Preliminary Results for the Year Ending 31 December 2015

SOCO, an international oil and gas exploration and production company, today announces its preliminary results for the year ended 31 December 2015.

Ed Story, President and Chief Executive Officer of SOCO, commented,

“Although no one in this industry is immune to the pricing storms that surround us, because of our business model and strong balance sheet, we are in a good position to take advantage of the opportunities available to build for the future. We are focusing on synergistic acquisition situations offering complementary cash generative strength as well as exploration opportunities providing future drilling optionality. Above all, we intend to manage this approach with the overall objective of targeting sustainable cash returns to shareholders.”



  • Annual production net to the Group’s working interest averaged 11,976 barrels of oil equivalent per day (“BOEPD”) (2014: 13,605 BOEPD); at the top end of our guidance range
    • Te Giac Trang (“TGT”) Field production averaged 34,032 BOEPD gross and 10,227 BOEPD net
    • Ca Ngu Vang (“CNV”) Field production averaged 6,997 BOEPD gross and 1,749 BOEPD net
  • First oil from TGT H5 development achieved on 10 August 2015
    • Delivered under budget and more than one month ahead of schedule
    • Exemplary health and safety record of 2.4 million man hours without a lost time incident
  • Updated Reserve Assessment Report completed by Hoang Long JOC
    • Approved by PetroVietnam; final approval from Vietnamese Government expected Q2 2016
  • Group year-end 2015 commercial reserves 37.3 MMboe (2014: 40.8 MMboe) following production and modest upward revision
  • Memorandum of Understanding signed for Blocks 125/126, offshore central Vietnam; work is ongoing towards formalisation of a Production Sharing Agreement


  • 12 month extension granted on the Marine XI licence
  • All commitments under Mer Profonde Sud (“MPS”) licence have been completed


  • Ongoing balance sheet strength; year-end cash balance of $103.6m and no debt
  • Capital expenditure of $87.5m (2014: $162.5m)
  • Cash operating costs were approx. $10 per barrel
  • Revenue $214.8m (2014: $448.2m)
    • Average realised crude oil price approx. $54 per barrel; $2 per barrel premium to Brent
    • Net cash generated from operations $80.3m (2014: $251.2m)
  • After tax loss $33.8m (2014: $14.0m profit) after exploration expenses, including Baobab Marine-1 well on MPS
  • No impairment of our producing assets in the period (2014: $60.5m)
  • Recommended dividend of 2 pence per share (approx. $9.5m) to be approved at the AGM
    • Distribution made to shareholders during 2015 of $51.1m (2014: $119.2m)
    • $383.6m returned to shareholders over the past three years


  • 2016 exploration and development programme is fully funded from existing cash resources
  • 2016 financial and operating metrics
    • 2016 production guidance 10-11,500 BOEPD
    • Operating expenditure expected to remain at approx. $10 per barrel
    • 2016 firm capex budget of $54m including MPS well costs provided for in 2015; Vietnam $18m
  • A Full Field Development Plan for TGT has been updated during the year. Expected submission by to the relevant Vietnamese authorities Q2 2016
  • Deferred payment of $52.7m associated with 2005 sale of Mongolia interests expected to be fully received in next 12 months
  • Additional distribution to shareholders to be considered in H2 2016
  • Ongoing focus on sustainable cash flow generation and commitment to strategy of cash returns


SOCO International plc

Roger Cagle, Deputy Chief Executive and Chief Financial Officer

Antony Maris, Chief Operating Officer

Tel: 020 7747 2000

Bell Pottinger

Nick Lambert

Elizabeth Snow

Tel: 020 3772 2500


SOCO is an international oil and gas exploration and production company, headquartered in London and traded on the London Stock Exchange. The Company has field development and production interests in Vietnam and exploration and appraisal interests in the Republic of Congo (Brazzaville) and Angola.

In accordance with DTR 6.4, SOCO has notified the FCA that its home member state is the United Kingdom. SOCO is registered in England and Wales; company registration number 03300821.


Although 2015 was a continuation of the tough industry environment which began the previous year, when assessed on the basis of those things over which the Company could exercise some element of control, SOCO performed well and emerged in excellent shape.

We allocated capital to those projects that positively impacted the bottom line. We cut costs by renegotiating reductions in vendor contracts and services. We closed offices and deferred any cash bonuses to executives. We deferred projects to take advantage of an improving cost environment. All this and we still returned $51.1m to shareholders whilst maintaining a strong balance sheet with a year-end cash balance of $103.6m and no debt.

The Company is staffed and managed by people who have extensive experience in this industry and we are accustomed to having to deal with its cyclical nature. Thus, whilst we are impacted by the downturn and it affects our decision making, the business remains resilient, well positioned and robust, with a strong balance sheet and a cash break even oil price in the low $20 per barrel range.

With our significant financial flexibility, fully funded capital programme and strict cost discipline, we can continue our strategy of focusing on delivering to shareholders both value – through cash returns – and growth, be it organic or inorganic. The short term priority is to shape the business, which is already resilient in a downside scenario of persistent low oil prices, and to ensure that we are positioned for delivering sustainable growth as the oil price recovers.


Against the poor industry back drop, 2015 was another solid year for SOCO. We sustained our policy of returning cash to shareholders by declaring a final dividend for 2014 and paying out $51.1m to shareholders. We brought the H5 development into production ahead of schedule and below budget, and maintained our exemplary health and safety record.

Group production of 11,976 barrels of oil equivalent per day (“BOEPD”) was at the top end of our guidance range, down from 13,605 BOEPD in 2014. The year-on-year drop was mainly attributable to a slowing of investment on the TGT Field thus allowing the higher water cut producing wells to force us into capacity limits on the shared FPSO.

Directly correlating with the approximately 50% decline in oil prices (from $103 per barrel in 2014 to $54 per barrel) and lower production, revenue dropped from $448.2m in 2014 to $214.8m. The Group posted a loss of $33.8m (2014: $14.0m profit) in the period after taking account of exploration expenses. The 2015 exploration expenses were primarily associated with the costs to complete the Mer Profonde Sud licence commitments of $36.4m (2014: $79.5m). There has been no impairment of our producing assets in the period (2014: $60.5m).

Net cash generated from operations, again reflecting lower sales and declining oil prices, fell to $80.3m in 2015, down from $251.2m in 2014. Capital expenditure essentially halved, dropping from $162.5m in 2014 to $87.5m as we slowed spending not directly tied to adding value to the bottom line and postponed non-essential spending.

SOCO made its first dividend distribution in 2015 of $51.1m shelving returns via B/C share schemes which are no longer available, which paid out $119.2m to shareholders in 2014. SOCO has returned $383.6m to shareholders over the past three years putting it into a class of its own amongst our peer independent E&P companies.


Te Giac Trang (“TGT”) Field

(30.5% working interest; operated by Hoang Long Joint Operating Company (“HLJOC”))

TGT Field production for 2015 averaged 34,032 BOEPD gross and 10,227 BOEPD net to SOCO’s working interest.

The H5 development was successfully brought on stream on 10 August 2015, more than one month ahead of schedule, under budget and with a total of 2.4 million man hours without a lost time incident.

The updated Reserve Assessment Report has been completed by HLJOC and approved by PetroVietnam. The formal presentation to the relevant Vietnamese authorities has been made and final approval is expected in Q2 2016. Following receipt of the approval, the revised Full Field Development Plan (“FFDP”) is expected to be submitted for approval in Q2 2016. The scope of the development programme in the FFDP is expected to include additional wells and facilities options to increase water handling capacity.

The capital expenditure budget for Vietnam is approx. $18m, which includes long lead items for four wells for the ongoing TGT Field development, the cost attributed to completing drilling activities on TGT-14X appraisal well and new venture costs associated with Blocks 125/126. For 2016, no firm production target has been agreed between the HLJOC partners pending agreement on the scope of the FFDP, as well as receipt of optimised 2016 production scenarios from the HLJOC utilising full reservoir potential from existing wells. The 2016 contingent capital budget covers the drilling costs for the wells, as well as costs associated with water handling facilities upgrade following FFDP approval.

The TGT Field has attractive economics and cost recovery terms, low operating costs and a benign operating and geopolitical backdrop. Moreover, the field economics also mean that the cash flow profile and returns are significantly geared to the oil price.

Proven and probable reserves for the TGT Field were broadly flat year-on-year reflecting the lack of further investment in the field, whilst the new H5 production partially offset the higher water cut coming from the older producing platforms. After adjustments for production during the year (3.7MMboe) and a modest downward revision (2.2MMboe), 2P commercial reserves for the TGT Field were 30.6MMboe as at 31 December 2015.

Ca Ngu Vang (“CNV”) Field

(25% working interest; operated by Hoan Vu Joint Operating Company (“HVJOC”))

CNV Field production for 2015 averaged 6,997 BOEPD gross and 1,749 BOEPD net to the Company’s working interest.

The HVJOC is evaluating the impact of the reservoir pressure drop from reduced water injection on the long-term performance and recovery of the field, as well as looking into potential ways of maintaining production performance and improving recovery from the field. The initiatives for the latter include conversion of the CNV-6P-ST1 injection well to a producer and modification of processing facilities on the Bach Ho platform to lower minimum tubing head pressure. Discussions with the owner of the Bach Ho processing facilities are under way.

Year-end proven and probable reserves for the CNV Field were increased after an over 80% upward revision (3.0MMboe) and production of 0.6MMboe, ending the year at 6.7MMboe.

Vietnam New Ventures

On 29 July 2015, SOCO signed a Memorandum of Understanding with PetroVietnam and SOVICO Holdings regarding obtaining petroleum contracts on Blocks 125/126, offshore central Vietnam. Work is ongoing towards formalisation of a Production Sharing Agreement.

Africa Exploration

Marine XI

(Operated, 40.39% working interest)

Following the successful Lidongo X Marine 101 exploration well drilled in 2014 on the Marine XI Block offshore Congo (Brazzaville), the focus turned to two things; discussion with authorities regarding commercialisation options for the Lidongo discovery area, along with potentially other prior discoveries on the Block, and reprocessing of our 3D seismic previously acquired over Marine XI. Options for commercialisation alternatives were limited as block expiry was scheduled for March 2016; however, the Congolese authorities agreed in early 2016 to a 12 month licence extension.

With the Lidongo well suggesting a possible extension into our Block of the Litchendjili Field on the Marine XII Block, which began production in 2015, we entered into an agreement with the interest holders of Block XII to explore options for a potential joint development or unitisation.   Although a data exchange has taken place, substantive discussions have not yet begun.

The Marine XI partners have prepared a Production Licence Application, which has been submitted to the Congolese authorities. Meanwhile interpretation of the reprocessed seismic is ongoing.

Mer Profonde Sud

(Operated, 60% working interest)

The Mer Profonde Sud Block is located in the Lower Congo Basin, offshore Congo (Brazzaville). SOCO farmed into the Block in November 2013 with a 60% working interest (100% carried interest for one well) and assumed operatorship. Regulatory approval was granted in the first quarter of 2014.

The Block was in its third and final period of the exploration licence with a mid-2016 expiry. The licence carried an obligation to drill an exploration well.

In February 2016, the well was drilled on the RR Prospect to a measured depth of 3,275 metres and intersected the stacked early Miocene channel complexes that were targeted. Although good quality sands were present, no hydrocarbons were encountered, suggesting lack of communication with the known oil source. The well was plugged and abandoned and the drilling programme was executed under budget.

Cabinda North

(Non-operated, 17% working interest)

Discussions are ongoing among the partners and with the authorities to agree the new partnership, operator and activities during the licence extension period to April 2018.


Non-Executive Directors

Corporate governance remains a priority and the Company has initiated a further programme of Board refreshment with two long serving Non-Executive Directors, John Norton and Robert Cathery, not seeking reappointment at the upcoming AGM. We thank both for their many years of excellent service to the Company, throughout which they continued to discharge their duties with the rigour and objectivity expected of fully independent Non-Executive Directors.

We appreciate their valuable contribution during the induction and assimilation of our most recent appointments. Accordingly, we believe that the continuing Directors will comprise an appropriately balanced Board with the experience and attributes critical to the success of the Company.

We will continue to review the balance and effectiveness of the Board with a view to adding independent non-executives commensurate with our size and need.


The Company has a strong track record of managing its asset and capital base effectively which has enabled it to return approximately $438m to shareholders over the last seven years via dividends, capital returns and share buybacks. This prudent and rigorous approach to capital has served the Company well even in the face of the recent, very significant decline in the oil price.  Indeed, even at current oil prices, SOCO continues to generate solid cash flow, has a strong balance sheet with over $100m of cash and no debt.

The Board of SOCO has a very clearly defined approach to capital which is to:

  • Retain a strong balance sheet under all oil price scenarios;
  • Pay a sustainable dividend to shareholders;
  • Invest organically and inorganically in attractive risk / return profile ‎projects; and
  • ‎Periodically assess, in light of the prevailing environment, uses for excess capital and consider additional capital returns

In light of this capital allocation philosophy and to emphasise our intent for the sustainability of creating value for our shareholders, the Board has proposed a final dividend for the year ended 31 December 2015 of 2 pence per share which will be recommended for shareholder approval at the Annual General Meeting to be held in June of this year. Further, given an oil price at or above current levels and no major adverse surprises in our budget for the year, we anticipate that the Board will at mid-year results propose a special payout to be distributed in the second half of the year.


We remain committed to evaluating alternatives to optimise our exposure to upside without jeopardising our focus on sustainable cash flow generation. We expect to secure synergistic, longer term opportunities that offer exploration drilling optionality in a more robust environment without putting our dividend policy in jeopardy. We are refocusing our business in South East Asia as past merger and acquisition activity has substantially reduced the number of competitors in the region. We understand the region, particularly Vietnam, and have had considerable success there in the past, which we aim to repeat in the future.

In January 2016 and prior to firm agreement on the TGT FFDP, we set our production guidance range for 2016 to 10-11,500 BOEPD. The lower end reflects limited reservoir management and natural field decline. The upper end reflects the additional optimised reservoir management with production from potential newly drilled wells. However, if non-essential capital outlay does not contribute directly to the bottom line, we do not expect to go forward with the expenditure at this time.

Thus continuing from last year, our operational focus for 2016 will be on working with the TGT partners to submit the updated TGT FFDP in Q2 2016. Otherwise, it will be a year of prudent cost management whilst taking proactive measures to ramp the TGT development programme back up when conditions are more conducive and positioning ourselves for future growth.

At budgeted oil prices for 2016 and based on ongoing correspondence with the counter party, we project that the deferred payment of $52.7m associated with the 2005 sale of our Mongolian interests to be fully received in the next 12 months.

Current market conditions notwithstanding, our strategy of targeting sustainable cash returns to shareholders remains.

With our consistent long term approach to appropriate resourcing and diligent spending, we believe that we are well placed to take advantage in this difficult and sustained economic climate, unlike many of our peers who are focusing on survival or care and maintenance. We hope to seize real opportunities as they arise and continue our focus on creating value for our shareholders.


Rui de Sousa



Ed Story

President and Chief Executive Officer