Soco Share Discussion Threads

[kenobi] 24/5/2018 10:31

...The best way to predict the direction of oil price is to look at how long it’s been since any meaningful investment has taken place compared to historic norms….

Good luck with that. Can't quite see how that would have helped with any of the oil price collapses experienced in the past 20 years. They were all preceded by intensive investment.

>> Isn't that the point ? that if the oil supply/demand gets out of balance then it takes time to correct, either by falling demand via a recession or rising production via large investment. There's a lot of uncertainty at the mo, the excess supply has been wiped out by production cuts but tight oil is increasing in the US, what level can this be increased to ? currently exports are limited due to lack of facilities, suppressing the wti price. As these are expanded you might expect the gap between brent and wti to narrow. It wasn't so long ago that wti was always at a premium to brent. Once the Saudi's have their ipo out of the way, will they still be happy with their cuts ? It's one thing for the US to become energy independent using shale etc, quiet another thing to keep increasing exports and eating opecs lunch. why should the saudi's cut production while at the same time the US goes all out to increase it's production ? Surely it makes more sense environmentally to extract the easier to extract oil in saudi and venezuela ahead of the shale or tar sands ? And then there's the political aspects, if there were regime change in Venezuela to a friendly regime to the US wouldn't the multi nationals flock there and oil production boom ? If they don't will it continue to collapse ? not to mention uncertainty in the middle east. What I'm saying is while it looks bullish now, the oil price isn't a one way bet in my view. My worries re soco are the ever shortening of the licences, lack of ability to monetise any of the african assets, and length of time to get 125/126 explored, which of course may come to nothing too.

[tournesol] 24/5/2018 09:34

What Nigel said.





(There's a first time for everything - even for N & me to be in perfect harmony)

[nigelpm] 24/5/2018 09:01

Fair enough. Let's compare notes in a year from now. I'd be amazed if soco doesn't go on to hugely outperform oil from here. I wouldn't be surprised to see oil at 60 bucks and soco at 1.50.

[stemis] 24/5/2018 08:41

That's generally my thinking as well. 94p was insane as I said at the time (but plenty of bears popped up to tell me I was wrong), 118p is just very good value.

SIA has solely benefited from the rise in the oil price. If you map the share price over the last 3 months against that of BP, for example, the rises are pretty much the same. We've discussed the numbers on here a few times and the bulls haven't been able to quantify how SIA is significantly undervalued (other than vague comments about 'deals' and paying a dividend).

[tournesol] 24/5/2018 08:22

Tyler
...The best way to predict the direction of oil price is to look at how long it’s been since any meaningful investment has taken place compared to historic norms….

Good luck with that. Can't quite see how that would have helped with any of the oil price collapses experienced in the past 20 years. They were all preceded by intensive investment.

...alternative energies are nothing new, they’ve been around meaningfully at least since the 70s…

No. There really was very little focus on alternatives back then. The motivation to reduce carbon emissions is relatively new. In the 70's global warming had not been identified as a problem. Apart from GW the motivation/need to cut air pollution is much higher now, China was not worried about industrial/vehicle generated smog back in the 70's.

In the early 80's I worked for a major integrated oil co and spent some time in their Hong Kong office. I remember making a day trip to Shenzen across the border. It was a small town with people driving pigs on the rail tracks. We were told it was to be a new industrial hub. The last thing anyone was worried about was cutting oil consumption or switching to alternatives. All different now.

Then I saw oil price strength as inevitable driven by population growth and progressive industrialisation "middle-classification". Now I see oil as an outmoded technology which we all want/need to reduce/abandon as soon as we can. Periods of price strength seem more like the convulsions of a dying behemoth rather than evidence of recovery.

But like I said earlier I'm not looking for multi-decades long (which is what I mean by long term) investment returns. I'm inured to having to duck and dive as ripples pass through.

This looks like a ripple moment, or at least a ripplette. So let's enjoy it while it lasts. Just don't relax into it and most of all don't expect a bell to ring when it reaches an inflexion point before going into reverse. I've come to believe that one of the critical skills we need as investors is to identify when we need to leave the party and to quit early. These days I don't let myself get too comfortable/relaxed. I am always looking for reasons to call it quits.

[tyler19] 23/5/2018 22:21

Also, alternative energies are nothing new, they’ve been around meaningfully at least since the 70s. Oil is still the most versatile fuel with a high level of availability. Solar and wind are subject to weather conditions and require storage of electricity which is easier said than done on a large scale. As for shale, it is not a new technology, it’s been around for many decades! Shale is cost effective in very few regions and cannot meet the increase in global oil demand.

[tyler19] 23/5/2018 22:12

The link. hxxps://oilprice.com/Energy/Crude-Oil/Traders-See-Higher-Oil-Prices-In-The-Long-Term.html

[tyler19] 23/5/2018 22:11

Tournesol, you can simply google oil futures. These are reported on numerous free websites. By long term I mean 2 to 5 years. Below is a link to a news article a couple of days back stating the same thing. The best way to predict the direction of oil price is to look at how long it’s been since any meaningful investment has taken place compared to historic norms. We are just coming out of the longest downturn in investment in the history of the oil industry. Oil supplies naturally deplete approx 6% a year. It normally takes a year to 18 of reduced investment to bring the market into balance, we’ve had 4 years. The futures markets are starting to reflect the dynamic. I hold shares in soco on a 2 year time horizon and am optimistic. However, in e&p you can never completely eliminate risk and market is often volatile reacting to gdp data and oil inventories, which can be difficult to understand as the latter is subject to trades, hedges etc.. I would suggest holding a basket of 5 to 10 oil stocks to mitigate your risk

[tournesol] 23/5/2018 21:40

Hi Tyler

you said

..I’m also seeing the long term oil prices moving upwards, which is used to value oil companies…

Could you say a bit more about that please? eg What do you mean by long term? What is your source for long term price forecasts? What do those sources actually say?

Personally I've given up on oil price forecasting and likewise on demand/supply forecasting. Feels like it used to be reasonable to model supply/demand/price as if it were a closed system with interdependent variables. But doesn't feel like that to me any more. Alternative energy sources, unconventional hydrocarbons, shale, renewables, increased environmental pressures all look to me like spanners in the works of any closed system. Political instability and irrationality provide the nails in the coffin.

In the old days of Peak Oil and Desert Twilight I had a confident vision of a long term uptrend in price allowing a relatively relaxed long term buy hold approach to undervalued E&P's. That's all long gone and these days I am less relaxed and more interested in taking an opportunistic shorter term approach which involves watching from sidelines for much of the time then surfing visible short-medium term trends.

POO is clearly relatively strong on a short term view but I can't begin to feel confident about the medium-long term. So I'll be ready to bale out when momentum subsides.

[tyler19] 23/5/2018 20:39

Absolutely, the share price movements of oil companies remind me of 1999 when it was all doom and gloom on the outlook for oil. At the time the tech stocks were booming and overall market was heading into a bubble. Soco share price was volatile but as soon it was obvious that the oil market was tightening the share price took off on a very steep rise. If you were able to top up during the volatility you did extremely well. I see a similar repeat here, although not the same magnitude.
as the company market cap is much larger now. Still a 10 fold increase is very plausible, as obsurd as it may sound at this moment in time. Good luck.

[nigelpm] 23/5/2018 20:26

That's generally my thinking as well. 94p was insane as I said at the time (but plenty of bears popped up to tell me I was wrong), 118p is just very good value.

[tyler19] 23/5/2018 19:51

Nigel, these risk off trades are brilliant buying opportunities. I now see a tightening oil market going forward. I find Soco shares attractive as they have significant cash in the bank, operational issues are being addressed, new wells being drilled, produces a premium product, large dividend and above all it’s really cheap. Not to mention looking for mergers/acquisitions.

I’m also seeing the long term oil prices moving upwards, which is used to value oil companies.

[nigelpm] 23/5/2018 16:18

Decided I couldn't resist 118.6p with the 5.25p dividend entitlement coming tomorrow.

[tyler19] 23/5/2018 06:38

Sources close to OPEC are suggesting that the organisation may ease supply cuts in June. This is really good news for oil stocks as it will allow stock market rally to continue for longer and deplete spare capacity at a quicker rate whilst new investment struggles to take off.
EE, looks like Soco share price is finally about to take off. Enjoy the ride, after such a long consolidation period it’s likely that the recovery will be equally long!

[fangorn2] 22/5/2018 20:16

Ah Pity Nige, but now worries.

Always the rugger in Sarf Africa to contemplate. :)
(Or the footie World Cup)

[yasrub] 22/5/2018 18:56

Is it reasonable to start considering thought might be given to a positive reclassification of contingent resources to reserves on TGT ? - whilst the price environment has improved it would also need a clear path with partners in improving production. I assume the AGM might also add some colour as to merger/acquisition activity perhaps something tangible.

[brucie5] 22/5/2018 18:23

I'm not, incidentally, a fan of oil. The sooner we consign it to the dustbin of history, the better for the planet.

[brucie5] 22/5/2018 18:21

With those purchases in mind, it's instructive to look at the chart from 2015, when there was a huge gap down through the 200p level. I suggest anyone who is chart minded pulls up the 5 year view. This might take a few more weeks to develop properly, but a retrace that finds strong support on rising moving averages and a golden cross, could be a very good medium term trade. Though it mostly depends, of course, on a benign environment for PoO. But there seem to be global factors at work here.

[brucie5] 22/5/2018 18:00

emptyend
22 May '18 - 17:56 - 21117 of 21117
0 0 0
I've previously noted that the current new management team loaded up at 150-160p in February 2017 and have been ploughing 50% of their post-tax salaries into the shares ever since.
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That's good to know. What is your target, please? Excluding a sale? I have bought these both on my own account, as a medium term trade, and for an income folio. It seems on both accounts an attractive situation.

[emptyend] 22/5/2018 17:56

I've previously noted that the current new management team loaded up at 150-160p in February 2017 and have been ploughing 50% of their post-tax salaries into the shares ever since. They have been (very) lucky to drip in for a year at extremely low prices - but the fundamentals of the company are now substantially better that they were when they were buying at 150-160p..... so frankly it would be amazing if the shares didn't get back to that level in reasonably short order. If the TA people think that a pretty chart picture reaches the same conclusion, then I suspect that the price moves will soon accelerate further (once XD shuffling has passed).

[nigelpm] 22/5/2018 17:08

Not really someone who follows TA for equities but this does appear to be a situation where the TA/FA and outlook are all aligned quite nicely.

[ny boy] 22/5/2018 17:01

Ex div this Thursday 24 May (05.25p) quick payout too 15 June and potentially some decent capital growth if chart technicals are correct. Certainly a hold for me

[ny boy] 22/5/2018 16:35

Breakout soon, strong buying interest, nice ex div Thursday and a quick pay day too.

Chart technicals indicate breakout above 130p, target higher resistance 147p

[brucie5] 22/5/2018 16:06

And someone's buying at 1.21, which means take off imminent from this level...

[brucie5] 22/5/2018 15:40

1.20, to be followed shortly by 1.30, 1. 40. But that only takes it back to the year high. TLW 35% ahead of that already, presumably by virtue of the leverage.

I have a very clear target on the chart of 1.60.