Soco Share Discussion Threads

[cerrito] 10/6/2018 18:10

emptyend I had to leave after the meeting as I would have liked to have stayed and chewed the cud.
Perhaps next year if there is a next year

[nigelpm] 10/6/2018 07:48

Thanks for that. No-one else had mentioned next few weeks so was taken by surprise. Good to hear.

[emptyend] 10/6/2018 07:16

nigel.....that is a pretty accurate report. I had noted it verbatim as "the next few weeks" but (it was Ed) I applied the hyperbole discount and translated it as "over summer".Cerrito - sorry you didn't make yourself known, we could have chatted over lunch. The IR post was created in December and filled at the end of February. Sovico is a major conglomerate which, inter alia, owns top-end hotels in Nha Trang. They aren't oil and gas specialists.

[nigelpm] 09/6/2018 20:44

We should expect news of the Marine exit in the next couple of weeks.

A couple of weeks! - are you sure about that?

[cerrito] 09/6/2018 20:03

Advfn
I was at the AGM- my first for some years. Agree with other comments that it was a good meeting and Directors made themselves available and there was scope to ask questions.
No surprise given the shareholder base that all resolutions easily passed with the biggest no being the 6.52 pc against the remuneration report. There was a specified question on this and I was interested that the Chairman addressed it himself rather than the Remco Chairman.

I noted that Story twice mentioned need to increase liquidity of shares to allow big shareholders to sell down. They are spending more time talking to institutions who no doubt are reluctant to buy given there is no liquidity . The company hope that doing a deal could break this logjam; I note they have an IR internal person- not sure how long SIA has had this post. I did not gather who wanted to sell down or how urgent their wish was and of course one's mind boggles at would happen to the share price if a big holder had a desire/ need to sell in a hurry.


Storey also referenced talks with Sovico the Vietnam company about them taking a shareholding and my notes said that Story commented that they did not need more large shareholders. I am a bit confused here as I gathered that Sovico was in the oil industry and it was run by a man but the website indicates it is run by a woman and Sovico do not mention in their headlines any involvement in O&G. Help please.
Confirmed it is against company policy to do hedging.
The US$ 4m + spent on m&a costs last year was almost entirely spent on Kuwait Energy; we were told that the main reason they did not go ahead with the deal was that there would have been a delay before it was completed and so great were the splits within the Board and Management they were concerned that the company could collapse in the interim.
Agree with others that Story exuded a send of ennui that I have not seen before.
We should expect news of the Marine exit in the next couple of weeks.
I need to say I am as confused as I was before the meeting whether to buy more

[emptyend] 08/6/2018 18:34

Regarding what?"Regarding getting to some sort of exit for himself whether by selling or merging and bowing out, that's another matter altogether, I'll agree he seemed keen on that."...we are agreed then!I've seen it before (in my chairman, when the chips were down).The indicator will be what is achieved re Marine XI. You know what our views were in the pub. If you are correct, I will "eat my hat". I don't expect a knock out deal, but I do think it will exceed your expectations.....

[kenobi] 08/6/2018 18:02

steely resolve regarding what exactly ?

you're not suggesting that you're expecting a big payment for marine xi surely ? if so I think he might have been more forthcoming when you asked what his estimate for reserves was.

Regarding getting to some sort of exit for himself whether by selling or merging and bowing out, that's another matter altogether, I'll agree he seemed keen on that.

As always will be delighted if the most positive outcome is the case, I think the most likely though is somewhere between your view and that of the lord or darkness himself (Ed as he's know on this board !) so that's my view but hope the out come is closer to your views than Ed's or even mine !

[emptyend] 08/6/2018 17:52

...mmm...not sure that either of you have quite grasped the vibe here. I detected quite a steely resolve in Ed Story's demeanour.....of a sort I have seen before in others. I have no problem at all in declaring that "I am encouraged" that the outstanding questions will be resolved positively.

[kenobi] 08/6/2018 15:51

yes redhill absolutely, I think the point I'm making is it's more likely to be a smaller amount up front and something per barrel produced so while it could be that amount or more, significantly more only a little amount is likely to be upfront. I dont know what amount so it's pointless to speculate. Of course in this makes it especially important to sell to someone who will deliver and maximise your return.

[redhill9] 08/6/2018 14:35

Regarding the potential disposal of Marine XI, emptyend makes the point that until recently these were in the books at $150m. Worth noting perhaps that a sale at just half that value would equate to around 16p per share - a bonus not to be sneezed at if these assets are not recognised in the current share price

[kenobi] 08/6/2018 13:44

Hi Ed,
Nice to see you too yesterday, I suspect things aren't quite as bleak as you paint them, but from the outside looking in, I can see your point of view. I certainly agree that they sat on a pile of money throughout the crash and didn't manage to do deals that could have been transformational. many shareholder suggested it, and I'm sure they tried but didn't manage to, others did.
Even in the last year, after identifying and targeting it over the last year they didn't manage it, which is particularly disappointing given the oil price rise over that period. But I got the sense that we've got a lot going on, I would be surprised if at least the congo assets weren't sold soon, I'm sure the payment won't be great, I would guess closer to what you're thinking than the optimists, but it might have a royalty component too, which might produce a windfall like the mongolia sale did recently. Regarding vietnam I suspect that production will at least stablise and might improve slightly, the new lease on the fpso will reduce costs slightly, and the higher oil price will improve the economics as well as make the joc more likely to drill wells. Re the extension I don't know I understand your logic, but the initial extension is contractual, so while no doubt it will cost us something, we'll have to see what.

On the directors, I think for the first time this year Ed was suggesting he would like to retire, previous years it's all been "as long as you're having fun", this year he seemed keen on an exit, he's seen Roger go off and live the high life and I suspect he'd like a bit of it himself, good luck to him. Hopefully that will move us towards some kind of exit

[kenobi] 08/6/2018 13:42

I agree EE, but I heard Ed say when asked about this years plans for next year that he would be happy with 3 wells again. now perhaps we'll get to a point where it turns out PV are willing to drill more wells, however at this point that doesn't look that likely

we'll see

K

[emptyend] 08/6/2018 12:43

I think the point (to both Kenobi and Ed) is that the apparent "cooperation" issues with PV in the 2015-2017 period were due to several things, all of which militated against drilling/deal action in VN whilst oil prices were low:1. Oil prices fell sharply, making returns on investment weaker and more uncertain.2. PV corruption probes, making it difficult to get anyone at all to be proactive or stick their neck out, especially when those authorising any action may have been vulnerable to investigation.3. Not having put cash aside in 2012-14, so no reserves and a much reduced ability to fund development out of cashflow. This was particularly also the case for PTTEP, who spend $1.2bn (from memory) buying Cove at the top of the market.The key point is that this period is over. Personnel changes have stopped and there is more stability and confidence within PV. Oil prices are higher, the FFDP was agreed over a year ago, and drilling plans are being executed. Since oil prices have risen from the time the FFDP was agreed, there is also some possibility that they will accelerate drilling for 2019/20.... though that won't be clear until December/January. However, for VN as a whole, oil production has been under pressure. No-one else is drilling (still) and therefore depletion is taking its toll. Recall previous views of TGT as a relatively straightforward swing producer.

[ed 123] 08/6/2018 12:18

I'd like to add my thanks to Kenobi and Emptyend for their comments on yesterday's agm. Thanks also to the Soco people at all levels, who were both welcoming and helpful, even with a challenging shareholder (myself!).

I found it a pleasant and illuminating meeting. I felt huge respect for Ed Story, particularly, seeing him stood there in his mid-70's, having spent 50 years in the industry and still working as a CEO, far from home.

That's me as a person but, functioning as an investor, I needed take a view on Soco as an investment proposition.

For me, nothing really changed yesterday. I went with an open mind and I reflected on the whole after the event, but concluded with a reinforced opinion of Soco and where it is now.

I was critical of the Board yesterday, for Soco's performance over the past few years, and suggested to the meeting that it was time for Ed Story and Rui de Sousa to go. They sat on cash and profitable production through the commodity price downturn and didn't (for whatever reason) conclude a deal. A deal at that time could or should have been transformational for Soco. This was a serious failure, to me.

Where are we now? This is my personal view (no guidance and no advice to anyone):-

Vietnam output likely to decline over the next 7 years. Unlikely to get sufficient co-operation from PV.

Extension to Vietnam licences not likely. Why would anyone give away an asset when they didn't have to ?

Blocks 125/6 unlikely to yield anything commercial. For me, it's a wildcat well (in 2 years time) and a percentage game. So, shareholder money likely to be lost.

African assets highly likely to be sold but I'd guess, only for a nominal amount.

Sale of whole company? Highly unlikely unless for a 'low' price. Partner issues detract from value.

Deal to buy some asset(s)? Likely to happen but they missed the oil price boat and will not get the value the they could have done in late 2015/early 2016.

My conclusion? With a couple of thousand companies London listed or AIM, there will be better homes for investment cash.

I will continue to follow Soco and, as with all investments, review my opinion with any changing events.

I do hope Soco goes well for shareholders and for all others connected with it.

[kenobi] 08/6/2018 11:59

Not suggesting it wasn't public record, but it was news to me,

Historically some years we've got a lot done in vietnam and other times we've had periods of waiting to get things done, so it's significant. The fact that we've got 125/6 approved and are drilling this year hopefully signifies that the latest incumbents are more well disposed to soco, I know we have different views about how the wheels are greased to get deals done, but I think we both agree that personal relationships are important.

K

[emptyend] 08/6/2018 09:12

Just to clarify on the compressor point, Kenobi, the absolute worst case scenario would be complete replacement which would, as you say, cost high single figures millions (gross, not net) and lead to 12 weeks of lower production (followed, presumably, by a significant increase). But until the FPSO lease is sorted, and the compressor remedies fully checked out, we won't know whether the worst case scenario applies. There are a number of much lower cost possible solutions but the precise problems have yet to be fully diagnosed (even by the manufacturer, who is "on the case").Also, I wouldn't go all "Daily Express" with the point about changes to the movers and shakers in Vietnam. All this is public record and mostly relates to fraud allegations within various PV units....and has been going on for 3-4 years as you can see from Google News. The key point is that this has now settled down and been "sorted out".....and that the forward outlook is stable re government relations etc.

[kenobi] 08/6/2018 08:22

Re the Talisman/Repsol deal, the point Ed made was that they initially got a very good deal, being marginal additional cost, this is going to disappear with the renegotiation of the deal, and costs will be going down generally, although we have this compressor issue which is likely to cost a number of millions to solve (not 10's of millions). The fix might require six weeks, it might be implemented by six weeks on each of the two compressors, so effectively running on one for 12 weeks, logically this would mean half capacity but I don't know that's the case as they are unlikely to be exactly half the power needed to run the fpso at 100% as we know they've run above this before. They made the point that the 125/126 won't be a joc, it'll be a more conventional production sharing arrangement. They feel this will give them more control over development. It might but the control is always with the government anyway. Sometimes they suggest it's because the Vietnamese have no money to fund drilling, but then in the next sentence say oh we've offered to fund it but they still don't want to, so there are multiple agendas going on here.

The old boy network ebbs and flows but this year Ed mentioned that there has been a clear out, and some people have been executed and others jailed for many years. This is worrying but Ed assures us that it's all settled down and ours is the only joc drilling this year, so hopefully we're still in the good books (and we recently got the 125/6 extension)

[emptyend] 08/6/2018 07:57

This is the question that shareholders (and potential shareholders) need to answer: is there market-moving news in the offing? I think there is likely to be, hence my "watch this space". Others will just shrug and want to see the evidence first.I'd make a number of points:1. They plainly expect to sell Marine XI assets over summer, as they now are in discussion with at least two parties....and are also very tight-lipped regarding potential terms. These are assets which, until recently, were in the books at $150mn+ so, whilst a big haircut certainly can't be ruled out, neither can a more substantial "windfall". I'd expect this to have been one of two main items on the board agenda at yesterday's meeting.2. The other main item on the agenda is likely to be the possibility of purchasing some assets in the Middle East. Those attending yesterday will have a fair idea about their profile, but they should have a steady cashflow in a wide range of oil price scenarios. This may also get done over summer.3. They are clearly working on multiple other potential deals at present. The overall aim being to find something of substance that provides growth opportunities whilst not prejudicing the capacity to pay dividends....and, crucially, at the right price.4. In the medium term (2 years) I see the VN business as being all bound up together. The potential of 125/6 may also have implications for the licence extensions on TGT; it has taken 7 years to finally get 125/6.....lets hope it is worth the wait. Note that (as Kenobi said) there is a well planned by ENI in block 124 near the boundary with 125 - probably in 2019. I note, on investigation, that a 40% stake in that well will pass to Ophir as part of their recent Santos purchase, so it will get a fair bit of airtime in London if successful. And in 2019 SOCO will be shooting 3D over 125/6. Currently the (largely undrilled) basin is viewed as an analogue of Cuu Long.....and if it is then many of the best leads look to be in our blocks. Ed told a little (detailed) story about how the blocks came to be held back by the Vietnamese authorities because they looked too good to be passed out to "just anyone".5. On TGT the FPSO lease extension is likely to be finalised in a matter of weeks. Then it will be time for compressor solutions to be put to the test. Could be up to an additional 1500boepd net if the solutions work perfectly but, more likely, it will be a 500+ uplift? The other production constraint is the extent of drilling that the partners approve. If oil prices continue to firm then the partners will be keen to drill more (and can afford more)6. FPSO additional capacity may emerge with the extension deal. I think the Talisman/Repsol access deal only runs until August.In sum, you can certainly make a case for waiting. But the question will be "at what potential cost"?"

[lauders] 08/6/2018 01:53

Thank you for the feedback kenobi. Pretty much a "game" of wait for the news while enjoying the continuing dividends it appears! Not sure there were enough signs to excite the market into buying the story though. Are we destined to just wax and wane between 100-120p for months and months I wonder?

[eggbaconandbubble] 07/6/2018 20:00

Steptoe, you can't argue with the facts chum!

[kenobi] 07/6/2018 18:33

Not much to say, I would take away that at least some of the African Assets are on the way out, I think Ed referred to it as "out of africa" He was talking about Marine XI. I wouldn't be expecting much money from the sounds of things, perhaps a small payment and some royalties from production ? Cabinda, well not sure if that's going to be sold soon. When I suggested six months that seemed a long time so it could be much less, or the nature of these things perhaps not. EE asked what their estimates were for marine xi and they preferred not to say, saying that it was up to the new owner to have their estimates. Again this suggests that we shouldn't expect too much. It turns out ENI were not very helpful in trying to resolve the Marine XI issue, they didn't want to buy, hoping we'd walk away and they would get it for nothing, seems odd as they could have offered $50M we'd have bitten their hand off, and they'd have $150M in sunk costs to recover plus more acrage and discoveries. Still there seemed to be 2 people interested, sounded like they knew who they would prefer to deal with. what we get may seem like peanuts now, but you could have said the same of the mongolia sale and that was pretty nice when $50M odd turned up.

Interesting comments re 125/6 Mr Story said ENI were going to drill wells to the east (or a well), and that might give some indication as to whether there's oil in them underwater hills. It was unclear if they would drill in 2018 or 2019, soco were planning to drill in 2020 after shooting 3d next year.

The Kuwait oil deal wasn't right for soco so they walked away, still looking at a number of corporate deals. Areas of interest seem to be the middle east or north africa. So we'll see about that in due course.

I didn't come away with much hope for the current assets, in terms of dramatic increases, there's 3 wells this year, like last year, and the compressor issue we'll see what difference that makes. I had thought that given oil price moves they might be suggesting that next year we'd drill 6 or 8 wells, that didn't seem likely from what I saw today, but in part will depend on oil prices later in the year surely ?

So at least some tidying up to be expected, perhaps some corporate deals, perhaps buying into either expo/development / production in the areas suggested,

It was the first time I got the impression that Ed Story wanted to retire, but whether he was trying to placate those that asked about succession plans or not I don't know.

Nice to have a drink and chat with Danny, Mick, Ed and of course our very own EE !

I agree it was very much watch this space, although nothing concrete at the mo so meh is another interpretation, especially given that much of this was said last year.

K

[emptyend] 07/6/2018 16:20

My own summary would be "watch this space". Ed's will be "meh" ;-)

[emptyend] 07/6/2018 16:19

I doubt it My boy.....too tight.....err.....careful ;-)

[ny boy] 07/6/2018 13:59

Will Ed be in First Class?

[stupidboy] 07/6/2018 13:24

The current FDP was to prevent production falling further and to get back to 10-12k bopd.
To reclassify reserves a more comprehensive FFDP would be required including both more wells and significantly higher capital investment in alternative production infrastructure.