Soco Vietnam Oil Company Valuation
Following this post on the fool, emptyend lays out all the key parameters required to calculate the intrinsic value of Soco International(my largest holding).
I thought I would give this a go and keep it as an example of how to calculate the NAV of an oil exploration company
It is anticipated that Soco would like to sell it’s vietnam assets once the appraisal areas have been confirmed. These assets are located very close to China and it wouldn’t surprise me if it was sold to the Chinese.
So, my calculation:
| Current Vietnam reserves | = | 126 million barrels (2P) |
| Current Thialand reserves | = | 7 million barrels (2P) |
| Unproved TDG barrels | = | Est. 300million x 10% (as not prooved) |
| Price per 2P barrel | = | $25 (previously told range between $20-$30 |
| Exchange rate ($:£) | = | 1.5 |
| Shares in issue | = | 75million |
| Total oil | = | 126 + 7 + (300 * 10%) = 163 million barrels. |
| Total oil cost | = | 163 million barrels * $25 = $ 4075 million |
| Total in pounds | = | $4075million/1.5 = £ 2717 million |
| Estimated value per share | = | £ 2717 million / 75 million shares = £36 |
This ignores cash, around £3.50 per share by my calculations (using the data in emptyend’s post on the value of other Soco assets). It also ignores the highly sought after African acerage Soco owns.
So, what price can you buy Soco for?…..Currently around £12.50 - As things stand, Mr Market is offering you the chance to triple your money.
It’s worth noting that the calculation is very sensitive to USD/GBP exchange rate. At a rate of 2 USD:GBP the above calculation comes out at £27.
Fingers crossed the sale goes through as expected.
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