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.