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.
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