1st Apr 2005 09:53
Soco International PLC01 April 2005 SOCO International plc ("SOCO" or "the Company") Sale of Mongolian Assets SOCO is an international oil and gas exploration and production company,headquartered in London. The Company has continuing interests in Vietnam, Yemen,Libya and Thailand with ongoing production operations in Yemen. SOCO announces that it has entered into a Sale and Purchase Agreement (the "Agreement") for the sale of its Mongolian interests to Daqing Oilfield LimitedCompany ("Daqing"), a subsidiary of PetroChina, a publicly listed company thatholds interests in China and worldwide. Key highlights: • Disposal of SOCO's Mongolian Assets to Daqing for total consideration of approximately US$93 million • The total consideration comprises: - a cash consideration of US$30 million payable on Completion - US$10 million payable in cash 18 months later (in escrow from Completion) - a cash payment of approximately US$53 million based on production above 27.8 million barrels from 1 January 2005 • The Agreement is consistent with SOCO' strategy of rationalising its portfolio by monetising non-core assets, with proceeds further strengthening SOCO's ability to participate in further opportunities • The disposal is subject to certain conditions, including approval of SOCO shareholders Ed Story, President and CEO of SOCO, said, "This transaction with Daqing isparticularly beneficial as it provides SOCO with additional capital to deploytoward projects that can further enhance our core portfolio and is seen as thefirst step in greater co-operation with a Chinese industry participant who couldhave further interests in expanding its international role." 1 April 2005 ENQUIRIES:SOCO International plc Tel: 020 7747 2000Roger CagleDeputy Chief Executive and Chief Financial Officer College Hill Tel: 020 7457 2020Ben Brewerton Nick Elwes Details of the Agreement The Agreement with Daqing comprises SOCO's entire shareholding in the whollyowned subsidiaries, SOCO Mongolia Ltd ("SOCO Mongolia") and SOCO TamtsagMongolia LLC ("SOTAMO"). These subsidiaries hold interests in three ProductionSharing Contracts ("PSCs") over Contract Areas XIX, XXI and XXII in the TamtsagBasin of Mongolia (the "Contract Areas"). Completion is expected to takeplace following satisfaction of certain conditions contained in the Agreement,including the approval of the disposal by SOCO's shareholders in anextraordinary general meeting. Pursuant to the Agreement, Daqing will acquire the whole of SOCO's Mongolianinterests from SOCO International Operations LLC ("SIOPS") and SOCOInternational Cayman Ltd ("SOCO Cayman") (the "Sellers") for a consideration ofup to approximately US$93 million comprising a cash consideration of US$40million (£21.3 million at an exchange rate of US$1/£0.532), plus a subsequentcash payment amount based on total crude oil produced from the PSCs subsequentto 1 January 2005 in excess of 27.8 million barrels. The cash consideration ispayable in two tranches. The first tranche of US$30 million is payable, subjectto certain working capital adjustments, in cash on completion. The secondtranche of US$10 million will be paid into an escrow account on completion to bereleased to the Sellers 18 months following completion, assuming satisfaction ofthe condition that no material undisclosed additional liabilities are discoveredin the interim from the date of completion. The subsequent payment amount is in respect of all production of crude oilproduced from the three Contract Areas in aggregate subsequent to 1 January 2005in excess of 27.8 million barrels. This subsequent payment amount isequivalent to an amount which the Petroleum Authority of Mongolia approves asrecoverable costs and expenses incurred in respect of the Contract Areas in theperiod to 31 December 2004. The directors currently estimate that this amountwill be US$53 million. Once the 27.8 million barrels threshold is exceeded, thebuyer is obliged to pay to the Sellers a monthly payment equal to the totalaggregate production for that month multiplied by the average monthly postedmarker price for Daqing crude oil multiplied by 20%. Based upon the directors'estimates of proven and probable reserves from the Mongolian interests and thedevelopment scenarios as discussed with the buyer, the directors believe thatthe full subsequent payment amount estimated to be US$53 million will be payableto the Sellers. The timescale for the production of crude oil in excess of 27.8million barrels and the price of Daqing marker crude oil are factors that cannotbe accurately predicted. The transaction is subject to normal interim periodadjustments from 1 January 2005. Working interest production to the Company from its Mongolian interests averaged354 barrels of oil per day during the first half of 2004. SOCO's Mongolianproved and probable reserves on an entitlement basis totaled 42 million barrelsat the end of 2003. Crude oil sales from the pilot production programme inMongolia are recorded to reflect nil gross margin. For the year ended 31December 2003, turnover of £1.7 million was attributable to these sales. As at31 December 2003, the net intangible asset value of the Group's Mongolianinterests was £40.4 million. The disposal is consistent with the Company's stated strategy of rationalisingits portfolio by monetising non-core assets. The proceeds from this transactionwill further strengthen the Company's debt free balance sheet, providingadditional leverage to allow it to participate in further opportunities that mayarise. Notes to Editors The Group's Mongolian interests are held directly by SOCO Tamtsag Mongolia (XIX)Ltd ("SOCO XIX"), SOCO Tamtsag Mongolia (XXI) Ltd ("SOCO XXI"), SOCO TamtsagMongolia (XXII) Ltd ("SOCO XXII") and SOCO Mongolia . The share capital of SOCOXIX, SOCO XXI and SOCO XXII is 100% owned by SOTAMO, which is in turn whollyowned by SIOPS. The share capital of SOCO Mongolia is 100% owned by SOCOCayman. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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