PeterGray wrote:Sentiment has turned against, partly obviously the change in PoO, and the reticence of the partners to spend which led to a lot of reserves being moved from 2P to 2C - as there were no current plans to drill the wells to extract them.
Since then the PoO has risen and a capex program been agreed, and partly executed, which should see production increasing, and could in time lead to some of the 2Cs becoming 2P again. Alongside that the SP has continued downwards!
I continue to see Soco as undervalued at these prices, based on the existing VN production alone. In addition they have just finalised the remaining 3 25 year production licences in block XI offshore Congo (where they hold 40% and are operator), for which I think no one is assigning any value. They are not vast amounts of oil, but are exploitable, ENI is developing in the adjacent block. It's likely the whole interest will sold off which if it happens will crystalise a chunk of value no one is paying much attention to.
Clearly it can go further down, and until there is some firm news that is a real possibility, but I don't see the current price as a realistic valuation.
Peter
I agree with Peter. Unlike him, I have about 70% of my max holding (which was when the shares were about 60p in today's money)......but of course since then the company has distributed close to 90p per share, so GoSeigen's premise isn't wholly accurate. ie....ex distributions the absolute (and very brief) peak of the share price was at around £5 in todays terms.
But it is right to observe that the company has changed little over that period at least in terms of oil in place - save for the ticking clock of production. What has changed is the following:
1) oil price now c.$60 compared to over $100
2) As a consequence of that (and the haitus in agreeing the full field development plan for TGT) reserves were reclassified nearly three years ago, downgrading a chunk to "resources". They haven't disappeared - and we now have an agreed plan for TGT.....and, before Christmas, we will have an agreed budget for 2018. As Peter says, that may facilitate a reclassification of reserves (though it might also facilitate a deal of some sort before that happens).
3) African exploration has been largely discontinued. The market rarely gave much credit at all for anything in Africa, but it is noteworthy that there are now a clutch of development licences held on Marine XI in Congo B (following the successful Lidongo well) and those are available to be monetised in an asset swap.
4) $50mn was finally received from the 2005 deal to exit Mongolia.
As for the implied lack of change on the board, that plainly isn't right. By SOCO standards, 2017 has been a year of radical change at board level. New team, new deputy Chair, retirement of one of the two founders (and perhaps the other quite soon?) etc. I suspect that more concrete evidence of change will emerge shortly.
The strategy has been reset as one aimed at cash-generative growth. The dividend will continue to be paid (amply covered out of cashflow).... probably at a rate of 4-5p per share pa (though not necessarily in a conventional dividend pattern of payments). There will be deals to bring in new assets (most likely in Asia) and to dispose of non-core assets (viz Africa).
It should be noted that over 20p per share is represented by cash - so I'm afraid that trolling the idea of a 50p target is plainly nonsense. I'm expecting the shares to rerate by at least 20% within the month, as the company will be providing an update once the 2018 budget meeting for TGT has occurred. The market has simply been wrong to take the share price down from the 120-130p area, and I expect that will become clear in the next 10-14 days.