Interim Management Statement Nov 2013
SOCO, an international oil and gas exploration and production company, today announces its Interim Management Statement relating to the period from 1 July 2013 to 18 November 2013.
OVERVIEW
- On 14 October 2013, SOCO made a return of cash to shareholders, the first in the history of the Company, returning 40 pence per share, approximately £133 million
- Operatorship and farm-in to Mer Profonde Sud in Congo (Brazzaville)
- The TGT-10XST1 exploration well located in the southern part of the Te Giac Trang (“TGT”) field tested at over 27,600 barrels of oil equivalent per day (“BOEPD”)
- Production net to the Company’s working interest averaged 15,616 BOEPD year to date through 31 October 2013. Guidance for the full year remains at 16,000 BOEPD
- A gas sales contract for TGT has been agreed
- Net cash and liquid investments as at 15 November was approximately $200 million
OPERATIONS
Vietnam
Block 16-1
Te Giac Trang ("TGT) Field
The TGT field is currently producing from sixteen producing wells from two unmanned platforms. The field continues to perform in line with expectations, with field production averaging 45,132 barrels of oil per day (“BOPD”) through the first 10 months of the year, 13,519 BOPD net to the Group’s working interest. TGT crude sales currently realise a premium of approximately $4 per barrel to the Brent benchmark crude price.
TGT-10XST1 exploration well
The TGT-10XST1 exploration well is located approximately six kilometres south of the H4 Well Head Platform in the southern part of the TGT field. In early October 2013, SOCO announced that completion of the testing of TGT-10XST1 had exceeded all pre-test expectations, flowing at a combined average maximum production from the three zones tested at over 27,600 BOEPD.
The first test, over a net 93 metre section in the Oligocene “C”, produced at a maximum rate of 9,488 BOPD and 1.16 million standard cubic feet of gas per day (“MMSCFD”) of 41.1 degree API oil. The second test, over the Miocene Lower 5.2L sequence, tested 7,100 BOPD and 1.76 MMSCFD. The final test, in the Lower Miocene Intra Lower Bach Ho 5.2 Upper and Lower sequence, over a perforated interval of 88.6 metres, flowed at an average maximum rate of 5,156 BOPD and 32.5 MMSCFD.
The well encountered approximately 250 metres of gross pay section (approximately 119 metres of net pay) in the Miocene and Oligocene reservoir horizons. Approximately 100 metres of net pay were evaluated by the three tests.
Associated Gas Gathering and Sales Agreement
The approval for the TGT Associated Gas Gathering and Sales Agreement from the relevant Vietnamese authorities has been received. A signing ceremony has been set for 19th November in Hanoi.
Congo (Brazzaville)
Marine XI
Lideka East Marine-1 well
As announced in September 2013, drilling of the Lideka East Marine-1 well (“LDKEM-1”) targeted a post-salt structure, up-dip from the Lideka Marine-1 well which found oil shows in the Sendji Formation (“iS3”). The well encountered approximately 50 metres of net pay section in the Upper and Lower Sendji, of which approximately 30 metres of net pay are within the targeted iS3 and S4 horizons.
The LDKEM-1 well was tested over a 20 metre interval in the iS3 and S4 horizons. The well flowed 30-35 degree API oil at a sustained rate of 350 BOPD, with base, sediment and water around 1%, in line with predictions from the petrophysical analysis. Produced gas volumes were very low.
The well was drilled on the crest of the structure to identify the length of the oil column. The Sendji is known to be a heterogeneous reservoir, and detailed rock physics and inversion models will need to be used to determine where the best porosity zones are situated. The oil water contact was not clearly defined in the exploration well, and an “oil down to” shale barrier could present upside. Further work will be conducted to establish viable opportunities on this field.
Nanga IIA
Reprocessing is still ongoing of the remaining previously acquired seismic data, and is expected to be completed in the second quarter of 2014. We are awaiting approval from the Congolese Ministry of Hydrocarbons for a further year’s extension to the Prospection licence .
Mer Profonde Sud permit
The Company also announced that it has entered an agreement with PA Resources Congo SA (“PAR”), a wholly owned subsidiary of PA Resources AB, to farm-in to a 60% working interest in the Mer Profonde Sud permit, offshore the Republic of Congo (Brazzaville). The Mer Profonde Sud permit comprises the exploration area of the licence but excludes the Azurite Field.
In return for carrying certain of PAR's costs, SOCO will assume a 60% working interest in the Mer Profonde Sud exploration area as operator and will drill an exploration well in the remaining licence period. The well will test a different structural setting and play, identified from recent seismic reprocessing and subsurface re-evaluation, from the other wells already drilled on the Block. It will target similar reservoirs that produce from offsetting fields in the Congo and in Angola/Cabinda.
The transaction is subject to the necessary partner and regulatory approvals including both the assignment of the interest to SOCO and renewal into the third and final period of the licence. Following approval, the partners would look to drill the well in 2014-2015.
Following completion of the transaction, PAR will retain a 25% working interest in the licence, whilst the Congolese state oil company, SNPC, will retain its current 15% interest.
Democratic Republic of Congo (Kinshasa) (“DRC”)
Nganzi
The Board has decided to not proceed into the next phase of the licence. Accordingly, the Company has submitted its application to relinquish the Block. Ministry confirmation is expected to be received by the end of the year.
Block V
SOCO has not yet commenced any exploration activities. The Company is currently conducting environmental baseline studies of fish and molluscs on Lake Edward, utilising the Okapi Environment Conseil Sprl, a respected environmental consultancy specialising in environmental and social evaluations. A lake bathymetry study has commenced. A hippopotami inventory is due to commence in November 2013.
In August 2013, SOCO launched its social projects for the communities around Lake Edward. These projects include a mobile hospital, the launch of a disease mapping campaign and the installation of a communications mast at Nyakakoma. The mast will immediately reduce the human footfall across the Virunga National Park as it will enable communities to access a communications signal for the first time from their own village. This will reduce the need to travel long distances (reportedly walking up to 20 miles) across unsafe and hostile territory. Addressing these risks positively contributes to the efforts to bring stability to the region.
Republic of Angola (Cabinda)
Cabinda North
Dinge 20-6 well
The Dinge 20-6 well, the first of a two well exploration programme that commenced on 9August 2013, identified two hydrocarbon zones which have subsequently been tested. The results of these tests are under review and details will be released by the operator in due course.
The well tested the Vovo Sands in the pre-salt section onshore Cabinda North in the area of the Dinge discovery. The target sands were deposited in a lacustrine environment above the middle Bucomazi, which is a world class source rock.
The second well, Dinge 20-7, is expected to be drilled immediately following completion of work at the Dinge 20-6 location.
The Vovo sands of the Dinge Field are in an equivalent stratigraphic position to the Mengo-Kundji-Bindi reservoirs of the Republic of Congo, 17 kilometres northwest and on trend.
CORPORATE
Return of Cash to Shareholders
On 14 October 2013, SOCO completed a return of £133 million to shareholders, after receiving shareholder approval at a general meeting on 25 September 2013. The return of cash was structured using an issue of B Shares and/or C Shares, which enabled Shareholders to elect to receive their return of cash proceeds as either income or capital or any combination thereof on the equivalent basis of 40 pence for ordinary share.
Directorate Changes
Michael Johns, Senior Independent Non-Executive Director, retired as a director with effect from 30 September 2013. The Board thanks Mr Johns for his invaluable contribution to the Company during his tenure of office.
Marianne Daryabegui, currently the Managing Director of the Corporate Finance Oil & Gas team at BNP Paribas in France, was appointed as a Non-Executive Director with effect from 1 October 2013 and will serve as a member of the Audit, Remuneration and Nominations Committees.
OUTLOOK
By continuing its disciplined approach to the allocation of capital, the Company is comfortably positioned to continue an annual return of cash to shareholders and to also retain exposure to a high potential exploration programme.
19 November 2013
ENQUIRIES:
SOCO International plc
Roger Cagle, Deputy Chief Executive Officer and Chief Financial Officer
Tel: 020 7747 2000
Bell Pottinger
Rollo Crichton-Stuart
Elizabeth Snow
Tel: 020 7861 3232
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 Marine XI and the Nanga II A Blocks 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 hold its 60% working interest in the Mer Profonde Sud permit, offshore the Republic of Congo (Brazzaville) through its wholly owned subsidiary, SOCO Congo BEX Limited.
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 an 85% working interest and is the designated operator in Block V, situated in the southern Albertine Graben in eastern DRC.
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.