Soco Share Discussion Threads

[greyingsurfer] 15/2/2019 22:01

In its report on Thursday, Global Witness has said that the June 2018 sale to “opaque shell companyâ€? Coastal Energy breached Congolese law and appeared to make no commercial sense.It made perfect commercial sense if you bear in mind that Global Witness, amongst others, had a run a virulent, and often misleading, campaign to stop Soco progressing with the licence! Now they're complaining Soco sold it! Of course, what they really object to is that, as they were warned would happen, forcing Soco out just meant that an unlisted company without the public scrutiny of Soco would take it over, giving them less or no leverage.

[joestalin] 15/2/2019 20:56

Anybody calling themselves 'Global Witness' has to be treated with a pinch of salt.

[magic_spehar] 15/2/2019 18:26

I came across this article online. Don't know what to think of it as a shareholder

Global Witness: Soco’s Congo sale unlawful, with tell-tale signs of corruption

Oil company Soco International’s last year’s sale of its offshore block in Congo to Coastal Energy has been put under the spotlight this week by Global Witness, an international NGO investigating corruption in the energy sector.

In its report on Thursday, Global Witness has said that the June 2018 sale to “opaque shell company” Coastal Energy breached Congolese law and appeared to make no commercial sense.

Global Witness said:

“On 25 June 2018, SOCO announced it had signed and completed an agreement to sell a subsidiary holding its operating stake in Congo’s Marine XI offshore oil block to an opaque shell company with no prior experience, cash or assets called Coastal Energy Congo.

SOCO failed to inform or seek authorization from the Congo’s oil authorities prior to the sale, in breach of Congolese law. It announced completion of the transaction without receiving any money and had at least one better offer, which it declined. Payment for the asset was conditional on certain terms, which ran an eighty to ninety-eight percent chance of failure, the company reported shortly after the transaction.

Coastal, incorporated just weeks before the deal in the secretive Marshall Islands, promptly installed a close relative of Congolese president Denis Sassou Nguesso to manage its local business and started to transfer payments to at least one company connected to its CEO.

Overnight, the Congolese government found an empty shell company responsible for running one of its prime untapped oil blocks, and SOCO’s shareholders found themselves an asset short with nothing concrete to show for it.

A few months after the deal was announced, Congo’s oil authorities commissioned a formal inquiry to establish whether Coastal had the technical and financial capacity to operate the block. The conclusion was negative.

What happens next is anyone’s guess. Congo could revoke the license, which would set a precedent in Congo’s oil sector. Or Coastal could sell it on – a classic ‘asset flipping’ procedure – but to whom, how and at what price?

“Republic of Congo is on the brink of bankruptcy, yet cowboy companies continue to strike oil deals that appear to be dismal both for the country and company shareholders,” said Natasha White at Global Witness.

“For over two decades, Global Witness has investigated corruption in natural resource deals, and SOCO and Coastal’s deal appears to have many of the tell-tale signs. Congo’s oil authorities have begun to investigate; UK regulators must do the same.”



Offshore Energy Today has reached out to Soco, seeking comment on Global Witness’ allegations. While the company has yet to respond to OET, Global Witness has said that SOCO “strongly rejects” any allegation that it has been “less than transparent and legally compliant in its handling of the transaction” with Coastal, and Coastal “strongly denies” any allegations of corruption relating to the deal.

To remind, when announcing the completion of the sale in June 2018, Soco, listed on the London Stock Exchange, said that the sale consideration was up to $10 million in cash and an overriding royalty interest of up to US$1 per barrel on all future gross production of oil and condensate sold from any of the four exploitation permits. Soco at the time said the value of the gross assets of the Congo (Brazzaville) assets held on the balance sheet as at 31 December 2017 was zero.

The interests held indirectly by SOCO Congo comprised a 40.39% operated interest in each of the Lidongo, Viodo, Lideka and Loubana exploitation permits within the former Marine XI Block, located in shallow water offshore Congo (Brazzaville).

“The assets in the Congo (Brazzaville) are not yet developed and have generated no revenue from hydrocarbons to date,” Soco said in June last year.

Soco at the time said that it planned to use the sale proceeds and the potential future royalty revenue from the exploitation permits to provide funds to invest in the company’s growth plans and to support the commitment to paying an annual dividend. If Global Witness’ report is proven to be true, there actually aren’t any funds from the transaction at all.

As previously reported, Soco last year announced it would exit Africa altogether as it also struck a deal to sell its assets in Angola, with the goal of focusing on its assets in Vietnam.

Offshore Energy Today Staff

[emptyend] 15/2/2019 12:51

Orient,Liquidity improvement measures will follow deal completion, IMO.

[kenmitch] 15/2/2019 09:48

Thanks for that very interesting post tournesol.

Coincidentally I hold the same shares (along with BP) and you've summarized the key points so succinctly. Luckily in profit with all of them (except Soco) with PMO a recent buy. Also hold Diversified Gas and Oil and dividend is 14% at my buy price with very high chance of dividend increases too. Well worth checking out.

Hurricane as you say is at a pivotal stage. A lot of overplayed concern right now about the rope when main requirement is simply a calm sea.. which will come in due course?

Soco? Only holding for the dividend and outside chance of a bid, and because the dividend yield looks high enough to limit the downside.

I hold a lot of bombed out big dividend paying UK shares (some commentators claiming they are the cheapest for 30 years) and am wondering whether just to ditch Stocko which has way underperformed my other dividend shares since the start of the year.

(e.g AVIVA 7.7% Paypoint 9% Legal and General 6.5% Phoenix 7% housebuilders BDEV and Persimmon 10% (including specials) Somero 6.2% and positive update recently so divi hike with results?) Rio Tinto 5.5%. Standard Life 10% if held (and news of big seller today possibly a buy opportunity?). HSBC 6%. Lloyds 5.5%

These yields are current and not what I'm getting. e.g Legal and General bought after Brexit vote and now up 50%, and BP and HSBC bought a couple of years ago on big dips and luckily near their lows, so yield for me is sometimes much better. Ditto for Diversified Gas and Oil.

I realise this is totally off topic - but no more so than the endless Brexit posts here at the time of the referendum. I've posted it partly because of the hostile reaction to any of my posts from the established SOCO posters here who think all my posts (especially so on buybacks!) are rubbish. A few readers keen on dividend shares might just find this rubbish one worth following up!

I also realise that anyone can post about their investment successes after the event and that's what it looks I'm also doing in this post.

BUT as some here will know I have posted on all of these shares on a subscription bb at the time of buying, and have frequently updated on them too.



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[stepone68] 15/2/2019 09:20

Orient - late 20s, rather than 30s for license expiry I think.

[0rient] 15/2/2019 09:17

Cheers tournesol..I'm a decent size HUR holder too & been buying PFC last few trading days as feel the drop is well over done. Only thing putting me off buying more SOCO is the liquidity issue..hopefully that will improves dramatically when the Merlon deal is finalised :-)
The very best of fortunes with your holdings

[nopedigree] 15/2/2019 08:52

Well as they say on the TV, I'm out. Just got rid of the last 5k of my holding of over 12 years, not been my finest investment by a long way, had a far better return from the 50k in premium bonds than the original 50k l put into here. Ho hum.

Good luck to all who continue to hold!

Cheers, NoPedigree

[tournesol] 15/2/2019 08:49

Orient

...What you reckon tournesol..u a buyer down here??

Afraid not. I am overweight the sector, with large holdings in HUR (12%)and PMG (8%) and a smaller holding in SDX(4%). All of these holdings are under water for me at present.

HUR gives me exposure to a particularly interesting story and I expect the proof of concept to make big progress this year. Longer term it has a decent chance of generating v large returns over a medium-long period although there is still a possibility of a negative outcome. I am watching it like a hawk.

PMG is a retelling of the Dana story which did well for me years ago. Tom Cross, late of DNX, is playing a long and patient game here which, if ultimately successful, will provide a good medium-long term return. TC is as always keeping his cards v close to his chest and says v little. You have to stand back and look at the overall picture to see what he is up to.

SDX gives me exposure to E&P in Egypt and Morocco, so the same growth area as SIA's new venture. Its exploration seems to be phenomenally successful but development is irritatingly behind the curve of the CEO's optimism and it doesn't ever quite translate into production.

Together these 3 holdings give me more exposure than I need to the sector and I can't envisage opening any new positions in any other E&P for the foreseeable future.

Obviously I still try to keep up with developments across the sector and I reserve the right to change my mind.

To be perfectly honest I'm wishing I had been more fearful and stayed more in cash than my present 25%. I am considering moving in that direction.

T

[0rient] 14/2/2019 23:19

Cheers Ed..it was the 13 Jun 2017 AGM presentation & yes my info taken from SOCO presentation, thanks for rectifying 👍🏻

Good synopsis on current events although only 500k traded today which is good for SOCO but still really low in £££;'s terms.

Totally agree with all the negative news now factored in..sellers are totally exhausted, you could tell that watching the trades go through today 👍🏻

[ed 123] 14/2/2019 22:59

Hi Orient. Was it the 2017 agm or the 2018 one? Also, regarding the 20 trading days, I guess you've taken the date 17 September 2017 from Soco's presentation? That's a mistake of Soco's. It should have read 17 September 2018. I make the shares to be issued to Merlon at about 92p each. With the shares now at 72p, it's still not good for Merlon's owners, but they will be getting about 70% of the consideration as cash - so a good measure of protection for them.

Moving on to today's update, I'm pleased that it was released to the market. Does that explain the persistent selling which kept the shares below about 77p for the past couple of months? Big volume of shares traded today. Some (like me) were adding, some stale/shocked/cautious holders giving up and selling (these might yet prove to be the wise ones?). At risk of being called, paranoid, I am wondering if some of today's buying was closing of short positions? Some of the issues reported today would have been known about by those close to the operations. Of course, I'll never know whether such shorting was going on, but having followed trading in the shares it did make me wonder.

As to Soco's future, any growth definitely lies with the Merlon arm (assuming it completes ok). I'm ignoring any 125/6 exploration, as it would have only a small chance of success. Results should declare a good (for a share at 72p) amount of dividend. That will reward me while I await for (better?) events to unfold.

Sentiment is (rightly) very poor for Soco. That leaves scope for a rise in the share price - if Egypt goes to plan.

[0rient] 14/2/2019 21:05

Did anybody here go to SOCO's 2017 AGM ? Just been scanning over a few old presentations and there was a slide saying they wanted to improve share liquidity..anyone remember what they proposed to remedy this?
Also very difficult to find dates for Vietnam licence expiry..2030's??

Another point regarding the Merlon deal is the 66 million shares issued as part of the deal:
The value of the Share Consideration of approximately US$79 million has been calculated by reference to:
a. c.66 million new SOCO shares which will be issued to Merlon shareholders;
b. the arithmetic average of the daily volume-weighted average price for a SOCO ordinary share for the 20 trading days
ended 17 September 2017;

That volume weighted price would be around 120p...making the 66 million shares worth considerably less now. The big shareholders of Merlon can't be happy with that unless they have been forward selling some as a hedge but very much doubt that.

Cheers 👍🏻

[0rient] 14/2/2019 19:59

What you reckon tournesol..u a buyer down here??

[tournesol] 14/2/2019 17:16

Thank you for your support Nigel.

I shall wear it with pleasure.

[tournesol] 14/2/2019 17:12

Stemis

I can do no more than repeat one of my favourite aphorisms.

Passer pour un idiot aux yeux d'un imbécile est une volupté de fin gourmet
………;……̷0;……R30;……230;……………………………;……..Georges Courteline

[0rient] 14/2/2019 14:21

Haha..unfortunately very true stepone68!!! ;-)

[0rient] 14/2/2019 14:01

Been watching level 2 all day(and the previous days) for SOCO and I definitely get the feeling that the sellers are exhausted, there's just not much appetite for selling in the low to mid 70's. Level 2 has been 160k vs 80k for most of the day..suggesting that it will not take much for us to see some upside :-)

[dunderheed] 14/2/2019 11:57

22215 - ah lol gobbers me old mate.
Also reserved for prammy, monte1 and Saul Goodman.

[emptyend] 14/2/2019 11:54

Am in complete agreement with you on the compressor problem, Kenobi. Expectations management of TGT production has been very poor. No doubt there are a list of extenuating circumstances, but it was positioned as a material issue and they have spent two years trying to analyse/resolve it. Note that the third party well that has made the problem worse will be a factor in the negotiations over FPSO access going forward - at least the partners seem aligned on prioritising TGT production and hopefully access terms will reflect that.

[kenobi] 14/2/2019 11:22

I guess the issue is as it has always been price, and given the situation at least as seen from the outside, would they get a good price for the VN assets ?

I cannot understand why it's taking so long to resolve this compressor issue. We were told that the water handling capability would be transformational, it's done nothing, they then blamed the compressor issue, they've looked into it and seem to be telling us it's caused by a well, and it's being managed. Well if that were true wouldn't you expect higher production ? if the problem has been mitigated. If it is an issue, then how much production has been lost since it was discovered ? why can't the parties agree on getting it sorted even if it requires a shutdown ?

I am sure we'll get very reasonable sounding explanations at the AGM, but our interests seem to be less aligned than ever with PV.

A reason to stay might be 125/126 however if they drill that and it's a duster, especially if other things come up, or there's more potential in the merlon blocks and capital can be better used there, the argument for further investments in Vietnam need to be proven worthwhile. The strength of relationships in the JOC/ with the government, don't seem to be there, even considering the new block partnership.

[emptyend] 14/2/2019 11:22

Asagi,The answer to your question is 2013/14. After the oil price collapse the partners simply didn't have the funds to support the level of drilling/work that SOCO wanted.The relevant passage in today's release is here:"The reserves update is based on the economic recovery to the licence expiry date, which have been impacted by previously announced operational, drilling and rig delays and the operational delays outlined in this press release, and are not a reflection of the fields' reservoir potential."i.e. this is another indication that partners are not moving quickly enough to produce the oil that is there. That could be resolved in several ways:1. Higher production rates (eg by fixing compressor problems etc)2. Licence extension (wholly possible and much discussed here - but requires conducive politics)3. Reconfiguration of JOC ownership to advance either of the above.From the outside, all of these seem possible.....and there are some possible solutions that AGM attendees are aware of. But, be that as it may, they have clearly not been able to progress TGT over the last 9 months as they would have hoped. On the other hand, some success with CNV drilling seems to have enabled a reserves write-back for that field.

[0rient] 14/2/2019 10:30

Lauders..I reckon all the weak holders and those fed up with SOCO are long gone leaving a fairly firm base of stubborn investors who will see this through and are happy taking the big dividend whilst they wait. Investors can be fickle, sentiment can change on a dime and hopefully SOCO will have its day shortly 👍🏻👍🏻

[dealer1972] 14/2/2019 10:26

Plus production remains within previous guidance! Bummer about the reserves downgrade although marginal. Dividend yield & future potential of M. will keep the share price propped up ;) plus oil price is having a bit of a boost at the minute which also helps the cause :)