Interim Management Statement Nov 2014
SOCO International plc today announces its Interim Management Statement relating to the period from 1 July 2014 to 12 November 2014.
- Production averaged 13,598 BOEPD year to date through 31 October 2014; 2014 full year production now expected at 13,300‐13,800 BOEPD due to higher‐than‐anticipated shut‐downs for additional drilling rig moves
- TGT 2014 in‐fill drilling programme is on track with four wells drilled year‐to‐date and another two expected by year end
- The TGT H5 development is progressing well – the Field Development Plan was approved in September and drilling of the development wells has commenced following the installation of the wellhead jacket ahead of schedule
- The Lidongo Marine 101 exploration well offshore the Republic of Congo successfully drilled and tested, with oil flow rates significantly exceeding pre‐test expectations Financial
- On 10 October 2014, SOCO made a cash return to shareholders of $121 million, or 22 pence per share, representing c.60% of free cash flow for 2013
- Net cash and liquid investments as at 12 November 2014 were approximately $177 million
- Capex for the full year 2014 is expected towards the top end of the $160‐170 million guidance mainly due to the acceleration of H5 drilling activity and Marine XI testing
- The combination of cash generation from the Vietnam producing assets, even at lower oil prices, and the Company’s strong balance sheet means that SOCO can fund its exploration and development activities and continue its strategy of cash returns to shareholders
SOCO International plc
Anya Weaving, Chief Financial Officer
Tel: 020 7747 2000
Tel: 020 3772 2500
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.
Block 16-1 – Te Giac Trang (TGT) Field (30.5% interest; operated by Hoang Long Joint Operating Company (“HLJOC”))
TGT field production averaged 38,498 barrels of oil equivalent per day (“BOEPD”) through the first ten months of the year, 11,545 BOEPD net to SOCO. In the four months to October 2014, TGT total field production fell to 36,490 BOEPD. This was mainly due to the higher-than-expected rig activity in the field, with a larger number of shut-downs required to allow rigs to move onto and off the wellhead platforms and over the in-field pipelines, in order to perform abandonment operations on previously suspended wells. As a result, the overall Group production guidance for 2014 has been lowered to 13,300-13,800 BOEPD from the previous 14,000-15,000 BOEPD range.
TGT crude sale contracts to December 2014 continue to realise a premium slightly above $4 per barrel to the Brent benchmark crude price. As in the past, premia for the sale of Vietnam crude oil has moved in line with the market price for crude. Thus, if conditions persist we expect lower crude prices and market uncertainty to adversely impact the premium for new term contracts for next year.
TGT 2014 Drilling Programme
The 2014 in-fill development drilling programme at the TGT field remains on track. Subsequent to the Interim results, three additional wells have been drilled on the TGT field – two on the H4 Well Head Platform (“WHP”) using the Naga-2 rig, and one on the newly installed H5-WHP by the Naga-3 rig – bringing the total number of wells drilled on TGT and H5 year-to-date to six.
The two wells drilled and completed on TGT are TGT-19I and TGT-9X. TGT-19I, the TGT field’s first injection well drilled to the east of the H1 Fault Block, encountered the reservoir horizons slightly deeper than expected although the well was in line with pre-drill expectations. The location of the well will help define the eastern limit of the field in the H1 area. The second well, the TGT-9X appraisal well, has been drilled to the top of the reservoir section and is having casing run and cemented. The TGT-9X is an appraisal well designed to prove up reservoir potential in the ILBH 5.2, and the Oligocene C and D sequences in the H3 fault block.
The H5 development project is progressing well and remains on target for first oil in September / October 2015. The H5 Field Development Plan (“FDP”) was approved on 20 September 2014, and the first phase of the H5 project has been successfully executed with the completion of fabrication and installation of the H5-WHP on 1 September 2014 in less than four months, 22 days ahead of schedule, and with more than 500,000 man-hours without an LTI.
The development drilling of the first of the development wells from the H5-WHP commenced on 1 October 2014. The jack-up rig Naga-2 completed the TGT-22P well and is now batch-drilling the TGT-23P and -24P wells. The TGT-22P well was drilled in a manner to more accurately determine the distribution of gas and oil seen in the testing of the Miocene sands on the TGT-10X discovery well. The results are being analysed, however, initial analysis indicates a significantly higher distribution of oil in the upper portion of the Miocene reservoir and a more limited gas section than previously expected.
The Naga-2 will drill a total of five to six H5 wells before leaving the platform in April 2015 to allow for the H5 topsides and production pipelines to be installed and hook-up and commissioning operations to commence for start-up in September / October 2015.
2015 Budget / Development Programme
The TGT field 2015 activities programme and budget, as well as the production forecast, are expected to be approved by the HLJOC by the end of the year. The partners also continue working on updating the TGT Field Development Plan, which is still targeted for submission to the relevant authorities in Q1 2015.
FPSO de-bottlenecking, increasing production and improving field recovery performance remain key focus areas. The decision as to optimal timing of the FPSO oil capacity test will be made subsequent to the approval of the drilling programme and sequence in the updated TGT FDP.
Earlier this year, SOCO retained ERC Equipoise Limited (“ERCE”) as independent experts to construct a field wide model of the TGT field, incorporating all available data including seismic, appraisal and development well data and production history. The scope of the ERCE work is to build a new static geoscience model and a new dynamic engineering model. The ERCE study is currently nearing completion, with the new results from the TGT-22P well being incorporated into the model. The full field simulation model is on target to be completed by the end of 2014.
The new field model will enable us to further advance our understanding of the field and to optimise future drilling and field management activity. The results of the new model will be incorporated into the reserves assessment as part of the year-end process. SOCO also expects to commission an independent reserves evaluation report following completion of the ERCE work.
Block 9-2 – Ca Ngu Vang Field (CNV) (25% interest; operated by Hoan Vu Joint Operating Company (“HVJOC”))
Production from CNV averaged 2,053 BOEPD net to the Company’s working interest during the first ten months of the year.
The decision as to the timing of returning to the CNV-7P well is expected to be made following completion of the agreed detailed rock mechanic and drilling studies which are expected to be undertaken in early 2015.
REPUBLIC OF CONGO (BRAZZAVILLE)
Marine XI (40.39% interest held by 85% owned subsidiary; operated)
On 4 November 2014, SOCO announced that SOCO EPC, operator of the Marine XI Block, had successfully completed testing the exploration well Lidongo X Marine 101 ST1 (“LXM‐101”). The well significantly exceeded pre‐test expectations, reaching a post stimulation frac peak rate of 5,174 barrels of oil per day and 3.65 million standard cubic feet of gas per day.
The well results are being analysed in order to determine the continuity of the well with the nearby discovery in the Marine XII Block.
Nanga II A (100% interest held by 85% owned subsidiary; operated)
Following the expiry of the Prospection Authorisation on 11 October 2014, SOCO has approached the Congolese Ministry of Hydrocarbons and indicated interest in entering into negotiations for a Petroleum Sharing Contract.
Mer Profonde Sud (MPS) permit (60% interest; operated)
The partners have commenced a detailed well location study. Timings for delivery of long-lead equipment required to drill the deep-water well mean that in the event of agreement on a location we would look to drill in late 2015 / early 2016.
DEMOCRATIC REPUBLIC OF CONGO (KINSHASA) (“DRC”)
Block V (85% interest held by 85% owned subsidiary; operated)
The lake bed seismic survey on Lake Edward was completed in July 2014 and the acquired data is being processed and interpreted. All equipment and services used during the seismic survey have been withdrawn from the area under the supervision of the DRC environmental authorities.
SOCO is no longer conducting operations anywhere in Block V including Virunga National Park. The Company has ongoing non-operational investment obligations regarding environmental baseline studies and social projects, which include the recent installation of facilities capable of providing potable water to several local communities. These activities should be concluded by the end of 2014. The delivery of seismic results to the DRC authorities is SOCO’s obligation under the licence.
SOCO has already publicly committed, in a joint statement with World Wildlife Fund (WWF) five months ago, that it will not further explore or drill within Virunga National Park in the absence of an agreement between the DRC and UNESCO.
Cabinda North (17% interest held by 80% owned subsidiary; non-operated)
The operator, Sonangol, is preparing detailed plans for operations on the Block in the next phase of the licence period commencing 1 April 2015. These are expected to be reviewed by the partnership by 2014 year-end.