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"What we’ve experienced are the kind of problems that can easily occur when you are drilling wells - we’re just unlucky to have experienced them all on one well," says Soco International's finance director Roger Cagle of his company’s frustrations on its ‘E’ prospect in the Cuu Long basin offshore of Vietnam. Success on ‘E’ would crown Soco’s successful Cuu Long exploration campaign. But through 2007 the exploration well suffered successive problems with a newly-built drilling rig and then extremely high pressures. Nevertheless, ‘E’ should now be completed with a better rig by June, at which point Soco will know whether to include it in production plans for its existing ‘TGT’ discoveries.
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Also by June-July production should begin at Soco’s earlier ‘CNV’ discoveries in the same basin, with around 5,000 barrels of oil-equivalent per day (boepd) net attributable to Soco once output is ramped up. This contribution plus a small share in a Thai offshore oilfield entering production soon should roughly match the 6,300 boepd working interest production Soco currently claims from Yemen, but which it will lose once the $465m (£232m) sale of these assets to Chinese state-owned Sinochem is approved. However, better Vietnamese contract entitlements should boost Soco's cashflow and the Yemen proceeds will in turn fund TGT into production, with or without ‘E’, by 2010 - transforming Soco into a 50,000 boepd producer.
| SOCO INTERNATIONAL (SIA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,843p | MARKET VALUE: | £1,343m | |
| TOUCH: | 1,839-1,843p | 12-MONTH HIGH: | 2,395p | LOW: 1,470p |
| DIVIDEND YIELD: | nil | PE RATIO: | 81 | |
| NET ASSET VALUE: | 451¢ * | NET DEBT: | 47% ** | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2004 | 29.4 | 14.9 | 11.8 | nil |
| 2005 | 57.2 | 33.7 | 29.0 | nil |
| 2006 | 76.5 | 48.2 | 41.3 | nil |
| 2007 | 98.4 | 57.1 | 45.8 | nil |
| % change | +29 | +18 | +11 | - |
*Includes intangibles of $247.2m, or 339¢ per share **Including $224m of outstanding convertible bonds £1 = $2.00 |
||||
Shares in Soco have fallen back sharply from their all-time high last autumn when we rated them high enough. But we still perceive excessive hope value for ‘E’ in the share price, so the risk still looks to the downside. High enough.
Last IC view: High enough, 2164p, 5 September 2007
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
