9th Jun 2016 07:38
LONDON (Alliance News) - The chief executive of SOCO International PLC said the company's business model is working to create growth through the current commodity cycle and said a special shareholder distribution may be launched later this year.
The statement by Chief Executive Ed Story, who is also the president of the company, comes ahead of the company's annual general meeting to be held later Thursday.
Although SOCO's dividend last year more than halved, Story said there may also be a special distribution in the second half of 2016 as long as there are no sudden shocks related to its budget requirements or to the oil price.
"SOCO's operational and financial health remains robust. We have a strong balance sheet, steady cash flows, no debt, low operating costs and attractive Vietnam production economics, all of which are significant differentiators for the company within our sector," he said.
"The directors are fully committed to the strategy of shareholder value creation through cash returns to shareholders and growth of the ongoing business," Story added. "We have a business model that works and the capacity and momentum to ensure that we continue to deliver value and growth through the cycle."
SOCO will pay a final dividend of 2.0 pence per share for 2015 if approved by shareholders at the AGM, which will push the full year dividend to 10.0 pence and cost the company a total of USD51.1 million.
SOCO is determined to maintain a sustainable dividend and that 2015 payout is less than half the 22.0 pence dividend paid in 2014 that cost a total of USD119.2 million.
"SOCO's board continues to be committed to its strategy of shareholder value creation through sustainable cash returns to shareholders and growth of the ongoing business. The board anticipates that, given an oil price at or above current levels and no major adverse surprises in our budget for the year, a special payout may be distributed in the second half of the year," said the company.
The company is in an ideal position during the current downturn within the wider oil and gas market as it has no debt and around USD90.0 million in cash, meaning its exploration and development programme for 2016 is fully funded.
Capital expenditure this year will be USD45.0 million after being lowered from the original USD54.0 million budget. Breaking that down, the budget for Africa has been reduced to USD28.0 million from USD36.0 million whilst the budget for Vietnam has been lowered to USD17.0 million from USD18.0 million.
SOCO's operations in Vietnam are producing stable rates of oil and positive economics even at current prices, meaning the company is focusing on maximising the value from its portfolio of assets in Africa.
The company reported net production of 11,000 barrels of oil equivalent per day throughout May from the Te Giac Trang and Ca Ngu Vang fields in Vietnam, at the top end of SOCO's full year guidance of 10,000 to 11,000 barrels of oil equivalent per day.
Te Giac Trang has been the main contributor to overall production since the start of the year, delivering an average of 9,380 barrels of oil equivalent per day whilst the Ca Ngu Vang field has produced an average of 1,620 barrels of oil equivalent per day.
SOCO said four well interventions on the Te Giac Trang field has delivered better-than-expected results. The company was expecting a 1,600 barrel per day rise in gross production from the interventions but said this ended up delivering 2,000 barrels a day of extra production.
Although production is currently at the top of the full year guidance range, SOCO said maintiaing the top-end rate will rely on the well intervention work, which is ongoing and started in May, and the implementation of the full field development plan which is currently being drafted up.
The average oil price received by SOCO during the first five months of 2016 was USD39, a USD1 premium to Brent. SOCO said it expects that premium to continue throughout the rest of 2016.
Brent has been steadily rising since the middle of January and reached a new year high earlier this week after breaching the USD52 per barrel threshold, and was still trading around that level on Thursday morning.
SOCO has also secured two new blocks offshore Vietnam, and said updates will be provided later this year.
SOCO shares were up 3.4% to 131.80 pence per share on Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
Soco International