Interim Management Statement

RNS Number : 0322Q

Soco International PLC

01 November 2012

 



1 November 2012

SOCO International plc

("SOCO" or the "Company")

INTERIM MANAGEMENT STATEMENT

SOCO, an international oil and gas exploration and production company, today announces its Interim Management Statement relating to the period from 1 July 2012 to 31 October 2012.

OVERVIEW

·     Production for the three quarters ended 30 September 2012 was approximately 400% higher than the same period in 2011 and averaged 13,755 barrels of oil equivalent per day ("BOEPD") net to the Company's working interest (18,824 BOEPD week ended 26 October).  Entitlements production was approximately 1,000 BOEPD higher than the working interest.

·     Net cash as at 31 October 2012 was approximately $170 million (30 June 2012: $178.0 million and 31 December 2011: $113.5 million).

·     The Te Giac Trang ("TGT") H4 Wellhead Platform ("H4-WHP") commenced production a month ahead of schedule in July 2012, increasing total field production to average above 50,000 barrels of oil per day ("BOPD") since start up; peak production reached over 60,500 BOPD; production for the last 24 hour period reported (30 October) was 58,867 BOPD.

·     In July 2012, the Company announced and completed the acquisition of the outstanding 20% non-controlling interest in SOCO Vietnam Ltd for cash consideration of $95 million.

·     Lideka Marine East Well 1 is expected to spud offshore the Republic of Congo before the end of 2012.

OPERATIONS 

VIETNAM

Block 16-1

Te Giac Trang ("TGT")

Production from TGT's southern platform, the H4-WHP, commenced on 6 July 2012, over one month earlier than scheduled and nearly a year ahead of the original approved development plan.  Production from TGT has averaged 11,556 BOPD net to the Group's working interest during the first three quarters of 2012 (16,317 BOPD for the week ending 26 October 2012) with net entitlement production averaging 12,543 BOPD, including recovery of costs carried on behalf of PetroVietnam.

With the introduction of production from the five wells at the H4-WHP, production from TGT has achieved stable flow rates ranging from 50-56,000 BOPD, with daily rate fluctuations reflecting well intervention activities.  A one-day "high rate" flow test of the floating, production, storage and offloading vessel ("FPSO") was carried out at 60,789 BOPD with no issues seen in either the reservoir performance or the FPSO operability.  The data gathered during this performance test is being analysed to enable us to identify and alleviate bottlenecks in the systems to assess the FPSO oil production handling potential.

At the northern platform, the H1-WHP, the PetroVietnam Drilling Rig, PVD-II, has been on location to complete the four-well, infield development drilling programme which included two infill wells, an appraisal well and one development well.  The TGT-15P and TGT-16P infill wells on the H1.1 fault block and the TGT-8X appraisal well on the H2N fault block were batch drilled into the reservoir section.  These wells are now producing. The TGT-17P development well was suspended following a "twist-off" in the bottom-hole assembly above the reservoir section.  The rig has been released ahead of the monsoon season and will return to the TGT field in the second quarter of 2013 for the 2013 drilling programme, which will include completing the TGT-17P well.

Block 9-2

Ca Ngu Vang ("CNV")

Production on Block 9-2 from the CNV field has been steady during the year with production net to the Company's working interest averaging 2,199 BOEPD during the first three quarters of 2012 (2,507 BOEPD for the week ending 26 October 2012).

Dedicated test separation and metering facilities have been installed on the Bach Ho central processing platform complex and commissioning is near completion. Once in service, the new facilities will allow the operator, the Hoan Vu Joint Operating Company, to more accurately measure liquid and gas production from the CNV production stream entering the Bach Ho central processing platform complex.  A long term production test to validate the newly installed system is underway.

AFRICA

REPUBLIC OF CONGO (BRAZZAVILLE)

Marine XI

From an analysis of the results of previously acquired data on the Block, incorporating the results of the Lideka Marine 1 well drilled by the previous Block concession holder, the Marine XI partners have agreed to drill the Lideka Marine East 1 well.  It is expected to spud before the end of 2012.  This well is a test of stacked plays and will test both the structural closure updip from an oil leg encountered in the Sendji Formation in the Lideka Marine 1 well that was drilled two kilometres to the west and also the large untested structural closure in the overlying Tchala Formation.

Marine XIV

The Marine XIV partners have determined that they will not enter into a second exploration phase on Marine XIV and accordingly have relinquished the Block back to the Government of the Republic of Congo.

Nanga II A

The Group has been awarded a sole one-year exploration licence over the Nanga II A Block.  The Block covers 687 square kilometres and is located adjacent to the coast, onshore the Republic of Congo, near the M'Boundi producing field.  The plan is to conduct an aeromagnetic survey followed by a 3D seismic survey on the area within the year.  The Group will determine whether to enter into a Production Sharing Contract following an evaluation of the data.

DEMOCRATIC REPUBLIC OF CONGO (KINSHASA)

Block V

The Government of the Democratic Republic of Congo ("DRC") commissioned an aerial survey and baseline studies over Block V in September 2011 as part of its wider objective of performing a strategic environmental evaluation.  Accordingly, SOCO's work programme has been agreed in close collaboration with the Congo Environmental Studies Group ("GEEC") and the Congolese Wildlife Authority ("Institut Congolais pour la Conservation de la Nature" or "ICCN").  

Preparations are ongoing for the aerial survey, which will involve a helicopter flying over Lake Edward and the surrounding lowland savannah area. The mountain gorilla habitat is not in the flight path of the helicopter and there will be no scheduled touchdowns in the Virunga National Park.  The security status is being assessed on a continual basis and we will only proceed when the assessment is that it is safe to do so.  Environmental baseline studies including an inventory of hippopotami and fish/mollusc studies are also scheduled to take place on Lake Edward, pending the security status on the ground. 

In July 2012, SOCO increased its interest in the Block V licence to 85% by acquiring the 46.75% interest held by Ophir Energy Plc.  The remaining 15% interest is held by Cohydro, the national oil company of the DRC.

Nganzi

Processing of the data from the 2D seismic acquisition programme is ongoing.  Following interpretation, decisions will be made by the partners on potential drilling locations prior to year end.

ANGOLA

Cabinda North

Interpretation is ongoing of the data acquired from the 2D seismic acquisition programme which was concluded over the Cabinda North Block in 2011.  The results of the interpretation have been factored into drilling decisions made by the partners, with the first wells likely to be on the Dinge discovery on the Block early in 2013.  The Company has announced that it has entered into a conditional agreement to sell its interest in the Cabinda North Block (see below for details).

CORPORATE

Acquisition of the outstanding non-controlling interest in SOCO Vietnam Ltd

In July 2012, SOCO completed an agreement with Lizeroux Oil & Gas Ltd ("Lizeroux") to acquire the 20% outstanding non-controlling interest in SOCO Vietnam Ltd ("SOCO Vietnam"), for a cash consideration of $95 million ("the Acquisition").  The consideration was satisfied out of existing cash resources of the Company. The Group has carried Lizeroux`s share of all costs and expenses incurred by SOCO Vietnam, and, prior to completion, was entitled to receive 100% of any and all distributions made by SOCO Vietnam until such time as the Group fully recovered those costs and expenses, including a rate of return ("the Carry Recovery").  Lizeroux was classified as a related party by the UK Listing Authority by virtue of its substantial shareholding in SOCO Vietnam.  In addition, Lizeroux's majority shareholder, Mr Hai Hoang Nguyen, was a related party due to his being a Director of SOCO Vietnam.  The Acquisition was therefore conditional upon the approval of SOCO shareholders, a resolution for which was passed by shareholders at a general meeting of the Company on 20 July 2012.  As a result of the Acquisition, SOCO acquired the right to receive all of the future cash flows that the non-controlling interest is entitled to receive, namely the remaining 20% of distributions made by SOCO Vietnam post Carry Recovery.

Transfer of the interest in Block V, DRC

In July 2012, Dominion Petroleum Congo Sprl transferred its 46.75% interest in the Contractor`s right, title and interest in a production sharing contract relating to Block V to SOCO Exploration & Production DRC Sprl ("SOCO E&P DRC"). The transfer was completed on 20 July 2012 for the cash consideration of $6.5 million plus agreed reimbursement of $2.2 million for the cash calls paid in 2012. As a result of the transfer, SOCO E&P DRC has an 85% interest in Block V.

Option to sell majority interest in SOCO Cabinda Limited to minority interest holder

On 25 September, SOCO announced that it had entered into a conditional agreement (the "Disposal") with Quill Trading Corporation ("Quill") wherein SOCO will sell its 80% majority interest in SOCO Cabinda Limited ("SOCO Cabinda") to Quill, which holds the remaining 20% interest.  SOCO Cabinda has a 17% participating interest in the Cabinda North Block, onshore the Angolan enclave of Cabinda.  Under the terms of the Disposal, Quill has paid a non-refundable deposit to the Company for the option to acquire, within 120 days, SOCO's entire shareholding in SOCO Cabinda.  SOCO Cabinda had gross assets of US$32.5 million as at 30 June 2012. The Group has no reserves attributable to its interests in SOCO Cabinda.  The Directors believe that the Disposal is in the best interests of the Company's shareholders as the Group continues to re-focus the portfolio on higher impact projects in which it holds larger participating interests. 

OUTLOOK

Production for SOCO's Vietnam assets is expected to continue at the current rates for the remainder of the year with temporary fluctuations occurring due to well intervention work and facilities and FPSO testing.  Production capability could be increased in both projects early next year as drilling is anticipated to include an additional producing well on CNV and a step out appraisal well for the previously undrilled H5 fault block on TGT.

The Company continues to negotiate for new projects which would give us larger footprints in regions where SOCO already has a presence, and continues to evaluate other projects in new areas of interest. Progress has been made on both initiatives, with the Nanga II A area exploration licence in the Republic of Congo added to our portfolio this year.

SOCO's primary focus has been on oil projects in hydrocarbon prone regions that can be commercialised within reasonable time frames to enhance its asset portfolio.  The priority remains to build shareholder value and the Directors continue to examine all avenues of achieving this goal.

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ENQUIRIES:

SOCO International plc

Roger Cagle, Deputy Chief Executive and Chief Financial Officer

Tel: [phone]

Pelham Bell Pottinger

James Henderson

Victoria Geoghegan

Elizabeth Snow

Tel: [phone]

NOTES TO EDITORS:

SOCO is an international oil and gas exploration and production company, headquartered in London, traded on the London Stock Exchange and a constituent of the FTSE 250 Index. The Company has interests in Vietnam, the Republic of Congo (Brazzaville), the Democratic Republic of Congo (Kinshasa) and Angola, with production operations in Vietnam.

SOCO holds its interests in Vietnam, all in the Cuu Long Basin offshore, through its wholly-owned subsidiaries, SOCO Vietnam Ltd and OPECO Vietnam Limited. SOCO Vietnam Ltd holds a 25% working interest in Block 9-2, which is operated by the Hoan Vu Joint Operating Company and holds a 28.5% working interest in Block 16-1, which is operated by the Hoang Long Joint Operating Company. OPECO Vietnam Limited holds a 2% interest in Block 16-1.

SOCO holds its interests in the Republic of Congo (Brazzaville) through its 85% owned subsidiary, SOCO Exploration and Production Congo SA ("SOCO EPC").  SOCO EPC holds a 40.39% interest in the Marine XI Block located offshore in the shallow water Lower Congo Basin and is designated operator of the Block. SOCO EPC also holds a 100% interest in a one-year exploration licence over the Nanga II A Block, located onshore, adjacent to the coast. 

SOCO holds its interests in the Democratic Republic of Congo (Kinshasa), all onshore, though its 85% owned subsidiary, SOCO Exploration and Production DRC Sprl ("SOCO E&P DRC").  SOCO E&P DRC holds a 65% working interest in the Nganzi Block, situated 50 kilometres from the west coast, and an 85% working interest in Block V, situated in the southern Albertine Graben in eastern DRC.  SOCO E&P DRC is designated operator of both Blocks.

SOCO holds its interests in the Angolan enclave of Cabinda through its 80% owned subsidiary, SOCO Cabinda Limited, which holds a 17% participating interest in the Production Sharing Agreement for the Cabinda Onshore North Block.

 

END

 

 

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