Trading Statement and Operati

RNS Number : 8143F

Soco International PLC

20 January 2010

 



20  January 2010

SOCO INTERNATIONAL PLC

("SOCO" or the "Company")

 TRADING STATEMENT AND OPERATIONAL UPDATE

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER STATE OR JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.

SOCO today provides a trading statement in respect of its financial year to 31 December 2009. This is in advance of the Group's full year results which are scheduled for release on 24 March 2010. The operational update is in respect of recent production, development and exploration activities. The information contained herein has not been audited and is subject to further review and possible update.

This year is scheduled to see an exceptionally active drilling programme. The potential impact on reserves and production from this year’s development, appraisal and exploration programme is larger than anything undertaken by the Company to date. Subject to farm out discussions and critical equipment availability, the programme features a 12 month drilling campaign in the Cuu Long Basin offshore Vietnam to appraise and prove up significant additional reserves, two to three high impact exploration wells on the Nganzi Block onshore the Democratic Republic of Congo (Kinshasa) and two exploration wells in the Congo Basin offshore the Republic of Congo (Brazzaville), one on the Marine XI Block and one on the Marine XIV Block. Total capital expenditure for 2010 is projected to be in the order of $185 million.

Ed Story, President and Chief Executive, said:

"Our high impact drilling programme accelerates as soon as weather windows open offshore Vietnam following the winter monsoon season and in West and Central Africa following the rainy season. Multiple projects in both regions offer upside potential equal or greater to that accessed by the Company in all previous drilling programmes.

 

The funds raised from the placing of shares by the Company announced today, from existing cash resources and from cash flow from operations, enable us to retain the financial and operational flexibility necessary for our next phase of growth and the continued delivery of shareholder value."

SOUTH EAST ASIA

VIETNAM  

Block 9-2 and Block 16-1 are situated in the Cuu Long Basin which is a shallow water, near shore, oil rich basin defined by several high profile producing oil fields, the largest of which has been the Bach Ho field, which lies adjacent to both Blocks. Bach Ho has produced more than one billion barrels of oil to date.  

Block 16-1 

Reprocessing of a 3D seismic grid over the fairway that includes both Te Giac Trang ("TGT") and Te Giac Den ("TGD") was completed during the second half of 2009. Initial interpretation has been encouraging for both projects. Whereas the initial wells on TGT were drilled based on time migrated seismic, future wells will be positioned on the newly reprocessed and depth migrated seismic. 

Initial interpretation of the improved TGT pre-stack depth migration data set suggests that the structural crests of the TGT fault blocks are further east than originally mapped. Thus, the seven exploration/appraisal wells drilled to date in the field, with an average oil and gas flow of approximately 11,300 barrels of oil equivalent per day ("BOEPD") per well, provide greater structural control and suggest improved results in development wells drilled up-dip of the existing wells.  

Early conclusions from the section over TGD appear to reinforce the previous interpretation of the lacustrine nature of the reservoir deposition and confirm the general location of the appraisal well, which is planned for the first half of 2010.  

TGT
The Company was granted approval from Petrovietnam, the Vietnam national oil company, of the Field Development Area for the TGT field in May of 2009 and, subsequently, Petrovietnam assumed funding of its 41% share of development costs as of 1 July.  In September, the Company was informed that the Ministry of Industry and Trade, on behalf of the Vietnamese Government, had approved the Development Plan for the TGT field.  

First oil is targeted for mid-2011 and this first phase of development should plateau at approximately 50,000 BOEPD. Tenders for a number of long lead items have been issued. Final negotiations are expected to conclude this month with a Bumi Armada – Vietsovpetro consortium to conclude the contract on the floating, production, storage and offloading vessel, which is the primary critical path item for meeting the first oil date. 

TGD

The TGD Appraisal Area encompasses an area of 150 square kilometres including the high pressure, high temperature ("HPHT") discovery well, TGD-1X-ST1, on Prospect E and the analogous E South Prospect. This area borders the southern boundary of the TGT field.  

In April of 2009, the Company was informed that the Vietnamese Government had approved, with agreed work programmes, the application for the TGD and Voi Trang (VT) Appraisal Areas within Block 16-1. Following an assessment of the commerciality of the previous discoveries in the awarded area in the VT Appraisal Area, the Hoang Long Joint Operating Company opted to relinquish this area. Petrovietnam issued a formal approval of the relinquishment in July. 

Bids for a drilling rig were received on 14 January 2010 and are currently being evaluated.

Block 9-2 

Ca Ngu Vang ("CNV") 

With the 2009 drilling and suspension of the CNV-6P development well, the initial phase of the development drilling programme of this field, which was brought on production in July 2008, was concluded. Since the efficient exploitation of this Basement field requires early water flooding to reach a plateau production and avoid gas breakthrough, the original development concept was to water flood the eastern flank of the structure. Because the fracturing in the eastern flank of the field of the Basement reservoir is not as intense as that indicated by wells drilled in other parts of the structure, a drilling programme is being finalised to drill a well to the western part of the field to be converted to a water injector and to sidetrack a current producer to increase production. In the interim, production has been scaled back pending the initiation of water injection in order to maintain adequate reservoir pressure.  

Preparations are underway to tender for a two rig programme. One rig will be devoted to the CNV field and TGT development wells and the second rig will drill the TGD-2X, an appraisal well which will only test the upper reservoir. Drilling is anticipated to commence in the first/second quarter of 2010 following the end of the winter monsoon season in Vietnam.  

CNV Production net to the Group's working interest averaged 2,848 BOEPD for 2009. Production is currently suspended as a routine cleaning of the production line connecting the CNV platform to the Bach Ho production platform resulted in a "pig" (pipeline inspection gauge) becoming stuck in the production line. Efforts are underway to free the stuck equipment and resume production. 

THAILAND
Bualuang field

During the first half of 2009, the operator drilled two horizontal attic wells in the Bualuang field and reported a reserves upgrade.  The two wells were drilled to maximise oil production from the strong water driven reservoir, whilst minimising production of water. In the reserves upgrade, the operator reported a rise from 20 million gross proven and probable barrels of oil to 26.3 million gross proven and probable barrels of oil recoverable.  

Additional development drilling is anticipated in the upcoming year to maintain production levels and to efficiently exploit the field.  

Bualuang production net to the Group's working interest averaged 3,567 BOPD for 2009.

AFRICA

REPUBLIC OF CONGO (BRAZZAVILLE) 

Marine XI

Liyeke

In 2009 SOCO drilled two wells on Marine XI. The first, which launched the Company's drilling campaign, was the Liyeke Marine 1 ("LM-1") well, a low cost wildcat well which was spudded on 22 August 2009 by the Pride Cabinda jack up rig. The LM-1 well targeted and encountered the Sendji (post-salt) formation on the previously designated S1 prospect.  On reaching target depth, the reservoir was found to be water saturated. A 62 metre heavy oil column was encountered in the overlying sediments, but log and sample data indicated that the oil would not flow. Accordingly, the well was plugged and abandoned after reaching a total depth of 1,140 metres. 

The result of this well has no bearing on the post-salt prospects to the south and west of the Liyeke Marine well where the salt is thinner and discontinuous and will not prevent migration from the pre-salt source rocks. More importantly, the well has no impact on pre-salt prospects where source rocks are adjacent to the prospective reservoirs.

Viodo

The second well to be drilled on Marine XI, the Viodo Marine 4 vertical appraisal well ("VIM-4"), was spudded by the Pride Cabinda in September 2009.  The VIM-4 well was an appraisal of the 1986 Viodo oil discovery which lies in some 65 metres of water and contains oil in the Toca formation, a lacustrine carbonate developed below the regional salt horizon. Three of the four existing wells drilled during the period 1986 to 1990 successfully tested oil, but also showed the accumulation to be geologically complex.  

The Company's objectives in drilling the VIM-4 well were to further delineate the field, gather data that would allow the 3D seismic to be used to map the distribution of reservoir quality limestone and to test the effectiveness of a completion strategy that could be applied to high angle development wells.

The Company completed two drill stem tests and, in November, announced the VIM-4 had tested at a combined maximum flow rate of approximately 2,600 BOPD and 7.0 million standard cubic feet of gas per day ("MMSCFD"). 

In the first drill stem test from the deeper Carbonate section between 2,240 to 2,273 metres, the well flowed at initial post-acid rates of approximately 2,600 BOPD and 2.5 million MMSCFD on a 3/4 inch choke. Flow rates stabilized at approximately 1,100 BOPD on a 1/2 inch choke after an approximate seven hour flow period. A test of the upper Carbonate section, between 2,205 and 2,230 metres, flowed at post-acid rates of approximately 4.5 MMSCFD. 
 
The results of the well and the reprocessed seismic are being incorporated into a 3D model that will be used as a tool to assess the commerciality of the accumulation.

Marine XIV

In March, SOCO EPC received Governmental approval for its farm-in to the Marine XIV Block. Since that time, SOCO EPC, as operator, has completed a 100 square kilometre multi-azimuthal 3D seismic programme. The seismic is currently being processed and SOCO's first well on Marine XIV is planned for 2010.

DEMOCRATIC REPUBLIC OF CONGO (KINSHASA) 

Nganzi 

SOCO completed a 360 kilometre 2D seismic survey in late 2008 over the onshore coastal Nganzi Block. Initial interpretation of the processed seismic has been very encouraging as several large structures have been identified. Interpretation will continue and drilling is planned for the second half of 2010 with two or three exploration wells.

Block 5

The Group's applications for licences elsewhere in the country are pending a Presidential Decree on Block 5 in the Albertine Graben and the finalisation of a production sharing agreement on a large interior block.

ANGOLA 

Cabinda North

SOCO Cabinda Limited holds a 17% participating interest in the Production Sharing Agreement for the Cabinda Onshore North Block. The same contractor that conducted the seismic programme on the Nganzi Block has been mobilised to acquire both 2D and 3D seismic in Cabinda North.  

There have been multiple security incidents in the region, but Company personnel have not been directly affected. Currently, the seismic acquisition programme is suspended following the latest incident, which was not related to the project. No drilling is anticipated in Cabinda in 2010.

PRODUCTION

Total production net to the Group’s working interest during 2009 was 6,415 BOEPD sourced from its Vietnam and Thailand operations compared to 2,533 BOEPD produced from those continuing operations in 2008. This increase reflects a full year of production in Vietnam and Thailand compared with five and four months, respectively, in 2008.

FINANCIAL

In 2009 the Group realised an average oil price of approximately $55.50 per barrel of oil sold, similar to that realised on oil sold from continuing activities in 2008 of $55.27. Price stability and increased production volumes provided sufficient operating cash flow to sustain the Group’s year end 2009 cash and liquid investment position above $300 million at a level slightly higher than that at year end 2008. The 2009 year end net debt position remains similar to that at year end 2008 despite increased capital expenditure programme associated with the commencement of the Group’s exploration campaign in Africa and the TGT development in Vietnam. Both of these significant capital programmes will continue throughout 2010. The Group’s 2009 operating profit is expected to be broadly in line, on a basis pro rata to production, with that achieved in 2008 on continuing operations. 

RESERVES 

SOCO's booked Proved and Probable (2P) reserves are expected to be materially unchanged at the end of 2009 from those booked at the end of 2008 with the exception of taking into account production for the year and the reserve upgrade in Thailand.

Conference Call and Preliminary Results Date

SOCO will announce its preliminary year results for the year ended 31 December 2009 on 24 March 2010. 

A conference call for investors and analysts will be held today at 08.15 (London time) on Wednesday 20th January 2010. Investors and analysts can access the call by dialling into [phone].

Enquiries

SOCO International plc

Roger Cagle, Deputy Chief Executive and Chief Financial Officer 

Tel: [phone]

Pelham Public Relations

James Henderson 

Evgeniy Chuikov 

Tel: [phone]

This announcement is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration under the Securities Act, or in accordance with an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Company has not registered and does not intend to register any of the placing shares under the US Securities Act. The placing shares will not be offered or sold to the public in the United States. The placing shares referred to in this announcement are being offered and sold outside the United States in accordance with Regulation S under the Securities Act and in the United States to "qualified institutional buyers" in accordance with an exemption from registration under the Securities Act.

 

END

 

 

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