Soco Share Discussion Threads

[emptyend] 14/6/2017 19:08

Kenobi.....re deals you'll recall that they RNS'd bid interest nearly a decade ago just before the financial crisis hit.On the shale topic we discussed yesterday, I saw an article earlier which indicated that shale drillers are largely hedged for 2017 and still well-funded by private equity....hence they continue to drill away and raise production. However, they are largely unhedged for 2018 - so, rationally, drilling activity should start to slow in the coming months. Meantime there will doubtless be plenty of speculation.On the question of deals, I'd say that SOCO is currently more vulnerable to an opportunistic takeover bid than it has been at any point since I've held the shares.....low valuation, lots of cash, drilling programme and water-handling yet to kick through into reserves and production.....and management that (with respect) is knocking-on. Though I see no sign of any such action.

[fangorn2] 14/6/2017 19:03

Sheesh the US shale ramp up is relentless.
Now matter that Opec/Non opec have cut 1.8m from production. US production has soared.
Quite incredible

[fangorn2] 14/6/2017 19:03

Sheesh the US shale ramp up is relentless.
Now matter that Opec/Non opec have cut 1.8m from production. US production has soared.
Quite incredible

[buywell3] 14/6/2017 17:26

buywell3 5 Jun '17 - 13:03 - 28214 of 28435 0 0 Edit
If Trump ramps up Shale oil production any further WTIC looks set to test $45 within a couple of months

[ed 123] 14/6/2017 17:15

Fair comment, Kenobi. :-)

[kenobi] 14/6/2017 17:04

Well, I'm not surprised if the share drifts a bit,

Soco does have a history of deal making, so it's not implausible,
arguably if the PV situation had been different, the Vietnam assets would have
been sold long ago, I don't know if it's not practical to develop lindongo,
they have renegotiated terms, I think they just think that the block is worth more to others, particularly ENI who have infrastructure to the north, and they claim it's the same formation. ATM, ENI don't want to play ball, but perhaps a deal can be done.

Re Cabinda, I don't really know what's going on, the last RNS said that they had a discovery, of hydrocarbons, and they were going to test. Then it all got shut down and the partnership was re negotiated. We have a tiny slither, ENI seems to be the big Partner , so it's going to happen on their timetable. However, perhaps it'll be a small bit in a deal with ENI, or perhaps a little bit of money down the line ? just like say The Mongolia payments that we've just had.

K

[ed 123] 14/6/2017 16:36

They simply have no basis for writing it down (or up) until they monetise it or put it into production.

They have more or less said that their Lidongo discovery was not commercial, prior to adjusting its commercial terms. I'd guess they've adjusted the agreement to relate it in some way to movements in the oil price. That way, it can move into development and the Government at least gets something back from it. Would the deal be generous to Soco or just enough to get it developed? I think the latter. Of course Soco won't want to write it down atm, as they are hoping to sell it. (Edit: Their problem of course is that the obvious (only?) potential buyers are the Marine Block XII partners - which gives the latter the more powerful hand in negotiations.)

Cabinda North Block? I can see the expenditure but what is there of any value to Soco? Nothing?

Soco say they are looking at buying production and development projects. They already have their share of Lidongo. Why look elsewhere? If they don't move ahead with development now, after the adjustment of terms, it tells me all I need to know about the value of Lidongo. We'll see which way Soco goes. (Edit: My guess, fwiw, is that Soco eventually sells to the Litchendjili partners, next door.)

Soco summary? I can't see them getting much at all for their African assets, their main production has a high water cut and limited licence period, and they're about to embark on deal making to address the slow decline. That is why the share price is around the 125p level.

Plenty of shares on offer on level 2 today. After the agm, I guess some are voting with their feet?

[emptyend] 14/6/2017 15:41

Thanks for kenobi's comments. The Marine XI number was $150mn....plus the $15mn scheduled upfront payments for the new PEX licence. There's another $66mn for Cabinda - so that is at least $231mn for Africa.Of course that may or may not be a reasonable value. Probably not - but that is what they've spent. They simply have no basis for writing it down (or up) until they monetise it or put it into production.......it would be nice to get some monetised and recovered.....

[haideralifool] 14/6/2017 15:31

K the reason why some people may feel that the time for bargains is rapidly passing is because whoever remains is more likely to have adapted to the new price environment.

I'd really have liked SIA to have pulled off a deal similar to SDX's purchase of Circle's assets in north Africa.

[investopia] 14/6/2017 14:23

The chart shows a period of consolidation for some two years now with gently narrowing undulations -- all driven by fundamentals, of course.

Recently I asked myself:

When we finally get to the actual pivot point -- where the volatility has contracted to its minimum -- which way do you think the shares are most likely to move, sharply up, sharply down, nowhere at all, or some other option?

How much confidence do you have in your opinion/projection/estimation/assumption/guess?

How long will the process take?

Meanwhile, are there any more attractive-looking stock market opportunities elsewhere or not?

I'm not going to let on what I decided, but the thought process definitely helped.

[ed 123] 14/6/2017 09:05

Hi Lauders.

Timing?

For me, the key thing about timing is that they missed the boat. When the oil price had dropped, January 15 to March 16, overstretched companies were having to do deals for their survival. This was the time for anyone with a strong balance sheet to pick up a bargain. What did Soco buy during that period? Nothing at all!

Today, with the oil price around $50/bbl and the Saudis trying to raise it and with overborrowed oil companies having done their sales or mergers, the sector is relatively destressed. Soco won't get as much for their money now.

Nature of investment?

Holders should also be aware that the nature of the investment propostition here may change. A plodding, nil borrowing, cash machine may become something with significant borrowings. If so, risk in holding Soco shares would go up.

Funding?

Equity finance has been suggested. Is there a rights issue or private placing to come? These normally result in a lower the share price.

Conclusion - Is Soco good place for money now?

Just my opinion but I would say, "No." The reason being that they have announced intention to buy assets from others and that carries risks. If the buys do happen to go well, I would expect that to become apparent gradually. So, in terms of an investment strategy, I would be inclined to side-step this acquisition/fund raising phase, then watch for progress with the new and existing interests. There should be time to come in later, if they look to be on the right track.

(As usual, no advice intended - just my own view.)

[emptyend] 14/6/2017 08:59

Not really Lauders. It is in the nature of these things that there could be 4-5 discussions "on the go" in theory at any point, but timings are extremely difficult to pin down. Even for people on the inside, you know that deals are never done until they are actually signed.So I'd be surprised if anything happened in the next week or so.....but quite possible that something gets signed in the coming months. Certainly doing deals is joint top on the "to-do list", along with installation of the water-handling.

[lauders] 14/6/2017 01:43

They plainly intend to do several deals - and my sense is that one or two could be quite material in size.

Any hint of time-frame EE? Near-term, medium-term or still a long way off?

[redartbmud] 13/6/2017 20:46

Note no PV stake here.

Music to my ears!

[emptyend] 13/6/2017 20:28

A few comments on the AGM:1) $130mn in cash gives some flex for deal-doing. Elements of debt finance and equity finance may also feature and perhaps private equity. Relative to most of the sector, they are well-placed. Deal focus is on Asia and Africa and on production & development. They plainly intend to do several deals - and my sense is that one or two could be quite material in size.2) 125/6 blocks look interesting but need work. 3D seismic followed by 1well by 2022 - most likely to be financed via farm-out. They think it looks a Cuu Long analogue - but the crucial question will be hydrocarbon type.....gas would be ho-hum but oil could be material for Vietnam. Generally it is gas to the north and oil to the south.....but the oil find on 124 gives reasonable hope. Note no PV stake here. 3) 2017 TGT drilling prog will end in a few weeks. Non-committal re the reserves outlook once those drilling results and FFDP plans are integrated into models. Similarly non-committal on production outlook, despite water-handling facility being "transformational".4) Marine XI will be in the books at $165mn soon. Can they get value by swapping those assets for something with nearer-term production?In sum, the focus is on deals. The first deal will be crucial.....

[jotoha2] 13/6/2017 17:20

Must say I like the assets and the way the share price has been worked for the last 18 months , it's clearly being squeeeezed either for the graveyard or rebound to reflect the assets , so have started to buy and will continue to do so .

[emptyend] 13/6/2017 14:42

...that's the plan, jotoha2.......

[ed 123] 13/6/2017 10:50

They have made multiple attempts at growing the company, through the licences they bought and the work they did in Africa. Sadly, so far nothing as yet commercial, just write downs of expenditures.

The dividends were part of a blended approach, some new adventures and some return to shareholders. As things turned out, shareholders would have been better off if they had not tried to grow in Africa and had paid out bigger dividends instead.

Dividends versus exploration, it's all about attitude to risk.

Anyway the past cannot be re-run. What of the future?

With mature production and no (atm) exploration, unless there's some big jump in the oil price, Soco's share price is likely to continue fairly flat. Today's update has been greeted with low volume and a small dip in the share price.

The market reaction for me confirms that, sadly for holders, there's nothing here to excite.

[jotoha2] 13/6/2017 09:09

Why all this return of cash to shareholders ,far more chance of impressing the city if they actually grew the company and made some decent profits going forward.

[emptyend] 13/6/2017 08:59

It's worth noting that Marine XI is in the books at $150mn and that (since net assets per share are around $2.60) the market seems to wholly discount that. A deal to realise that asset could have a significant impact, even if it is at a discount to book value. Similarly, Cabinda is in at $66mn.

[emptyend] 13/6/2017 08:08

Lauder's...it's just you. ;-)But basically it is saying we've got $150mn in the bank and are looking for deals on assets that are already in production but to which we could add value.Would also be nice if some of the African portfolio could be monetised. Certainly there is a big need to do deals, both as buyers and sellers.....considering very little has been completed after a year or so of active trying.