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 January 2012 to 15 May 2012.
- Production for the first four months of 2012 averaged 11,690 barrels of oil equivalent per day (“BOEPD”) net to the Company’s working interest, a 358% increase compared with the same period in 2011.
- Entitlements production equalled 13,924 BOEPD and is on track to meet the ca. 16,000 BOEPD guidance for the full year.
- Net cash as at 15 May 2012 equalled $181.8 million (31 December 2011: $113.5 million)
- The Te Giac Trang Field remains on track for production from the second platform commencing in late July/early August, increasing field production to approximately 55,000 barrels of oil per day (“BOPD”)
- During the period, the Company purchased 2.6 million ordinary shares into treasury at a cost of £7.5 million and redeemed $0.9 million convertible bonds
- The Te Giac Den Appraisal Area was relinquished after assessment that drilling a well on a sole risk basis well would not be in shareholders' best interests.
Activity in the year to date has been directed primarily toward evaluating TGT reservoir performance, accelerating the construction of the second platform at the TGT Field offshore Vietnam, which is operated by the Hoang Long Joint Operating Company (“HLJOC”), evaluating the existing exploration portfolio for a possible second round of drilling activity and evaluating potential new projects.
Te Giac Trang ("TGT")
Production from the H1 platform, which constitutes the first phase of development of TGT, averaged 9,312 BOPD net to the Group’s interest during the first four months of 2012, net entitlement production was 11,546 BOPD including recovery of PetroVietnam carried costs. Drilling of five development wells from the H4 platform (the second production platform of the TGT development), was completed and the rig was released on 26 April 2012. All the development wells are suspended and will be perforated to become producing wells on start-up of production from the H4 platform. Accelerated construction activities on the H4 topsides has allowed for an early load out from the fabrication yard on 15 May 2012. Production start up is now scheduled to commence in late July/early August 2012, ahead of schedule.
In May, the HLJOC entered into a term contract for the second half of 2012 to sell a total of 40,000 BOPD to three purchasers at a price equal to a $6.60 premium to Dated Brent. Production over and above the term contract will be sold on the spot market. Once the second platform is on stream, gross production from the TGT field is expected to ramp up to ca. 55,000 BOPD.
Te Giac Den ("TGD")
Whilst the results of the interpretation of the new 3D seismic, acquired late last year, enhanced the understanding of the area, the Company concluded that it was not in shareholders' best interests to drill another well in the TGD Appraisal Area on a sole risk basis. Although farm-out discussions were held with interested parties, a definitive agreement could not be reached. As a consequence, SOCO has informed the relevant authorities that it relinquished the TGD appraisal area upon the expiry of its option to drill, which ended 30 April 2012.
Ca Ngu Vang ("CNV")
Production at the Ca Ngu Vang Field in Block 9-2 offshore Vietnam, which is operated by the Hoan Vu Joint Operating Company ("HVJOC"), has been steady, although temporarily reduced for four weeks to test the efficiency of alternative production chemicals. Dedicated test separation and metering facilities are being installed on the Bach Ho central processing platform complex and commissioning will commence shortly.
Once in service, the new facilities will allow HVJOC to more accurately measure liquid and gas production from the CNV production stream entering the Bach Ho central processing platform complex. This will benefit to the Company by allowing for more accurate allocation of CNV oil, gas and gas liquids production within the Bach Ho production system. CNV production net to the Company’s working interest has averaged 2,378 barrels of oil equivalent per day during the first four months of 2012.
REPUBLIC OF CONGO (BRAZZAVILLE)
The Makouala Marine 1 (“MKM-1”) exploration well, spudded in November 2011 in the Marine XIV Block, encountered hydrocarbons in both the primary and secondary reservoir targets. However, analysis of the wireline logs indicated that the reservoir sands at the location were not as well developed as predicted and there was insufficient overall pay thickness for commercial flow rates. The well was subsequently plugged and abandoned and the rig released.
Information from this drilling campaign will be factored into further drilling decisions to be taken later this year.
DEMOCRATIC REPUBLIC OF CONGO (KINSHASA)
During the period, SOCO has continued to actively engage with local communities, regional and national authorities and other stakeholders regarding potential activities on the Block and the assessment of their environmental and social impact. Specifically, to foster a comprehensive debate amongst all stakeholders, SOCO organised meetings under the authority of the Governor of North Kivu and the Environment Minister of North Kivu. These meetings were attended by over 90 stakeholder representatives including the Congolese Wildlife Authority (ICCN), international and regional NGOs, local fishery representatives, other interested DRC governmental ministries, local customary chiefs and representatives from regional and provincial authorities. SOCO and the ICCN have signed a co-operation agreement which grants and governs SOCO's access to the Virunga National Park.
Having received the relevant approvals, SOCO is planning to undertake an aerial survey next month, which entails gathering magnetic and gravity information via instrumentation installed on a helicopter flying over Lake Edward. This survey is being conducted in accordance with a comprehensive Strategic Environmental Evaluation commissioned by the DRC Government in 2011, a component of which includes specific activities designed to investigate the probability of the presence of hydrocarbons in the Block. The survey is additionally governed and monitored under the terms of the Environmental Acceptability Certificate issued by the Ministry of the Environment, Nature Conservation and Tourism.
The 2D seismic acquisition programme, commenced early in the first quarter, has been successfully completed and processing commenced. Following interpretation, decisions on potential drilling locations will be made.
Repurchase of ordinary shares and redemption of convertible bonds
To date in 2012 the Company has bought back convertible bonds with a par value of $0.9 million representing 0.4% of the $250 million convertible bonds that were issued in 2006. Previously, the Company redeemed $165.9 million (66.4%) following the exercise of bond put options on 16 May 2010 and bought back a further 14.2% with a par value of $35.4 million during 2011. The remaining $47.8 million of bonds mature in May 2013.
To date in 2012, the Company has purchased 2.6 million ordinary shares into treasury at a cost of £7.5 million.
The second production platform at TGT is on track to commence production in mid-July/early August 2012. Gross production from the field is expected to reach ca. 55,000 BOPD shortly thereafter.
The Company continues to evaluate exploration opportunities in South East Asia and Africa. Although there is no certainty that any new projects will be introduced in the near term, revenue from TGT oil sales is set to transform the cash resources of the Company with the southern part of the field coming into production in a few months.
SOCO International plc
Roger Cagle, Deputy Chief Executive and Chief Financial Officer
Tel: 020 7747 2000
Pelham Bell Pottinger
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 80% owned subsidiary SOCO Vietnam Ltd. (”SOCO Vietnam”) and through its 100% ownership of OPECO, Inc. SOCO Vietnam 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, Inc. holds a 2% interest in Block 16-1.
SOCO holds its interests in the Republic of Congo (Brazzaville), all offshore in the shallow water Lower Congo Basin, through its 85% owned subsidiary, SOCO Exploration and Production Congo SA (“SOCO EPC”). SOCO EPC holds a 29% interest in the Marine XI Block and a 19.4% interest in the Marine XIV Block and is designated operator of the two Blocks.
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 a 38.25% participating interest in Block 5, 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.