TIDMSIA
RNS Number : 8076V
Soco International PLC
02 February 2017
SOCO International plc
("SOCO" or the "Company")
TRADING AND OPERATIONS UPDATE
SOCO, an international oil and gas exploration and production
company, announces its trading and operations update. This
summarises the Company's current financial and operational status,
provides guidance in respect of the financial year ended 31
December 2016 and guidance for 2017. The information contained
herein has not been audited and is subject to further review. Final
audited results are scheduled for release on 23 March 2017.
Ed Story, President and Chief Executive Officer, commented:
"We restarted the next phase of development of the TGT Field in
the latter part of 2016 in advance of formal approval of the
updated FFDP, signalling a positive realignment amongst partners
with regards to managing this key resource. We expect the
development drilling to arrest the production decline associated
with almost two years of no drilling.
Additionally, with oil prices achieving a relatively stable
mid-price range considerably above the lows of 2016, this year we
expect the industry to be very active on the M&A front and the
Company will robustly pursue growth opportunities. To emphasise our
commitment to energising our growth strategy, we have brought on Dr
Mike Watts and Jann Brown to lead the effort as co-heads of
Business Development for the Company. Not only do Mike and Jann
bring the experience, capability and industry network to suggest
success in our efforts, but they clearly bring additional strength
to our capability to manage an expanded portfolio both now and in
the future. "
2016 HIGHLIGHTS
-- Robust balance sheet, zero debt, solid cash flow, low cash operating costs
o Year-end cash balance in excess of $100m with no debt
o Revenue of $155m
o Average realised crude oil price of $45 per bbl, a premium to
Brent of over $1 per bbl
o Operating expenditure under $12 per bbl; operating cash flow
break-even oil price per bbl still in the low $20s
o Cash capital expenditure of $40m, fully funded from existing
cash resources
-- Vietnam $14m
-- Africa $26m, including cost savings achieved on the MPS
well
o Returns to shareholders of $18m via two 2p dividends
-- Net production of 9,883 BOEPD - slightly below our lower end
production guidance of 10,000 BOEPD
-- Commencement of TGT development drilling in November
-- New ventures negotiations for Blocks 125 & 126 concluded;
a PSC will be executed in due course
-- Marine XI Production Licence Application over 20 years has
been approved by the authorities and commercial renegotiation is
underway
-- Recovery of $10.0m as partial payment against the $52.7m
amount due, associated with SOCO's 2005 sale of its Mongolian
assets
OPERATIONS
Vietnam
Te Giac Trang ("TGT") Field production averaged 27,650 barrels
of oil equivalent per day ("BOEPD") gross and 8,330 BOEPD net to
SOCO's working interest in 2016; the Ca Ngu Vang ("CNV") Field
production averaged 6,211 BOEPD gross and 1,553 BOEPD net to SOCO's
working interest in 2016. Overall net production of 9,883 BOEPD was
slightly below the lower end guidance of 10,000 BOEPD due to the
delay in drilling postponed to the end of the year, unexpected
additional downtime due to pressure-testing on CNV, along with the
recent stoppage for rig positioning and down-well intervention work
beyond that originally planned for extra wireline and intervention
work.
The TGT 2016 development drilling programme commenced in late
2016, the first on TGT since early 2015. The infill wells, the
TGT-27PST1 and TGT-28P, were "batch drilled". The first well was
spudded on 6 November 2016 by the PetroVietnam Drilling PVD-6
jack-up rig on the H4-Well Head Platform ("WHP") in the central
area of the TGT Field. Both wells encountered hydrocarbons
throughout both the Miocene and Oligocene reservoir horizons, and
are currently being analysed following the execution of the initial
perforation programme. The TGT partners have agreed to add a
further two infill wells on the southern H5-WHP following the
completion of these wells, and delivery of long lead items. The
TGT-14X well into the H5 South fault block will also be drilled as
part of the programme.
The TGT Full Field Development Plan ("FFDP") has been formally
submitted to the relevant authorities. The FFDP includes additional
wells and facilities options to increase total fluid-handling
capacity.
New Ventures
On Monday, 6 February 2017, Dr Mike Watts and Jann Brown will be
joining the Company to co-head the Company's newly formed Business
Development group.
Negotiations have been concluded for a 70% interest in a
Production Sharing Contract ("PSC") over two blocks, Blocks 125
& 126, in the Phu Khanh Basin offshore central Vietnam. We
expect the PSC between SOCO, Petrovietnam and Sovico Holdings
Company to be executed in the first half of 2017.
Detailed negotiations for the PSC on Blocks 125 & 126 began
in May 2016 following the signing of a Memorandum of Understanding
in July 2015 and agreement of the main terms. Both blocks are in
moderate to deep water, adjacent to the coast, in the Phu Khanh
Basin, and have multiple structural and stratigraphic plays
observed on the available seismic data. Interpretation of the
available data indicates there is good potential for source,
expulsion and migration of oil with numerous reservoir and seal
intervals likely.
Africa Portfolio
Republic of Congo - Marine XI Block
SOCO's application for a 20-year Production Licence ("PEX") for
the area around the Lidongo well was approved in September 2016
with the PEX commencing in October 2016. Discussions with the
authorities are ongoing to review and improve the commercial terms
for the PEX. The Lidongo discovery area commercialisation
discussions are ongoing.
A 12-month licence extension to March 2017 has allowed
interpretation of the 3D seismic data from the remainder of the
Block, including the Lideka East discovery area, to be completed.
Reviews of possible additional PEX applications for the other areas
in Marine XI are ongoing.
Republic of Congo - Mer Profonde Sud ("MPS") Block
The MPS block has now been released. Final financial and legal
reviews are being performed by the authorities to allow for the
formal signoff.
Angola - Cabinda North Block
Discussions are ongoing among the partners and with the
authorities to agree the new partnership, operator and activities
during the licence extension period to April 2018.
FINANCIAL
SOCO's financial strength persists in this difficult market,
having its foundations built on positive cash flows, attractively
low operating expenditure and a disciplined approach to capital
allocation. The Company finished the year with no debt and over
$100m in cash, cash equivalents and liquid resources. An average
crude oil sales price of $45 per barrel was realised during 2016,
representing a premium of over $1 per bbl to Brent, generating
revenues of $155m, against low cash operating expenditure of under
$12 per bbl. SOCO's full operating cost break-even oil price per
bbl remains still in the low $20s.
The Company received $10.0m in December 2016 from Daqing
Oilfield Limited Company ("Daqing") as partial payment for the
$52.7m Subsequent Payment Amount associated with SOCO's 2005 sale
of its Mongolia assets. The full remainder, as acknowledged by
Daqing, is outstanding and past due. The parent company of the
debtor has not only re-acknowledged the debt, but confirmed payment
as soon as the regulatory hurdles are met. The Company intends to
fully enforce its rights for collection.
OUTLOOK
The Company continues to pursue growth and rationalisation of
our portfolio. Dr Mike Watts and Jann Brown will be joining the
Company to spearhead these efforts. In the coming months, we expect
to announce a new Production Sharing Agreement over two blocks,
offshore Vietnam, adding to our existing strong presence in the
region.
Capital expenditure for 2017 is expected to be approximately
$50m to cover the development drilling and infrastructure upgrade
on our existing Vietnam assets, purchase of seismic data for our
new venture Blocks 125 & 126 in Vietnam and PEX bonuses in
Africa on MXI.
Average production in 2017 will be affected by the additional
shut-ins (equivalent to up to approximately 25-30 days in total) on
TGT planned to accommodate the rig moves, as well as the extended
shut down for the installation, hook up and commissioning of the
equipment for additional liquid handling capacity, and FPSO
maintenance shut down. This is significantly higher than occurred
in 2016 and, as such, impacts on the expected total average
production for the year. Thus, although production last week
averaged almost 10,300 BOEPD after perforating the last two wells
drilled, production guidance for 2017 is presently set to average
8,000 to 9,000 BOEPD for the full year 2017.
The Board of Directors expects to recommend a dividend to
shareholders with respect to 2016 earnings consistent with our
strategy of sustainable cash returns to shareholders.
ENQUIRIES:
SOCO International plc
Antony Maris, Chief Operating Officer
Tel: 020 7747 2000
Bell Pottinger
Nick Lambert
Elizabeth Snow
Tel: 020 3772 2500
NOTES TO EDITORS
SOCO is an international oil and gas exploration and production
company, headquartered in London and traded on the London Stock
Exchange. The Company has field development and production
interests in Vietnam and exploration and appraisal interests in the
Republic of Congo (Brazzaville) and Angola.
SOCO holds a 30.5% working interest in the Te Giac Trang Field
of Block 16-1, which is operated by the Hoang Long Joint Operating
Company. Block 16-1 is located in the shallow water Cuu Long Basin,
offshore southern Vietnam.
SOCO holds a 25% working interest in the Ca Ngu Vang field of
Block 9-2, which is operated by the Hoan Vu Joint Operating
Company. Block 9-2 is located in the shallow water Cuu Long Basin,
offshore southern Vietnam.
SOCO holds a 40.39% interest in and is designated operator of
the Marine XI Block, located in the shallow water Lower Congo
Basin, offshore the Republic of Congo (Brazzaville).
SOCO holds a 17% interests in the Production Sharing Agreement
for the Cabinda North Block onshore the Angolan enclave of
Cabinda.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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