SOCO has been a hugely under performing share relative to other O&G companies (or at least amongst the ones I own). I fail to see how anyone can question Kuwait when SOCO previously wanted to operate in Virunga National Park in the Eastern part of the DRC, one of the most violent and unstable countries in the world - Kuwait etc. is like Switzerland in comparison. If it moves the SP to where it should be, I am for the deal.
Peel Hunt suggest £1.30 on 11th January 2018 (yes they get it wrong), however, I personally would prefer Soco to go it alone, I.e. no merger. I shall attend the EGM (assuming that talks continue to a merger agreement), it seems a little early to speculate further.
From memory the projected revenue for 2018 for Soco alone is £175M and thats based on a lower oil price, the oil price has been steadily rising and i suspect, if production is maintained, the revenue will be significantly higher. The company is cash rich and pays a dividend of approx 5%. Just in the current oil price environment the shares should go above £2 (IMHO). With the merger it will only speed things up with access to greater reserves and stable sales, this will act as extra operational gearing if the oil price remains high. I hope this helps.
If you take a slightly longer view, say 3 years, the increase in production could be quiet dramatic. Good luck!
Location risks are widespread in the oil industry. The risks are normally managed. Generally, where there is oil governments act to make those areas safe for operations as a priority. Most of the big players have operations in Iraq and other high risk locations.
Also, productions costs are amongst the lowest in the industry at these locations.
Kuwait Energy appears to have a much larger valuation according to FT, when it considered listing on the LSE April last year, it was valued at £780M, at a time when the oil price was much lower. This should be good for SOCO as its appears to be a merger of equals. Both companies have recently changed their management teams, I assume to ensure greater shareholder value. Good luck to those invested!
A recovery in the oil price has yet to be reflected in the shares of oil and gas producer Soco International (SIA), so get in quick before the market realises this anomaly.
We think the improved commodity price environment, under a new executive team, can help switch focus from several years of managing decline to a renewed focus on growth, backed by an extremely strong balance sheet.
In the last three months Socos peers Cairn Energy (CNE) and Premier Oil (PMO) have advanced 25.9% and 37.8% respectively and even sector juggernauts BP (BP.) and Royal Dutch Shell (RDSB) have posted double-digit share price gains as oil prices have firmed to two-year highs above $60 per barrel. Over the same period Soco is nearly 5% lower.
Why? Investors seem to have lost patience as Socos production from its flagship TGT field in Vietnam has tailed off due to a lack of development drilling. The table illustrates how production has declined over recent years.
However, in 2017 activity has been ramped up with five development wells drilled and new capacity being brought on stream which should lay the platform for production growth over the coming two years.
Peel Hunt forecasts 10,000 barrels of oil equivalent per day (boepd) for 2018 and 14,000 barrels of oil equivalent per day in 2019. Guidance for 2017 is for between 8,000 boepd and 9,000 boepd.
This weeks appointment of Mike Watts as managing director (MD) could be significant. He was among the architects behind Cairns successful exploration strategy in India which for a time propelled the company into the ranks of the FTSE 100.
Backed by net cash of $132m, Watts and fellow Cairn alumni Jann Brown, who is Socos joint-MD and chief financial officer, may add some exploration upside to the portfolio through acquisitions.
The company said two months ago it was vigorously reviewing growth opportunities and options to maximise value from its current assets.
On 30 October the company announced that it had secured a 17% interest in two exploration blocks offshore Vietnam which it had been chasing for several years although any exploration drilling will have to wait until 2021 at the earliest.
Earnings and cash flow are likely to be constrained by investment next year but a free cash flow yield of 16.6% and price-to-earnings ratio of 6.3 times based on Peel Hunts 2019 forecasts is attractive for those prepared to look that far ahead. (TS)
Yes, things are okay in these crazy times. It's been a long time indeed if we think about the many changes in this world... Suddenly there was IS, suddenly there was Crimea and suddenly there was Trump : ((
Shotry, first of all allow me to calm you a little: Today the Sp is holding above 135p, so the support has NOT been breached yet, and SIA even made attempts to bounce back to 140p.
Ignore where the price was last year - with different oil prices.
The current bearish alert has been generated at the end of Feb 2017. It covers about eleven months timeframe, as its been 11 months since the Sp tried to stabilize in this sideways formation, but suddenly broke out to the downside in late February, with pressure on 135p and 132p. http://www.google.com/finance?cid=668523
1) Something is not quite right, with SIM falling through 140p (the 200-day-average). Is it company insiders who fancy the parked cash? Who knows.
2) Irritating is also that there has been pressure on 132p (the vital 50-week average)!
3) That 135p is holding up decently at the moment. So be happy, enjoy your Wednesday pub night and greet your friends with pint. So far, so good.
4) But IF 135p is breached again, it gives a first bearish alert for a change in trend.
5) Long term bearish alert comes IF the 132p support (50-week average) folds. Breached, means the Sp drops below and does not make a rebound on the next day, as we've seen in the past.
6) If these factors are confirmed, then there is one final bearish alert when 117.20p falls apart. Then its time to kiss this share goodbye and let the market walk it down.
Remember: We can always buy back in!
What's the date on those predictions? 135 must never be breached or we're off to 77p? 135 has been breached a numerous times since July 2016 and the last time is now. I have the low at 114/15 so far, which is below the 117.
How old are those predictions rR and are they still valid?
Thank you for your "promotion" on the GPX site : ))
Now about this SIA/ Soco Intrnational: Currently this has a bearish alert on tradesignal-online-com. Very careful now:
- The vital 135p support must never ever be breached!!!!
- IF this is breached, then new long term bearish trend down to about 77p.
- Bearish confirmation comes IF the 117p support falls apart.
Its best to adjust the auto trailing stop and let the share price find its level. In case of a rebound the system buys back in automatically.
producing in Vietnam around 10,000 BOPD and plans to increase production by ongoing drills.
90- 100 million in the bank and no debt. Exploration assets in west Africa and Vietnam. Expecting some additional cash to be repaid from previously sold Mongolian asset. Pays dividend. Looking to acquire additional assets with cash balance.
Bottom out: 77 - 65p
I must admit I'm not too worried about the lack of drilling over the last two years. Its good practice to stop drilling during major downturns and to conserve capital for future purchases of assets and companies. Also, stoppage in drilling allows cost of services to fall and enables more favourable negotiations with local governments for permits etc. Soco has recently started drilling and more is to follow as per the last trading update. The update also mentions increasing fluid handling capacity at the TGT site, this IMHO will be a step change up in production.
I guess lack of liquidity may deter larger investors in the short term but with a market cap around £0.5B that should change quickly as the price of oil rises.
The oil market is already starting to tighten which should bode well for Soco. The company trades close to its NAV which makes it a bargain due to its high operational gearing, if the oil price continues upwards.
Please DYOR, IMHO its a strong buy with rising oil price.
This is an excellent well funded company with ok management.
There are a few big issues as to why we languish at this lowly price
Lack of share liquidity
Management haven't spent the cash wisely and haven't invested in new assets
Management were very slow to restarting drilling and stem the production decline
One asset company. Most of the revenue comes from one place and African assets are just a side show
With oil price trending upwards there should be a good increase in probable oil reserves. The company has also started a drilling programme that should increase production for the year ahead. With an excellent team in charge I'm surprised that the share price is not much higher. Am I missing something?
Its the second downward production guidance issued by the company associated with field decline. Oil wells deplete by a few percent every year which is usually offset by new wells drilled. During low oil prices companies reduce drilling and instead enhance recovery from existing wells to conserve capital. This is what seems to be happening here. Its good that the company is planning some drilling in the future but probably not enough for the short term. The company has good financials for an E&P but share price is unlikely to recover unless we have a sustained recovery in oil price.
Thanks. To me the RNS reads like there is exciting stuff in the pipeline (forgive the unintentional pun). Therefore the dip in the SP looks like a buying opportunity to me.
Funny how the markets work.
Production of 11,976boe/d, generated revenues of $215m, and $80m of cash flow before interest and tax; after capex of $87.5m the company ended 2015 with cash of $214m (as previously guided). SOCO reported a loss for the period of $34m; we were forecasting a loss of $29m. However, we were anticipating an impairment charge for CNV and assumed February's unsuccessful MPS well would impact H1/16 numbers; in contrast the company expensed MPS ($23m) and announced no impairment charges for any of its producing fields at year-end. Adjusting for this variance, there was an underlying earnings beat of $20m driven by lower G&A and taxes.
The Board has proposed a final dividend for 2015 of 2p/share ($0.05 forecast). Assuming an oil price at or above current levels and no major adverse surprises, management anticipates that the Board will at mid-year results propose a special payout to be distributed in H2/16.
SOCO ended 2015 with reserves of 37.3mmboe, down from 40.8mmboe; a (surprise) upward revision at CNV partially offset production of 4.4mmboe. An updated Reserve Assessment Report has been completed for the TGT field and a full field development plan is scheduled to be submitted in Q2/16.
This year's exploration and development budget is fully funded from existing cash resources, FY16 guidance includes production of 10-11,500boe/d, opex of $10/boe and capex of $54m including the expensed MPS well. A deferred payment of $52.7m associated with 2005 sale of Mongolia interests is expected to be fully received in the next 12 months, and this could lead to an additional distribution to shareholders in H2/16. The Congolese authorities have agreed to a 12 month extension to the previous March 2016 Marine XI licence expiry. Two long serving Non-Executive Directors, John Norton and Bob Cathery, are not seeking reappointment at the upcoming AGM.
A conference call facility is also available today at 10:15, dial in: 020 3059 8125. SOCO will be presenting on Friday in London as part of our Winter Lunch Series.
SOCO this morning announced headline FY15 numbers, including a 2p dividend with potentially more to come, which were in line with our expectations; but, the clean numbers included an earnings beat. The release focuses on maintaining cash margins and value over volume, with FY16 spending dependent upon its contribution to the bottom line. Management is scheduled to host an analyst presentation at 10.15.
FY15 Numbers: Production of 11,976boe/d, generated revenues of $215m, and $80m of cash flow before interest and tax; after capex of $87.5m the company ended 2015 with cash of $214m (as previously guided). SOCO reported a loss for the period of $34m; we were forecasting a loss of $29m. However, we were anticipating an impairment charge for CNV and assumed February's unsuccessful MPS well would impact H1/16 numbers; in contrast the company expensed MPS ($23m) and announced no impairment charges for any of its producing fields at year-end. Adjusting for this variance, there was an underlying earnings beat of $20m driven by lower G&A and taxes.
Dividend: The Board has proposed a final dividend for 2015 of 2p/share ($0.05 forecast). Assuming an oil price at or above current levels and no major adverse surprises, management anticipates that the Board will at mid-year results propose a special payout to be distributed in H2/16.
Reserves: SOCO ended 2015 with reserves of 37.3mmboe, down from 40.8mmboe; a (surprise) upward revision at CNV partially offset production of 4.4mmboe. An updated Reserve Assessment Report has been completed for the TGT field and a full field development plan is scheduled to be submitted in Q2/16.
2016: This year's exploration and development budget is fully funded from existing cash resources, FY16 guidance includes production of 10-11,500boe/d, opex of $10/boe and capex of $54m including the expensed MPS well. A deferred payment of $52.7m associated with 2005 sale of Mongolia interests is expected to be fully received in the next 12 months, and this could lead to an additional distribution to shareholders in H2/16. The Congolese authorities have agreed to a 12 month extension to the previous March 2016 Marine XI licence expiry. Two long serving Non-Executive Directors, John Norton and Bob Cathery, are not seeking reappointment at the upcoming AGM.
SOCO will be presenting on Friday in London as part of our Winter Lunch Series.
"Therefore, the board will decide on the level of future cash returns in light of the oil price, cash flow generation from Vietnam and expected capital expenditure at the time."
That final sentence hints at an impending dividend cut. Ughhh, the last thing I need on top of negative capital return. Dividends were what made SOCO a nice one to hold in spite of the declining price.
With production averaging 12 thousand barrels of oil equivalent per day (kboepd) in the first ten months of the year, Soco has increased guidance for 2015 from 11-12 kbopd to 11.8-12 kboepd, thanks to the early start-up of the H5 wellhead platform of the Te Giac Trang (TGT) field in the Cuu Long basin.
TGT has averaged 34kboepd, with Soco's 30.5% stake worth 10.2kboepd. One month ahead of schedule and under budget, H5 started pumping in August and is currently producing from five wells. Unfortunately, production of 9kbopd is behind both expectations and an initial 11-12kbopd flow rate, although bosses think unperforated intervals will increase that.
Soco's updated reserve assessment report has been completed, too, and will be presented to the Vietnamese authorities soon. A new field development plan (FDP) should be submitted in the first quarter of 2016. Until it has been approved, no firm production target has been agreed, although preliminary is just 10-11.5kbopd.
(click to enlarge)
"The delay to the original Q4 2015 schedule reflects the complex architecture of the revised geoscience model and integrated approach to field development and reservoir management," explained the group. "The scope of the development programme in the updated FDP is expected to include additional wells and facilities options to increase water handling capacity."
Issues with reservoir pressure maintenance at the Ca Ngu Vang field has forced a cut in 2016 forecasts to 25% below 2015 levels. Production reached 1.8kboepd from January-October thanks to higher-than-expected uptime.
Budget-wise, the group still expects capital investment to reach around $90 million (£59 million) in 2015, although some of the $25-$30 million cost of the Mer Profonde Sud in Congo could be also be booked before the year end if drilling begins ahead of schedule, currently pencilled in for the first quarter of 2016.
Soco is still working with PetroVietnam and SOVICO Holdings to decide a Production Sharing Agreement over the Blocks 125-126 offshore Vietnam. As it looks to maximise value from its Africa portfolio, management is looking forward to the $52.7 million earn-out payment from the sale of its Mongolia interest in 2005. But how much of this shareholders will see is uncertain.
"The company remains committed to its long-term strategy of targeting cash returns to shareholders and pursuing future growth; at the same time, with the current oil price uncertainty and potential capital commitments, SOCO believes maintaining its balance sheet and strategic flexibility is important to deliver long-term value and growth to shareholders," said Soco Wednesday.
"Therefore, the board will decide on the level of future cash returns in light of the oil price, cash flow generation from Vietnam and expected capital expenditure at the time."
"A broker warned just three weeks ago that things could only get worse for the oil exploration sector. They were right. Fear of the unknown has just wiped millions from LSE:SIA:Soco's market value after the Vietnam- and Africa-focused firm ..."
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