The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
What makes you think they stopped drilling
We're not going bust.
The share price bears no relationship to the internal financing of the company, especially with a cash-generative company like ours. The fact that we have stopped drilling for the time being means we also have a huge cash buffer in place to protect us.
Important to take a stand at times. Have retained a position, e.g. in iTE and PTAL, for obvious reasons but exited the likes of ENQ, JSE, KIST and SQZ after giving them a good run.
SOUC has some very good acreage Jefferson-Davis an CottonValley somewhere down the track.
Humble pie for this fella. I'll wait on production update and LNG export news plus summer demand before any further comment. The whole sector has been blitzed.
Shall write to SOUC by Friday.
I don’t think it will collapse ( I hope ), we are just tracking the oil and gas price lower. We will end up pumping more gas but generating less revenue. This is a low volume share, just a few sells can cause the share price to drop significantly. Buy an AIM share and it’s a gamble.
Are we seeing this company go bust? And should we get out now or risk losing everything?
Pausing of any acquisitions is a good thing at this time of year. I'll be adding here earlier than expected with a view that the cash could provide support. AIM is a brutal wild west due to low liquidity and high PI interest so you always need to buy on muti year lows.
Sadly I am not Viable haha. I worked as IM for 5 years and then have been an IFA for the past 3 years. I've followed a concentrated value approach into small cap cyclicals (mainly O&G) for the last 7 years.
I use Sharescope Gold (with no level 2 access) for screening...
SOUC current price movements are definitely painful atm and slightly make the stomach churn... however cyclical lows in gas won't last forever (they never do) and the long term demand picture for LNG remains strong with global undersupply projected from 2025 onwards by the likes of Shell (their Gas Outlook), McKinsey etc.
LNG developers signed nearly 34 million tons per annum (MTPA) of long-term LNG contracts in 2022, representing a 68% increase over the last record set in 2021. Most of these contracts anchor new or expanded liquefaction projects that aim to reach financial investment decisions in late 2022 and 2023 (Deloitte - 2023 Outlook for Oil & Gas).
The volatility of these kind of stocks is definitely not for everyone and tests even those with the most ice-cold detachment from investor emotions and behaviours.
GLA
Hows things Viable
I think for me, anyone with an investment horizon that extends over 1 year can clearly see this company is in a good position to take advantage of the global LNG export market. In Q3 2022, SOUC had one of the lowest all-in per unit operating costs of $0.64/Mcfe and expects to continue receive a premium to Nymex for its gas in 2023, albeit at a lot lower margins for the time being.
The gas price this year is a major frustration. From the presentation, I know that assuming a GEN 2 type curve, the wells at Gwinville are projected to generate an IRR of 33% @ $4 HH. GEN 3+ tech is expected to generate returns significantly better than that, however in the current climate they need to wait until gas is at least $3.25 to make the economics worthwhile... I therefore think delaying capex is sensible.
I would really like management to execute some M&A, taking advantage of the low gas price, their significant well inventory data and healthy cash balance. I think patience is key as deals often take a long time to materialise and negotiations to complete.
That being said, with Southern being valued at near cash, we are definitely more of a takeover target in the short term. An approach would certainly act as a catalyst but I would hope it be rejected in light of the company's long term potential and positioning.
I would love to hear others views. I think its a shame HH gas is struggling at the moment but I do think there are catalysts which should help rerate it as we approach summer...
Our market cap of £40M is not much higher than the amount of cash we probably have, so that should provide a support to the share price. And just because we may not be drilling new wells does not mean we are not currently generating revenue and profit from our existing ones.
The huge growth is on basis of new operating wells and acquisitions.. both of which don't look to be materialising
Souc q4 and year end results due mid April hopefully operation update too.
The management team anticipates growing production from 3,400 BOE per day of currently to over 25,000 BOE per day in the next 4 years.
Malcy bucket list:
"Plans to develop the portfolio makes 2023 a truly exciting prospect and I have what seems like a monster target price of 260p a share in the book."
Short term drift and lower gas price, fear not Defo hold long for decent rewards in the meantime great top up price ;) gla
I'm beginning to think this could quickly drop to pennies and never recover :(
Don't bet on it with the banking system in chaos everything is horribly down atm o&g will br cheaper still in the next few days imo
Excellent investment opportunity at todays price with news imminent :
Production will be starting to ramp up in February and March and continue to grow for years to come, with the strategy of drilling and average of 15 wells per year for the next few years from their strong financial situation and organic funds flow growth. The management team anticipates growing production from 3,400 BOE per day of currently to over 25,000 BOE per day in the next 4 years.
In addition to the growth of the Company’s Mississippi assets, there is still keen interest in growing through future acquisitions, possibly in Louisiana and Texas, as the Citibank formations, Selma Chalk formations, and Cotton Valley formations extend along trend in these jurisdictions. We wrap
"looks like there's a solid buyer at this price"
Yes, 68% of the last 3 days' volume was by one man in the jungle.
Thanks Dan, be nice to receive a RNS to back it up
Massive selling volume all absorbed at no change in price today so looks like there's a solid buyer at this price. I personally think this is massively undervalued at these levels. Even if the new wells failed to add to production the company produces >3,000 boe/d and given cost of production will be making solid double digit profits next year at depressed Henry Hub gas prices hence trading at a low single digit P/E with a net cash position. No brainer.
This share is depressing.. only way ATM seems to be down
'How Gas From Texas Becomes Cooking Fuel in France' - WSJ 03.03.2023
The U.S. currently hosts seven multibillion-dollar liquefaction plants with enough capacity to export more than 13 billion cubic feet of gas a day—more than a 10th of U.S. production. By 2030, new plants coming online are expected to push that capacity to around 23 billion cubic feet, according to S&P Global, requiring many more new gas wells.....
A mild winter and gargantuan imports of U.S. LNG helped restore gas storage back to healthy levels. But potential outages in gas-exporting Norway, an economic rebound in China, and renewed competition for cargoes from southeast Asia if LNG prices keep falling could deplete Europe’s inventories, said Eugene Kim, a research director at energy-consulting firm Wood Mackenzie. In that scenario, “the onus to refill will be even higher,” he said.
Drill results:
Results from the 18-10 pad are expected to be announced this month. The pad is targeting multi-zone potential in the Upper Selma Chalk along-side the first Gen-3 technology well drilled into the City Bank, where SOU does not have any booked reserves despite significant historical production from Vt wells. As a result, the pad could provide material reserve adds if proven successful. Remember, SOU employed directional drilling technology with this pad, which gives us confidence in the potential to see early indications of improvements relative to the 19-3 pad.
M&A Potential:
M&A now more important with management believing the environment is ripe for acquisitions given lower gas prices that all else equal increases the willingness to sell. Management has built an incredible database (~25k wells) and knowledge and experience around its focus area...
We expect Company to target purchase of assets at close to PDP value, with the emphasis on acquiring de-risked reservoirs where it can deploy Gen-3 tech. For context, the Company’s cash balance could support the acquisition of ~2,000 boe/d (2-3x; 2x its base).
Capex Outlook:
Management has laid out a US$78.1 MM capital budget for 1H23 which includes 13 horizontal wells targeting multi-zone potential in the Upper/Lower Selma Chalk and City Bank formation. However, with the precipitous drop in gas prices, we would not be surprised if the Company elects to defer capital until a gas price recovery. We are of the view that showing a degree of capital discipline to changing natural gas conditions and preserving undeveloped inventory for better pricing is prudent, particularly given the vast opportunity set to incrementally execute accretive M&A in the US.
Pure-play exposure to premium-priced NA natural gas prices:
SOU’s production base is >90% natural gas, with 100% of its natural gas sales fetching floating prices that approximate HHUB in 2023, which is attracting a premium over its Canadian equivalent. Moreover, SOU’s hedging strategy offers investors some of the best cash flow torque to rising gas prices, with every $1/MMbtu move in HHUB equating to a +22% increase in CFPS.
SOU provides one of the best 23’ debt-adjusted production and CFPS growth in the sector. Importantly, this can be achieved even when assuming Gen-2 well results.
Upside to 5yr development outlook:
Management is targeting organic production of ~17 mboe/d by ’26 by drilling 15 wells per year. This maps to ~60% CAGR from 2022-2026 and supports cash flow growth of ~50% (CAGR) at strip... However based on older Gen-2 results; assumes development of the Selma Chalk only (not inc. City Bank); deeper prospective zones in the Hosston and Cotton Valley remain untapped; Co. could actually drill up to 21 wells per year.
Catalysts. 1) Well results from 18-10 3-well pad; 2) Gen-3+ type curve (1Q23) – important for business planning and formal Street guidance; 3) Reserve report (March 2023); 4) M&A poten
50p and I'm out .. cmon news
Very odd gas down over 14% and the sp up nearly six% I guess news will be very soon
And this podcast from January;
http://www.kereport.com/2023/01/17/southern-energy-introduction-to-a-growth-oriented-us-natural-gas-producer/
Highlights
Regular newsflow expected Feb through July. Drilling and completions.
Still getting Premium to nymex through Transco 4 location.
Sees current SP as misvalued and expects rerating this year.