Final Results

Soco International PLC 22 March 2001 SOCO International plc ('SOCO' or 'the Company') Preliminary Results for the year ended 31 December 2000 SOCO is an international oil and gas exploration and production company, headquartered in London, with operations in Mongolia, Yemen, European Russia, Thailand, Tunisia, Vietnam and North Korea. SOCO today announces record preliminary results for the year ended 31 December 2000. HIGHLIGHTS * Turnover increased 93%54 to £45.9 million (1999: £23.8 million). * Record net profit, up 137% to £17.6 million from £7.4 million in 1999. * Production increased more than 22% to 8,810 BOPD (1999: 7,205 BOPD), primarily due to the continuing development programme in Yemen. * Further strengthening of balance sheet: net cash of £33.0 million versus £27.2 million at year end 1999. * Award of Block 9-2 offshore Vietnam. * Discoveries on three of four exploration wells drilled in Mongolia. * Near completion of the Russian pipeline, which will lead to a major increase in production capability. Ed Story, Chief Executive of SOCO, said: 'We are very pleased with the financial and operating results for 2000. We have further strengthened our balance sheet during a period where we conducted a very active exploration and development programme. We have continued to increase production during a period of high prices while retaining capacity for sustained future growth. 'We remain committed to achieving a balanced portfolio which we will continue to exploit in a unique fashion that is not overly-dependent on the oil price. We are confident that there will be material strides in building shareholder value this year.' 22 March 2001 ENQUIRIES: SOCO International plc Tel: 020 7457 2020 (today) Ed Story, Chief Executive Tel: 020 7399 3300 (thereafter) Roger Cagle, Chief Financial Officer College Hill Tel: 020 7457 2020 James Henderson Peter Brookes SOCO International plc Preliminary Results for the year ended 31 December 2000 CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT Results The year 2000 was a record year for SOCO, not only in terms of profitability but also in terms of production. Profit before taxation rose to £24.1 million from £8.3 million in the previous year whilst Group production rose from 7,205 barrels of oil per day (BOPD) last year to 8,810 BOPD in 2000, primarily due to the reinvestment programme in the Yemen development project. Cash Position At the year end 2000 cash and cash equivalents exceeded £38 million, an increase of more than 30% over balances held a year ago, despite conducting a very active exploration and drilling programme. Dividend Even with the strength of the balance sheet, the Directors believe that in the near to intermediate term the interests of the Company's shareholders can best be served by conserving funds to finance further growth. Accordingly, the Board has decided not to declare a dividend. Operational Highlights Our focus for 2000 was two fold: to capitalise on the strength of the oil price by maximising production as long as it did not prove detrimental to the long term value of the project and to continue to progress initiatives towards securing a significant, stable reserve base to provide a low cost source of cash flow to finance future activities. Relative to the latter goal, the Group neared completion on its northern pipeline in Russia, thus laying the groundwork for a significant increase in production. SOCO also signed an additional highly prospective block offshore Vietnam in an area of high industry interest and advanced negotiations for entry into other areas with the potential of securing development and exploitation opportunities. The Group enjoyed significant gains in year on year production net to its working interest, resulting from the reinvestment programme in its Yemen development project. As year end production levels reached approximately 9,400 BOPD, we have neared the maximum level from our current Yemen and Tunisia development projects but have room for considerable growth in European Russia. Our emphasis going forward is to strengthen the producing reserve base. Unlike the prior year during which there was little exploratory activity, the Company was very active in 2000 participating in the drilling of seven exploration wells and signing an additional licence offshore Vietnam on Block 9-2. In addition we conducted seismic programmes in Vietnam over Block 16-1 and in Mongolia over Contract Areas 21 and 22. Our Hoang Long venture in Vietnam completed an extensive joint 3D seismic programme on Block 16-1 in co-operation with the interest owners of adjacent Block 16-2. The data will be processed and interpreted in preparation for a drilling programme to commence in early 2002. As indicated last year, the eight well Mongolia drilling programme that began in April of 2000 is a significant determinant as to the future of our project there. While we await the production test results of last year's efforts, we expect to conclude in 2001 the eight well drilling programme that began last year. In December, a majority owned Company subsidiary, as sole participant with Petrovietnam, the Vietnamese national oil company, was awarded Block 9-2 in the Cuu Long Basin offshore Vietnam. Our subsidiary's 50 per cent interest in Block 9-2 combined with its 30 per cent interest in Block 16-1 gives us a significant position in what is one of the most active exploration plays in Southeast Asia. Block 9-2 is situated in the central and eastern portions of the Cuu Long Basin off the coast of Vietnam in water depths ranging between 40 and 60 metres and covers an area of approximately 1,370 square kilometres. In addition to its proximity to the Bach Ho field that is currently producing in excess of 250,000 BOPD, Block 9-2 is bordered to the north by the Rang Dong field, which is producing approximately 40,000 BOPD. Industry interest in the area was heightened with the October 2000 announcement by a major oil company of the most prolific discovery well in the Basin to date, which tested in excess of 17,000 BOPD. Russia Permtex, joint-owned by SOCO and Russian partner LUKOIL Perm, is on the verge of a step change in its development programme as commissioning of the pipeline and supporting infrastructure is scheduled for the first half of 2001, thus leading to a major increase in production capability. At year end an approximate five kilometre section of the 35 kilometre pipeline remained incomplete primarily due to unseasonably warm weather in the early part of winter, which made construction in the marshy regions of the Contract Area impractical. The pipeline was completed during the first two months of 2001. Work continues on the pumping stations and ancillary facilities. The development drilling programme in the Logovskoye field, the southern most field in the contract area and its largest producer of crude oil, was completed in the second half of the year. Five wells were drilled during the year and two more that were in progress over 1999 year end were completed and put on production. In all there are 30 producing wells and five injector wells in the field. Development drilling and recompletions in the Ozernoye field will be the thrust of the 2001 programme as Permtex ramps up production. Yemen Excellent results followed completion of the Phase II drilling programme as the East Shabwa Development Area (East Shabwa) hit a record gross production level exceeding 38,000 BOPD. A development programme was active throughout 2000 resulting in the drilling of five producing wells. During the year, production from East Shabwa averaged approximately 28,600 BOPD (SOCO's working interest approximately 4,800 BOPD) from the Kharir, Atuf NW and Wadi Taribah fields. SOCO's share of the crude produced is sold to the spot market. A major seismic acquisition programme began in the fourth quarter with both 2D and 3D seismic. After processing and interpretation of the seismic, the East Shabwa partners expect to resume drilling late in the year. Tunisia The Didon field reached record production levels in 2000 with no indications of a production decline in the near term. During the year production averaged approximately 5,800 BOPD (1,300 BOPD to the Group's working interest) compared to a daily average of 4,300 BOPD (950 BOPD to SOCO) in the previous year. Equipment modifications planned for 2001 are expected to allow the well to reach new daily production records. Currently, a technical evaluation and re-mapping of the structure is underway to assess future development alternatives. Mongolia Our operated exploratory programme in Mongolia is encouraging as three of four wells drilled during the year in Contract Area 19 were fracture stimulated for production testing. Unfortunately the production and processing facilities in Mongolia were damaged by fire in October and the outcome of production testing is awaiting the construction of new storage and processing facilities, which are expected to be operational in the second quarter of 2001. Seismic acquisition continued with 2D and 3D programmes conducted on Contract Areas 21 and 22 in preparation for a multi-well programme in 2001. The fifth well of the eight well drilling contract executed in 1999 with Huabei Oilfield Services, a Chinese company providing drilling services, is expected to spud in April. Further wells are expected to be drilled on Contract Area 21 where previous drilling has located extremely thick sections of high quality reservoir rock. Thailand Potential development of the Pornsiri field and additional exploration could follow the possible introduction of a farm-in candidate. As was reported in the 2000 Interim Report, reinterpretation of previously acquired seismic on Block B8/38 in Thailand allowed SOCO to map some interesting prospects. As a result, two structures were drilled, but both were plugged and abandoned in February without encountering commercial quantities of hydrocarbons. At least two other interesting prospects have been identified on Block B8/38 but further evaluation is required to determine suitability for drilling. Vietnam SOCO signed the Block 9-2 award with Petrovietnam in December. With this award, the Group now enjoys an outstanding acreage position with two Blocks combined to border the Bach Ho field to the north, east and west. On Block 16-1, the Hoang Long Joint Operating Company commenced operations and awarded a seismic programme tender in July. The seismic survey which concluded in October, was conducted as a joint 3D programme with the contracting parties of Block 16-2. It is anticipated that a back to back drilling programme will commence early in 2002 which will test structures on Block 9-2 and Block 16-1. SOCO should be able to realise significant cost savings by combining drilling programmes. The Board At the Annual General Meeting scheduled for May we will be asking to increase the number of Directors. This will allow us to strengthen the Board with people who are in a position to help us further grow the business. Summary The past year has been one of steady progress with continued growth in production coupled with an expansion of our exploration portfolio. In our business, properly focused production growth ensures success throughout the cyclical variations in oil price. A key priority for SOCO going forward is to introduce new exploration and development opportunities. Much progress has been made towards further expanding the Group's asset base and the realisation of such opportunities appears to be near. The Group is confident that the result will validate the process. Exploration offers a further opportunity for exponential growth. With our core production base in areas of relatively low cost and our aim to expand in these areas, combined with our exploratory acreage position in Vietnam and Mongolia, the Company is well placed to meet the challenges of the future. Patrick Maugein Ed Story Chairman Chief Executive 22 March 2001 SOCO International plc Preliminary Results for the year ended 31 December 2000 Consolidated Profit and Loss Account 2000 1999 £000's £000's Turnover Continuing operations 45,852 19,800 Discontinued operations - 4,002 45,852 23,802 Cost of sales (21,830) (16,310) Gross profit 24,022 7,492 Administrative expenses (1,973) (1,876) Operating profit (loss) Continuing operations 22,049 5,680 Discontinued operations - (64) 22,049 5,616 Profit on sale of discontinued operations - 1,820 Profit on ordinary activities before finance charges 22,049 7,436 Investment income 2,102 998 Interest payable and similar charges (62) (151) Profit on ordinary activities before taxation 24,089 8,283 Tax on profit on ordinary activities (6,524) (869) Profit for the financial year 17,565 7,414 Earnings per share Basic 25.6p 12.5p Diluted 24.3p 12.4p Consolidated Statement of Total Recognised Gains and Losses 2000 1999 £000's £000's Profit for the financial year 17,565 7,414 Unrealised currency translation differences 7,372 1,951 Total recognised gains relating to the year 24,937 9,365 SOCO International plc Preliminary Results for the year ended 31 December 2000 Balance Sheet Group Company 2000 1999 2000 1999 £000's £000's £000's £000's Fixed assets Tangible assets 94,064 70,051 133 158 Investments 368 368 49,355 49,355 94,432 70,419 49,488 49,513 Current assets Stocks 1,199 1,150 - - Debtors 7,869 4,834 229 927 Investments 22,252 20,639 8,977 9,508 Cash at bank and in hand 15,795 8,152 2,174 1,116 47,115 34,775 11,380 11,551 Creditors: Amounts falling due (12,668) (5,677) (672) (512) within one year Net current assets 34,447 29,098 10,708 11,039 Total assets less current 128,879 99,517 60,196 60,552 liabilities Creditors: Amount falling due after (5,021) (1,551) - - more than one year Provisions for liabilities and (1,040) (651) - - charges Minority interests - (175) - - Net assets 122,818 97,140 60,196 60,552 Capital and reserves Called-up equity share capital 14,026 13,828 14,026 13,828 Share premium account 38,910 38,367 38,910 38,367 Other reserves 34,961 34,961 - - Profit and loss account 34,921 9,984 7,260 8,357 Shareholders' funds 122,818 97,140 60,196 60,552 SOCO International plc Preliminary Results for the year ended 31 December 2000 Consolidated Cash Flow Statement 2000 1999 £000's £000's Net cash inflow from operating 30,902 9,175 activities Returns on investments and servicing of finance Interest received 1,947 778 Interest paid and similar charges (290) (25) 1,657 753 Taxation paid (6,794) (571) Capital expenditure and financial investment Purchase of tangible fixed assets (22,814) (7,589) Sale of tangible fixed assets - 8 (22,814) (7,581) Acquisitions and disposals Purchase of subsidiary undertaking - (427) Cash acquired with subsidiary - 8,911 undertaking Sale of business 507 7,681 507 16,165 Cash inflow before management of liquid resources and financing 3,458 17,941 Management of liquid resources Increase in cash placed on short (884) (13,028) term deposit Financing Issue of ordinary share capital 741 7 Issue of preference shares to 8 12 minority interests Increase in bank loan due after 3,338 1,550 more than one year 4,087 1,569 Increase in cash in the year 6,661 6,482 SOCO International plc Preliminary Results for the year ended 31 December 2000 Notes to the accounts 1. Basis of accounting The preliminary accounts have been prepared under the historical cost convention and in accordance with applicable accounting standards and on the same basis as the statutory accounts for the year ended 31 December 1999. 2. Basis of preparation The financial information presented above does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. An audit report has not yet been issued on the accounts for the year ended 31 December 2000, nor have they been delivered to the Registrar of Companies. The comparative financial information for the year ended 31 December 1999 has been derived from the statutory accounts from that year. Those statutory accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. 3. Dividend The Directors are not recommending the payment of a dividend. 4. Tax on profit on ordinary activities The tax charge comprises: 2000 1999 £000's £000's UK Corporation tax at 30% (1999-30.25%) - 91 Current overseas taxation 6,592 784 Deferred overseas taxation (68) (6) 6,524 869 Deferred taxation includes recognition of a net deferred tax charge of £601,000 (1999 - £230,000) in respect of the Tunisian interest and net deferred tax credits of £395,000 (1999 - £236,000) in respect of the Yemen interest and £274,000 (1999 - nil) in respect of the Russian interest. The overseas deferred tax credits arise primarily on the net foreign tax credits carried forward and fixed asset timing differences. There is no unprovided deferred taxation at either balance sheet date. 5. Earnings per share The calculation of the basic earnings per share is based on the profit for the financial year and on 68,591,969 (1999 - 59,387,904) ordinary shares, being the weighted average number of ordinary shares in issue and ranking for dividend during the year, excluding 600,000 (1999 - 600,000) ordinary shares of the Company held by the Group. The calculation of the diluted earnings per share is based on the profit for the financial year and on 72,416,560 (1999 - 59,990,023) ordinary shares, being the weighted average number of ordinary shares in issue and ranking for dividend during the year including 3,275,828 outstanding share options and warrants (1999 - 4,769) that have a diluting effect on earnings per share and 600,000 (1999 - 600,000) ordinary shares of the Company held by the Group 6. Reconciliation of operating profit to operating cash flows 2000 1999 £000's £000's Operating profit 22,049 5,616 Depreciation and depletion charges 8,942 6,479 Movement in stocks 169 (436) Movement in debtors (1,194) (2,542) Movement in creditors 936 58 Net cash inflow from operating activities 30,902 9,175 7. Analysis and reconciliation of net funds As at 31 Exchange As at 31 Dec 1999 Cash flow Movement Dec 2000 £000's £000's £000's £000's Cash at bank and in hand 8,152 6,661 982 15,795 Current asset investments 20,639 884 729 22,252 Bank loan due after more (1,551) (3,338) (132) (5,021) than one year Net funds 27,240 4,207 1,579 33,026 8. Current asset investments are term deposits. Reconciliation of movements in Group shareholders' funds 2000 1999 £000's £000's Opening shareholders' funds 97,140 79,275 Profit for the financial year' 17,565 7,414 Unrealised currency translation differences 7,372 1,951 New shares issued 741 8,500 Closing shareholders' funds 122,818 94,140 9. Preliminary results announced Copies of the announcement will be available from the Company's head office, Swan House, 32-33 Old Bond Street, London, W1S 4QJ. The Annual Report and Accounts will be posted to shareholders in due course.

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