Interim Results
Soco International PLC
19 September 2002
SOCO International plc ('SOCO' or 'the Company')
Interim Results for the six months ended 30 June 2002
SOCO is an international oil and gas exploration and production company,
headquartered in London, with operations in Mongolia, Vietnam, Yemen, Thailand,
Tunisia and Libya. SOCO today announces interim results for the six months
ended 30 June 2002.
HIGHLIGHTS
• 2002 focused on the most significant drilling programme since listing
• Increased position in Vietnam with one well currently testing
• Production maintained at 6,153 BOPD (1H2001: 6,150 BOPD excluding
Russia) with significant increase in Tunisia
• Maintained strong cash position of £56.3 million despite extensive
drilling campaign
Ed Story, Chief Executive of SOCO, said:
'In 2002, SOCO has focused on its most ambitious drilling programme in the last
five years. We expect to have test results of our second well in Vietnam within
the next several days. Importantly we have maintained a strong balance sheet
while increasing our interests in Vietnam and experiencing positive drilling
results in Mongolia and Yemen. SOCO remains focused on generating growth
through our commitment to realise early value from our portfolio.'
19 September 2002
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
Andree Taylor
Chairman's and Chief Executive's Statement
As we indicated at the time of announcing our 2001 preliminary results in March,
this year will be defined for the Company through its drilling programme. In
2002, SOCO has embarked on the most significant drilling endeavours since the
Company's listing in 1997. The primary focus is in Vietnam where the minimum
four well drilling campaign began in May. Additionally the Company is
participating in exploratory and appraisal drilling in Mongolia and Yemen, an
appraisal well in Tunisia and an ongoing development drilling programme in
Yemen. Although embarking on an ambitious drilling campaign, the Company
protected its strong cash position by farming-out 50% of its interests in
Vietnam to PTT Exploration and Production Company Limited of Thailand (PTTEP),
as was announced in February.
RESULTS
Turnover from continuing operations was almost flat at £12.4 million for the
first half of this year versus £12.2 million for the first half of 2001
(excluding disposed Russian interests at approximately £9.2 million) despite a
decline in average Brent crude oil prices and average per barrel realisations
net to the Group. Group realisations dropped to US$22.32 from US$24.71 for the
same period last year.
Profits before tax on continuing operations declined from £6.6 million (£9.0
million including Russia) reported for the first half of 2001 to £5.5 million
for the first six months of 2002. Reflecting a significant increase in tax on
profit primarily due to a low capital work programme in Tunisian operations, net
profits from continuing operations were also down from the prior period to £3.0
million versus £5.0 million (£7.0 million including Russia).
Production costs in Mongolia, recorded to reflect zero gross margin on the pilot
programme, and higher production in Tunisia increased total operating costs from
continuing operations excluding depletion and abandonment from £2.4 million
(£8.2 million including Russia) to £4.1 million. Direct production costs, which
were substantially increased by Mongolian pilot production, were approximately
US$4.60 per barrel reflecting a rise over first half 2001 (approximately US$3.30
per barrel, excluding Russia at approximately $14.00 per barrel). Both total
and per barrel depletion and abandonment costs from continuing operations
decreased, overall dropping to £2.4 million from £3.1 million (excluding Russia
at £0.9 million) and per barrel declining approximately $0.50 from $3.90
(excluding Russia at approximately $2.70) to approximately $3.40.
Corporate cash balances show a slight decline from December 2001 dropping from
£58.6 million to £56.3 million. Ignoring foreign exchange translation losses
resulting from the strengthening of the British pound against the US dollar,
cash balances, which are primarily held in US dollars, were essentially level
with those at year end largely as a result of the Vietnam drilling costs being
carried due to the farm-out of 50% of the Company's Vietnamese assets.
OPERATIONS
Exploration/Development
Vietnam
SOCO Vietnam Ltd (SOCO Vietnam), the Company's 80% owned subsidiary, initiated a
major drilling campaign in Vietnam in May of 2002 when the first well of a
minimum four well exploration drilling programme was spud on Block 16-1. The
Ngua O well, a vertical exploration well on the 'C' prospect, was drilled to a
depth of 3,684 metres, penetrating approximately 520 metres into Basement. Mud
logging indicated substantial oil shows in both the upper Miocene and Basement
sections. It was determined that the reservoir characteristics in the upper
Miocene were not sufficiently developed to warrant testing.
A drill stem test (DST) was conducted in a Basement interval of 3,174 metres to
3,563 metres after encountering multiple fracture systems. The DST recovered
oil at rates of approximately 250 barrels of oil per day (BOPD) over an 18 hour
interval. A decision regarding a horizontal or deviated well, which typically
increases flow rates substantially, to further appraise the 'C' prospect will be
deferred until after the data gathered from this first well has been thoroughly
analysed. The well was abandoned, as will be the case with each of the vertical
exploration wells in this programme, which are designed to test rather than
exploit the prospects.
Indications are that the results from this well have positive implications for
prospect 'A', the largest prospect identified on Block 16-1. There is clearly
an active hydrocarbon system on the Block. With the data gained from the Ngua O
well, it appears that both the 'source' and 'seal' risks on the larger prospect
are lower than previously projected.
The second well in the overall programme and the first on Block 9-2 was spud on
23 July. The well, the Ca Ngu Vang, encountered oil shows in both the Tertiary
and granitic Basement intervals en route to a total depth of 4,567 metres.
Although inconclusive, mud log analysis has been encouraging. Preparations are
underway to flow test the well prior to abandonment.
SOCO Vietnam recently increased its working interest in Block 16-1 from 15% to
28.5%. SOCO's working interest in Block 9-2 is 25%. The Company's interest in
Block 9-2 and its initial 15% interest in Block 16-1 are carried up to a maximum
amount of US$50 million by PTTEP through the initial exploration programmes
under the terms of a farm-out agreement announced earlier this year (further
details below in the Corporate Transactions section). Both Blocks are
contiguous to the Bach Ho (approximately 250,000 BOPD) and the Rang Dong
(approximately 55,000 BOPD) producing fields.
The additional interest in Block 16-1 is not covered by the previously announced
farm-out with PTTEP. PTTEP-HL and SOCO Vietnam will each fund their respective
higher participating interests in the second well to be drilled on the Block.
Mongolia
A new drilling contract was recently signed for this year's multi-well campaign.
The first well in the drilling programme, the 19-15 well, spudded on 10 August
to test a new fault block offsetting the 19-14 well drilled last year. The well
reached target depth of 2,579 metres on 30 August having encountered more than
100 metres of oil shows in a gross interval of 500 metres in the Lower
Cretaceous Tsagaantsav sands.
The second well, the 19-16, a rank exploration well, spudded on 3 September at a
location about 20 kilometres northwest of the currently producing wells and
penetrated the Upper Cretaceous Zuunbayan and Tsagaantsav intervals. The well
was drilled to a depth of 2,227 metres and had oil shows in the lower interval,
which is the currently producing reservoir in the Contract Area. Both wells
will be tested when a workover rig is released from remedial work on the 19-3
well. Should the test results on the 19-16 well prove interesting, the Company
will likely follow it up with an areal seismic programme in the winter.
Concurrent with the drilling of new wells, the Company is conducting workovers
on several of its previously drilled wells in order to increase the flow rates
of the producing wells or to induce production. Change out of some production
equipment is anticipated to alleviate flow restrictions.
Petrovietnam, the Vietnamese national oil company, has a 5% interest, carried
through the exploration phase, in each of SOCO's Mongolia production sharing
contracts. Huabei Oilfield Services, a Chinese company providing the drilling
services to the Company in Mongolia, has earned the right to a pro rata working
interest participation of 10%.
Yemen
In Yemen, the Amani exploration well was drilled in the first quarter which
indicated additional potential from both Basement and Biyad intervals in the
East Shabwa Development Area (ESDA). Subsequent testing in Basement yielded
some gas, but the well was plugged back and tested heavy oil from the Biyad
reservoir. Despite the lack of success of the initial exploration well, recent
drilling results on the neighbouring Masila Block suggest the need to drill
additional appraisal wells on several untested prospects which may offer
considerable upside in the ESDA.
The consortium has now drilled four development wells in the Kharir Field as
part of Phase III. Initial gross production rates have ranged from 2,000 BOPD
to 4,000 BOPD and field production levels have recently approximated 26,000
BOPD. Phase III drilling operations are expected to continue throughout this
year and next, with a tentative plan to drill several more exploration wells in
addition to development wells at Kharir and Atuf fields and several injector
wells.
Tunisia
An appraisal well spudded 26 July on the Didon field in Tunisia. The well, with
an objective depth of 2,835 metres, was drilling above the target El Gueria
formation at circa 2,750 metres as this report went to press. The well will
test the areal extent of the Didon reservoir and identify the current oil/water
contact. Positive results could justify a significant reserve increase and lead
to additional development locations.
Thailand
SOCO Thailand acquired a 1,000 kilometre 2D seismic programme over Block B8/38
in the Gulf of Thailand in February. With the new seismic acquisition, Block B8
/38 is essentially now covered with a two kilometre grid. The programme was to
fulfil the seismic commitment of the Block and signalled the Company's intent to
extend its exploration licence over the Block.
The Petroleum Committee of Thailand has very recently granted another three-year
extension of Block B8/38 to October 2005. Another 25% of the original acreage
of the Block will be relinquished according to petroleum regulation by this
October, bringing the acreage to 2,396 square kilometres. The retained areas
include all of the Pornsiri discovery and the remaining three prospective areas.
Production
Production net to the Group's working interest in continuing operations was
essentially level at 6,153 BOPD for the first six months of the year compared to
an average of 6,150 (9,362 BOPD including Russia) for the same period last year.
Production was up significantly in Tunisia, climbing from 1,040 BOPD to 1,856
BOPD, primarily as a result of reduced downtime and improved production
equipment that allowed the single well field to be produced at much higher rates
without increasing operating temperatures beyond acceptable levels. The
increase was offset in Yemen where, due to the increasing production of water
and a delay in the development drilling programme, which was to have begun late
last year, production net to the Company's working interest from the ESDA
declined to 3,905 BOPD from 5,110 BOPD for the same period during the previous
year. In Mongolia, where a pilot production programme continues on Contract
Area 19, production for the first half of this year averaged 392 BOPD compared
to nil production for the same period last year.
CORPORATE TRANSACTIONS
In 2002, SOCO entered into three separate transactions involving its Vietnamese
interests. The first occurred in January when the Company executed a Share
Exchange Agreement with the minority shareholders of SOCO Vietnam. Under the
terms of this agreement, SOCO acquired an additional 10% stake, increasing its
interest in the majority owned subsidiary from 70% to 80%. The consideration for
the exchange was £1,753,153 paid for by issuing 926,124 ordinary shares of £0.20
each (valuing each share at £1.893) in the share capital of SOCO.
In February, SOCO Vietnam executed a farm-out agreement with PTTEP, subject to
approval of the Government of Vietnam. Under this agreement, PTTEP agreed to
fund SOCO and PTTEP's share of drilling four wells on Blocks 9-2 and 16-1 in the
Cuu Long Basin offshore Vietnam to a maximum of US$50 million in order to earn
50% of SOCO Vietnam's interests in Vietnam. In August, SOCO announced that it
had entered into an agreement with Amerada Hess (Vietnam) Limited (Hess) to
acquire one-half, 13.5%, of the Hess total working interest in Block 16-1. As a
result of these transactions, post farm-out SOCO Vietnam retains a 25% interest
in Block 9-2 and a 28.5% interest in Block 16-1.
SUBSEQUENT EVENTS
In July, the Trustees of the SOCO Employee Benefit Trust (the Trust) acquired on
the open market 325,000 ordinary shares in the Company (0.456%) at an average
purchase price of £1.86 per share. Following this transaction, the Trust holds
2,125,000 ordinary shares representing 2.98% of the issued share capital of the
Company.
Following the vacancy created when the Company's prior auditors ceased trading
in the UK, the Board conducted a rigorous review of proposals from a majority of
the leading accounting firms. At the conclusion of the process the Board
appointed Deloitte & Touche to serve as the Company's auditors until the next
Annual General Meeting at which time the shareholders will have an opportunity
to vote on the appointment of the auditors.
PROSPECTS
The Company expects to continue a very active drilling programme throughout the
remainder of the year. The primary focus will be in Vietnam where a minimum of
two additional exploration wells will be drilled in the Cuu Long Basin, one in
Block 16-1 and the other in Block 9-2. Additionally, the exploration programme
in Mongolia will continue until the onset of winter, at which time drilling will
be suspended, and the development programme in Yemen will continue into next
year.
Work will continue in Libya where SOCO, through its 43% interest in the Libyan
joint venture ODEX, expects to progress towards negotiation and finalisation of
several exploitation/exploration projects.
OUTLOOK
Following the exit from Russia in the last half of 2001 as part of SOCO's
strategy to dispose of its mature producing assets, the Company has focused its
initiatives in two areas - Vietnam and Libya. There has been substantial
progress on both fronts and we expect positive results throughout the rest of
the year. The farm-out in Vietnam earlier in the year gave SOCO the balance
sheet flexibility to advance in both areas.
SOCO remains committed to the two major focus areas of Southeast Asia/Far East
and the Middle East/North Africa. We believe that we are just beginning our
first important steps to establishing very strong asset bases in these regions.
Patrick Maugein Ed Story
Chairman Chief Executive
19 September 2002
Consolidated Profit and Loss Account
(unaudited) (unaudited)
six months six months year
ended ended ended
30 Jun 02 30 Jun 01 31 Dec 01
Notes £000's £000's £000's
Turnover
Continuing operations 12,362 12,208 22,841
Discontinued operations - 9,221 14,476
12,362 21,429 37,317
Cost of sales (6,571) (12,045) (21,913)
Gross profit 5,791 9,384 15,404
Administrative expenses (871) (1,000) (2,079)
Operating profit
Continuing operations 4,920 5,886 9,471
Discontinued operations - 2,498 3,854
4,920 8,384 13,325
Profit on sale of discontinued operations - - 8,474
Profit on ordinary activities before finance charges 4,920 8,384 21,799
Investment income 737 769 1,361
Interest payable and similar charges (187) (142) (302)
Profit on ordinary activities before taxation 5,470 9,011 22,858
Tax on profit on ordinary activities 2 (2,453) (1,982) (5,118)
Profit for the financial period 3,017 7,029 17,740
Earnings per share
Basic 1 4.4p 10.2p 25.9p
Diluted 1 3.9p 9.4p 23.8p
Consolidated statement of total recognised gains and losses
(unaudited) (unaudited)
six months six months year
ended ended ended
30 Jun 02 30 Jun 01 31 Dec 01
£000's £000's £000's
Profit for the financial period 3,017 7,029 17,740
Unrealised currency translation differences (6,550) 7,464 2,931
Total recognised gains and losses for the period (3,533) 14,493 20,671
Consolidated balance sheet
(unaudited) (unaudited)
30 Jun 02 30 Jun 01 31 Dec 01
Note £000's £000's £000's
Fixed assets
Intangible assets 68,793 61,220 67,283
Tangible assets 17,062 44,816 17,667
Investments 1,222 1,622 1,418
87,077 107,658 86,368
Current assets
Stocks 1,507 1,205 1,068
Debtors 4,744 11,052 5,352
Investments 2,740 4,595 2,690
Cash at bank and in hand 53,534 26,398 55,910
62,525 43,250 65,020
Creditors: Amounts falling due within one year (6,719) (5,869) (6,848)
Net current assets 55,806 37,381 58,172
Total assets less current liabilities 142,883 145,039 144,540
Creditors: Amounts falling due after more than one year - (6,399) -
Provisions for liabilities and charges (1,017) (1,329) (1,051)
Net assets 141,866 137,311 143,489
Capital and reserves
Called-up equity share capital 14,268 14,026 14,026
Share premium account 40,578 38,910 38,910
Other reserves 34,961 34,961 34,961
Profit and loss account 52,059 49,414 55,592
Equity shareholders' funds 3 141,866 137,311 143,489
Consolidated cash flow statement
(unaudited) (unaudited)
six months six months year
ended ended ended
30 Jun 02 30 Jun 01 31 Dec 01
Notes £000's £000's £000's
Net cash inflow from operating activities 4 9,043 10,079 19,337
Returns on investments and servicing of finance
Interest received 428 969 1,508
Interest paid (7) (329) (843)
421 640 665
Taxation paid (2,045) (2,732) (5,024)
Capital expenditure
Purchase of tangible and intangible fixed assets (7,499) (16,368) (26,743)
Purchase of own shares by employee benefit trust - (1,253) (1,253)
(7,499) (17,621) (27,996)
Acquisitions and disposals
Sale of business - - 29,497
Cash (outflow) inflow before management of
liquid resources and financing (80) (9,634) 16,479
Management of liquid resources
(Increase) decrease in funds placed on short term 5 (50) 17,806 19,711
deposit
Financing
Issue of ordinary share capital 157 - -
Increase in bank loan due after more than one year - 1,037 3,455
157 1,037 3,455
Increase in cash in the period 27 9,209 39,645
Notes
1. Earnings per share
The calculation of basic earnings per share is based on the profit for the
financial period and on 69,154,043 (year ended 31 December 2001 - 68,625,106 and
six months ended 30 June 2001 - 68,927,433) ordinary shares, being the weighted
average number of ordinary shares in issue and ranking for dividend during the
period, excluding 1,800,000 (year ended 31 December 2001 - 1,502,603 and six
months ended 30 June 2001 - 1,200,276) ordinary shares of the Company held by
the Group.
The calculation of diluted earnings per share is based on the profit for the
financial period and on 77,310,484 (year ended 31 December 2001 - 74,427,164 and
six months ended 30 June 2001 - 74,382,485) ordinary shares, being the weighted
average number of ordinary shares in issue and ranking for dividend during the
period, including 1,800,000 (year ended 31 December 2001 - 1,502,603 and six
months ended 30 June 2001 - 1,200,276) ordinary shares of the Company held by
the Group, and 6,356,441 (year ended 31 December 2001 - 4,299,455 and six months
ended 30 June 2001 - 4,254,776) outstanding share options and warrants that have
a diluting effect on earnings per share.
2. Tax on profit on ordinary activities
The tax charge comprises:
(unaudited) (unaudited)
six months six months year
ended ended ended
30 Jun 02 30 Jun 01 31 Dec 01
£000's £000's £000's
UK corporation tax at 30% - - -
Current overseas taxation 3,081 3,755 5,506
Deferred overseas taxation (628) (1,773) (388)
2,453 1,982 5,118
The deferred overseas taxation credit arises on the net of tax losses carried
forward, foreign tax credits carried forward and fixed asset timing differences.
3. Reconciliation of movements in Group equity shareholders' funds
(unaudited) (unaudited)
six months six months year
ended Ended ended
30 Jun 02 30 Jun 01 31 Dec 01
£000's £000's £000's
Opening equity shareholders' funds 143,489 122,818 122,818
Profit for the financial period 3,017 7,029 17,740
Unrealised currency translation differences (6,550) 7,464 2,931
New shares issued 1,910 - -
Closing equity shareholders' funds 141,866 137,311 143,489
4. Reconciliation of operating profit to operating cash flows
(unaudited) (unaudited)
six months six months year
ended ended ended
30 Jun 02 30 Jun 01 31 Dec 01
£000's £000's £000's
Operating profit 4,920 8,384 13,325
Depreciation and amortisation 2,795 4,191 7,682
Movement in stocks 28 102 (231)
Movement in debtors 1,400 (2,023) (1,729)
Movement in creditors (100) (575) 290
Net cash inflow from operating activities 9,043 10,079 19,337
Net cash inflow from operating activities
comprises:
Continuing operating activities 9,043 7,615 14,436
Discontinued operating activities - 2,464 4,901
9,043 10,079 19,337
5. Analysis and reconciliation of net funds
(unaudited)
as at exchange as at
31 Dec 01 cash flow movement 30 Jun 02
£000's £000's £000's £000's
Cash at bank and in hand 55,910 27 (2,403) 53,534
Current asset investments 2,690 50 - 2,740
Net funds 58,600 77 (2,403) 56,274
Current asset investments are term deposits.
6. Basis of preparation
The financial information presented above does not constitute statutory accounts
within the meaning of section 240 of the Companies Act 1985. The financial
information for the year ended 31 December 2001 has been derived from the
statutory accounts for that year. Those statutory accounts, upon which the
auditors issued an unqualified opinion, were delivered to the Registrar of
Companies.
The interim accounts, which are unaudited, have been prepared on the basis of
the accounting policies set out in the Group's statutory accounts for the year
ended 31 December 2001 except that during the period the Group adopted FRS 19 '
Deferred Tax'. There was no effect on the Group's net assets and results for
the period or previous periods arising from that adoption.
7. Dividend
The Directors do not recommend the payment of a dividend.
8. Auditors' Review
The unaudited interim accounts have been reviewed by the Group's auditors,
Deloitte & Touche.
9. Date of approval
The interim financial statements for the six months ended 30 June 2002 were
approved by the Directors on 18 September 2002.
This information is provided by RNS
The company news service from the London Stock Exchange
Monday, 20th May 2024
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