5/2018 13:41

Cerrito....just on the licences loose end, one of the issues is that the "black and white" legal position at any point in time may not be the same as the "fair view" or a "reasonable" view. So, whilst a licence expiry date may be legally clear, if may not be a "fair view" to state it. So, in this case, if SOCO and the JOC expect to exercise their option to extend the licence and, at the same time, intend to negotiate a further extension it may be unhelpful to the negotiations (and misleading to shareholders and the market) to state the current licence date as if it were set in stone.What matters is that licence expiries are taken as an indicator of impairment and producing licences would normally/always be valued in the accounts at what can be produced before the licence expires. Management judgements on potential impairments will ALWAYS be a key area of auditor attention and the auditors will check all relevant documentation including legal agreements, letters and emails to ensure that the management judgements about potential impairments are both fair and reasonable. This process is described in some detail on p90.

[wilsonst1] 14/5/2018 13:38

Great thanks.

[wilsonst1] 14/5/2018 13:32

Just started to follow SOCO. Can anyone give me a few brokers target prices.

[emptyend] 14/5/2018 13:28

Thanks QP/Nigel. What was the context of the FT article and who wrote it please?

[quepassa] 14/5/2018 13:28

Fully concur.

Have been buying in good size.

All Imo. Dyor.
QP

[ny boy] 14/5/2018 13:17

Good FT write up, I like ...to pursue growth opportunities of scale!

Ex div. ext Thursday 5.25p final divi

Chart action looks promising first resistance 113p, through this, opens up 130p, which seems achievable if the current bargain hunting & Divi players continue

Good sector to be in imho, plenty of buyers looking for upside moves.

[cerrito] 14/5/2018 12:43

Thanks emptyend for pointing me in the direction of pages 29/30 ref hedging and of course one of the benefits of being debt free is that it is you rather than the Bank who decides if you hedge or not.
I note your comment that most of the $4.7m m&a spend was on the PEX licenses, something I have to admit had never occurred to me and let’s hope this investment can be recovered.
I did see note 25 and the reduction in the decommissioning provision and thanks for your thoughts on what we can learn from this pretty significant event-something to bring up at the AGM.
On the license I need to say I am not up to speed on the intricacies of oil and gas accounting but would have thought that the length was relevant and hence disclosable as to how one values the reserves. Perhaps it is covered by a confidentiality agreement and if so would be good if that could be explicitly stated.
I have just seen I have another AGM on June 7 morning for a company where I have more at stake-TPG- so may not make the SIA AGM, If I do go I will try and grab Mr Monteiro as Remcom Chairman to discuss the m&a bonus which concerns me.

[nigelpm] 14/5/2018 12:22

If the seller is done here we might be seeing one of the those 10% days we talked about last week coming into being rather soon.

[nigelpm] 14/5/2018 11:57

Here's the note from the FT:


The company, which has assets in Vietnam, the Republic of Congo and Angola, is among the very few to pay a dividend.

Preliminary results to the end of December 2017 and announced in March underlined the strength of its balance sheet; revenues for the year were up marginally to $156.2m but the company ended the year with $137.7m in cash and investments and no debt. Its cash capital expenditure in 2017 of $29.3m was fully funded from existing cash resources. It paid out dividends to shareholders during 2017 of $21m.

SOCO made headlines at the start of the year after it announced it was in talks with Kuwait Energy about a potential merger. Those talks failed to reach a conclusion and were ended in March. Analysts said at the time there was a strong potential for more mergers and acquisitions activity, which is also seen as key to generating a substantial uplift in value. SOCO said in March it continued “to pursue growth opportunities of scale”. Its shares have dropped from 146p in May last year to around 106p.

[quepassa] 14/5/2018 11:53

A favourable article about Soco on page 14 of the Weekend FT highlighting Soco's strong cash/investments position of $137.7m at year-end 2017 with no debt, alongside the volume of shareholder dividends paid in 2017.

Good to see Soco mentioned favourably in the FT


ALL IMO. DYOR.
QP

[emptyend] 14/5/2018 10:16

ps.....on the licences, I suspect that the lack of clarity is partly due to the fact that SOCO does not hold those licences directly, but instead (through subsidiaries) holds a shareholding stake in the JOCs. As you know, this is an uncommon ownership structure and not the same as holding the licences directly.That said, the length of the productive life of TGT and CNV is estimated at 13-14 years (from notes 9 & 25) and it is interesting to see that partners agreed in 2017 that the decommissioning provisions could be materially reduced (by $11.8mn in SOCO's case). I wonder if that is a prelude to the exercise of an extension option by the JOC? Whatever is the case, the value of the producing licences is reflected in the balance sheet under Property Plant and Equipment, with all the full details in note 16.... so $413.3 mn at year end, after charging depreciation/depletion re 2017 production.My guess is that the licences will ultimately be extended to match the productive life, once there is less certainty over the length of that period. There is, I understand, a five year extension option anyway for the JOC - and there is precedent in Vietnam for additional extensions. But that would be a matter for the JOC (which, of course, includes PV) to negotiate with the authorities......and in turn SOCO and PTTEP would need to agree this with PV within the JOC.

[emptyend] 14/5/2018 09:52

Cerito...further...still on ipad:Hedging and cash investment policies are in the risk mitigation statements on p29/30. Whilst these risk statements all look a bit anodine, they are generally a point of heavy focus for auditors - so shouldn't be ignored.Re the 40% for deal-doing, I think that is an appropriate weighting given the context of the corporate strategy. They have underperformed and not met that objective - hence losing 25% of potential bonus for that alone.On the $4.7mn M&A spend, that was primarily related to obtaining the PEX licences on all their assets in Congo including the smaller accumulations, to ensure that those assets had a long life and were saleable. Elsewhere in the AR (which I have dipped into but not read) you will note that the writedown of Congo was because there has been no agreement to sell those assets as yet and the company has finished spending money on them. There is at least one obvious deal to be done, but no transparency as to when that might be. I infer that not all business development discussions have attached value to those assets.Re compensation levels, my observation is that these are in line with FTSE250 companies......but SOCO is not now in that group, so they look excessively generous overall to me. That can be tolerated in the short term until the mismatch is corrected via M&A......but the short term keeps being extended. I note they need more independent NEDs.

[emptyend] 14/5/2018 08:01

Cerito, Some good comments there. I will respond with a bit more later, when I'm not on the ipad (which unhelpfully obscures your post with the text box I reply in).I've not read the AR as yet, but all prior years have made clear the investment and hedging policies and I expect it is there in the notes......investment being restricted to better quality bank/fund deposits etc and hedging being that they generally don't hedge but can if they wish (they never have hedged in 20 years despite this).On the net asset value, this is always a potentially-misleading measure in oil and gas companies, because the basis for it is the costs that have been incurred (impaired where required by accounting rules) and not the market value of the assets. For example, it is clear from the text that their view on the value of the African assets is unchanged, but they have nevertheless written them down to zero. That being the case, most of the book value comes from the producing assets, where the book value is reduced by the depletion charge pro-rata to remaining reserves...........so, if they finally get to reclassify back to oil reserves the reserves that were reclassified down to resources in 2015 (as they should, because that was largely due to the lack of an FDP)then that would ensure that the depletion charge per barrel comes down pro-rata to the reserves increase.I'm very comfortable that the NAV is a now a material underestimate of the value of the company, and can see several probable sources of upside "surprise".

[richalert] 14/5/2018 07:48

Yes. Soco was considered a safelay, and had exploration prospects in Africa as well as Vietnam. A new management team coming bringing new deals that were to be had at distressed prices. An FPSO that was operating under capacity and could process more coming from the wells which had had minimal development after the downturn in oil.

[linton5] 14/5/2018 07:43

Thanks emptyend To go a day today as sun is out in FIFE now that’s rare so gonna enjoy it hoping Soco can at least get over 111 resistance and head to 120 not to much to ask for is it?dont answer that. Enjoy the lovely fresh air guys

[linton5] 14/5/2018 07:24

Can anyone explain how shareprice was £1.50 when oil was $25 and now $70 price is £1.05.

[cerrito] 13/5/2018 22:58

I have had a small amount since 2010- luckily small as my in price is £2.45.
I have not been able to get to the AGM for the last few years and am keen to make it this year.
I have spent quite a bit of today catching up to see if I should buy more- more time than was really justified as it took me some time to figure that I needed to make the AGM
I see that at $2.1m Ed Story's remuneration is appreciably less than in times gone by but it is still a very high percentage of 2017 total staff costs of $13.2 m and indeed why were they up from $12m last year?
My eyebrows went up when I read on page 26 that $4.7m had been spent on m&a activity; then I read on page 74 that m&a success ( as defined) accounted for 40% of the bonus calculation. The performance of the three directors(Story.Watts and Brown) as per page 74 was deemed to be target and they got 15% of a maximum of 40%. Of course it is good they turned down deals but they did spend $4.7m.I assume if they do what appear to be excellent deals they would get the maximum 40% and us shareholders would need to keep our fingers crossed that the deals do not crater. Not very satisfactory.
I looked to see a comment on their hedging policy and could find nothing-nor indeed anything on investment policy ref their liquidity. It would be very odd if no mention of these issues and appreciate if anyone can point it out to me where it is in the AR. Thanks.
I could find no reference as to when the Vietnam licenses expire and indeed I could not see an accounting value for them on the balance sheet.
PS FWIW which is not much I see at current FX rate the NAV per share is par with the share price.

[brucie5] 11/5/2018 21:50

Oh the ones that got away!
Yes. I'm still fit and healthy, even if not yet wealthy!

[linton5] 11/5/2018 20:42

I could have been retired mate if KLG had stayed on the lse lol, they’ve went to mars last few years. Hope your fit and well sir

[brucie5] 11/5/2018 18:34

W'ssup, Linton! Nice to see again.

[linton5] 11/5/2018 16:03

Check Ved out Bruce if you like a bowl o soup

[brucie5] 11/5/2018 14:49

This looks technically very interesting, so I've just bought in for an income folio. I particularly love shares that combine a. paying a dividend, b. being potentially at the bottom of a long term chart range, and c. retracing towards a £1 potential support. Possible bowls to 1.20, 1.40, and 1.60. All in context, of course, of rising PoO.

[tournesol] 11/5/2018 11:39

Hi ExT

Have responded.

:~)