Soco International Seen as the Next Takeover Target for Asian Energy Companies

on Nov 19, 2012

With state-owned Asian companies recently expressing interest in western oil and gas producers, on 19 November 2012, Bloomberg reported that the next takeover target might be the London-listed oil and gas exploration and production company Soco International Plc (LON:SIA). Soco, whose shares jumped to a 14-month high following the interest of Indonesia’s state oil and gas monopoly Pertamina in Coastal Energy Co (TSE:CEN, LON:CEO), recently reported that its production for the first three quarters of 2012 was up by about 400 percent, relative to the same period in 2011.

**Soco Attractive for State-Owned Asian Companies**
Bloomberg quotes Jefferies Group Inc (NYSE:JEF) as saying that the London-based Soco with its largest production project off the coast of Vietnam is attractive for state-owned Asian energy firms since it produces oil in Southeast Asia and generates cash, with these attributes recently prompting the Indonesia-owned Pertamina to express interest in the Toronto-listed Coastal Energy.

For acquirers, “there does seem to be a bias towards companies that have low exploration risk, that have assets where reserves are proven and ideally where there is also some production in play,” notes Will Riley from Guinness Atkinson, as quoted by Bloomberg. “Soco is in good shape from that perspective.” And while experts at Guinness Atkinson note that potential buyers interested in Soco may include state-owned companies such as Petrovietnam, Royal Bank of Canada (TSE:RY) points out that independent producers such as the Calgary-based oil and gas company Talisman Energy Inc (TSE:TLM) could also be interested in Soco.

**Soco’s Shares Up after Pertamina’s Coastal Energy Bid**
On November 7, Bloomberg reported that Soco’s shares jumped to a 14-month high after Pertamina expressed interest in buying the Toronto-listed oil and gas producer Coastal Energy. Soco rose as much as 4.1 percent to 375 pence in London trading, the highest level since September 2011.
!m[The London-Listed Oil Producer’s Shares Climb After Pertamina’s Bid For Coastal Energy](/uploads/story/847/thumbs/pic1_inline.png)Pertamina is not the only state-owned Asian company expressing an interest in acquiring a western oil and gas producer, with some of the more notable examples including CNOOC Ltd’s (HKG:0883, NYSE:CEO) offer for the Calgary-based Nexen (TSE:NXY) and the recently renewed offer of the Malaysian state oil company Petronas for the Toronto-listed gas producer Progress Energy Resources (TSE:PRQ). “We expect the energy supply deficit to deteriorate further” in Asia, notes Stuart Joyner, an analyst at Investec Securities Ltd, as quoted by Bloomberg.

**Quarterly Results**
Soco, which has interests in Vietnam, as well as in several countries in Africa, published its quarterly results on November 1, reporting that its production for the three quarters ended September 30 rose by approximately 400 percent relative to the same period in 2011, and averaged 13,755 barrels of oil equivalent per day. The company also reported that it acquired the 20 percent out-standing non-controlling interest in Soco Vietnam Ltd.
Bloomberg quotes Paul Mumford, a money manager at Cavendish Asset Management Ltd, as saying that Soco’s cash flow and improving results in Vietnam present potential buyers with the chance to gain access to oil reserves without the risk which comes with searching for them. “In the case of Soco, much of the hard work has already been done.”


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