FoxDavies Daily Monitor - SOCO International, Bahamas Petroleum Company and Andes Energia

Monday, March 11, 2013

SOCO International (SIA LN, MCap: £1251M, 386p) - Portfolio and Cash Make for Upbeat Outlook: Today's full year announcement from SOCO has underlined fact that the Company is close to crossing that line where its future is constrained by the opportunities in its hopper, opposed to its resources to pursue them. With $260mm of cash, and in excess of $300mm of operating cash flow, the Company's fiscal resources are robust. Its portfolio has been adjusted and now contains an improving balance between development, appraisal and exploration drilling. We continue to believe that SOCO's portfolio and management make it, along with a handful of other names, a must have for oil and gas investors.
In this news:

  • Record revenue of $621.6mm (2011: $234.1mm), a rise of 166%
  • 134% increase in after tax profits from continuing operations to $207.0mm (2011: $88.6mm)
  • 271% increase in operating cash flow to $334.8mm (2011: $90.2mm)
  • Cash, cash equivalents and liquid investments at 31 December 2012 were $258.5mm
  • (8 March 2013: $320mm)
  • Approximately $34mm of ordinary shares and outstanding convertible bonds purchased in 2012.

Bahamas Petroleum Company (BPC LN, MCap: £38M, 6.4p) - A Step Forward, But No Solution: That the Bahamian Government will allow operators to drill in its waters is good news and permits a certain element of forward planning, but any driller would be mad to contemplate executing a $50 - 100mm campaign without knowing that they could valorise their investment. To do so would leave any company open to leverage and weaken any negotiating position with the Government. While this is good news, a green light to development following the referendum will be essential before a final investment decision can be made.
In this news:

  • Exploration drilling to establish commercial viability ahead of referendum process on the future of oil development, allowing the people of The Bahamas the data from which to make an informed decision
  • Initial drill location containing significant prospectivity at multiple stratigraphic horizons further derisked based upon 3D seismic data interpretation
  • Front end engineering design (FEED) and initial well plan for the drilling of a deep exploration well has been completed
  • Active farm-out discussions given further impetus by political clarity on referendum.

Andes Energia (AEN LN, MCap: £46M, 23.2p) - Solid Acquisition, Shame About the Address: Management continues to focus the Company away from its power generation roots, and today's announcement of its most recent acquisition sets the course forward. As ever, however, the only problem is the address of this acreage and acquisition. Argentina's government is fast approaching a point at which its economic policies and limited headroom for manoeuvre given that is can raise limited capital in the international markets, start forcing it to make even bolder nationalistic steps. The first such opportunity could follow the Falklands referendum result, expected by the end of the week. After that, and as it seeks every more populist moves, we are positive it won't be long before the government look at nationalising the little remaining private enterprise that keeps the country hanging on.
In this news:

  • 1.2mm bbls of net 2P reserves, 39mm bbls of net contingent resources, 60mm bbls of net recoverable shale oil resources, and 1.9mm of net acreage
  • 6.75% working interest in 2 development blocks in Neuquen
  • 10% carried interest in 3 exploration blocks and a 5% carried interest in 4 exploration blocks in Mendoza
  • 40% working interest in 1 exploration block and a 15% working interest in 2 exploration blocks in Salta
  • 2% carried interest in 6 exploration blocks and a 20% working interest in 1 exploration block in Chubut
  • 2% working interest in 1 exploration block in Rio Negro.

Longreach Oil & Gas (LOI CN, MCap:C$38M, C$0.72) - Time to Drill: Today's financing update from the Company underlines the prospectivity of its acreage position within Morocco. With the recent deal now completed, there are all the right ingredients necessary to leverage off of its acreage. All that is missing is the geological success, and you can only fix that at the drill bit. So, on that basis, it's time to drill.

Contribution by
from FoxDavies Capital

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This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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