SOCO International plc
("SOCO" or "the Company")

Preliminary Results For The Year Ended 31 December 2006

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, Yemen, Thailand, the Republic of Congo (Brazzaville) and
the Democratic Republic of Congo (Kinshasa) with production operations in Yemen.


The Company today announces its Preliminary Results for the year ended 31 December 2006.

Key Highlights


  • 20% increase in proven and probable reserves (greater than 40% increase in Vietnam
    and 30% in Yemen);

  • 34% increase in revenue to $76.5 million (2005 $57.2 million);

  • Increase of 43% in pre-tax profits to $48.2 million (2005 $33.7million);

  • 70% exploration and appraisal drilling success rate during the year;

  • 19% increase in production;

  • Pilot development plan approved on Block 9-2 in Vietnam with first oil expected in
    2008;

  • Extensive pre-drill activity across the West Africa portfolio;

  • Convertible bonds issue netted the Group $243 million;

  • Acquisition of additional 2% working interest in Block 16-1 Vietnam;

  • Accelerated development in Thailand associated with farm-out.


Ed Story, Chief Executive Officer, commented:

"There is no question that 2006 was a banner year for the Company. However, the 2007
drilling programme in Vietnam alone will expose the Company to unrisked recoverable
resource potential of 2.5 billion barrels of crude equivalent."

15 March 2007




Enquiries:


SOCO International plc
Roger Cagle
Executive VP, Deputy CEO and Chief Financial Officer
Tel: 020 7747 2000

Pelham PR
James Henderson
Alisdair Haythornthwaite
Tel: 020 7743 6676




CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT



The past 12 months have been a watershed year for SOCO. Our hugely successful Vietnam project has evolved from pure exploration to development, appraisal and exploration; the potential of our Yemen project has been increasingly realised through Basement development drilling and increased facilities capacity and our West Africa portfolio has been expanded to increase the potential to repeat these successes. The Company has successfully de-risked its chances of long term success whilst maintaining significant upside that offers plenty of opportunity for exponential future growth.

We have again been very successful with the drill bit with our exploration and appraisal drilling success in Vietnam exceeding 70%. This coupled with the successful infill/injector drilling in Yemen has led to an increase in 2P reserves net to our working interest of 32.4 million barrels and 9.4 million barrels in Vietnam and Yemen, respectively. Before factoring in the reserve reduction associated with farming out half of our Marine XI interest in the Republic of Congo (Brazzaville), 2P reserves increased to 172.5 million barrels in 2006. Following the farm-out, 2P reserves at the end of 2006 equalled 160.6 million barrels.


FINANCIAL AND OPERATING RESULTS


After tax profit from continuing operations hit a record high of $29.1 million in 2006 exceeding that of the previous year that totalled $20.3 million. Largely as a result of the ongoing facilities expansion and infill drilling programme at the Kharir field in Yemen, production net to the Company's working interest increased, rising to 6,766 barrels of oil per day (BOPD) in 2006 from 5,684 BOPD the prior year.

The Group had its highest ever capital expenditures during the year with an extensive exploration/appraisal drilling programme in Vietnam, significant facilities expansion and development drilling in Yemen and its initial 3D seismic acquisition in Congo (Brazzaville). In order to bridge the period prior to translating its successes into operating cash flow, the Company guaranteed a convertible bonds issue of $250 million in May. Capital expenditure on operational activities rose to $114.3 million in 2006 from $76.2 million in 2005. With net proceeds from the issue of convertible bonds equalling $243.0 million and cash generated by operations of $53.0 million, the cash balance rose by $136.8 million to $187.8 million at year end 2006.


2006 OPERATIONS REVIEW


VIETNAM
The year got off to an impressive start when the second well drilled in the same fault block as the initial 2005 discovery well on the Te Giac Trang (TGT) structure, the TGT-2X, tested at a total combined flow rate of approximately 17,500 barrels of oil equivalent per day (BOEPD) from the Miocene Lower Bach Ho 5.2 (LBH 5.2) and Oligocene "C" intervals. The good news continued when the rig moved to a location on the fourth fault block on the TGT structure and the TGT-3X tested at a combined maximum rate of 9,908 BOEPD.

Buoyed by so much early success on the TGT structure, the rig moved approximately 30 kilometres south of the TGT-3X discovery to spud the initial well on the "L" prospect, the Te Giac Vang (TGV) 1X well. The TGV structure was a priority not only because of an apparent large shallow structure with good Miocene potential, but also because success here would hold the rights for the apparently even larger high potential Basement/Oligocene structure. Enthusiasm was tempered by realism as the TGV-1X intersected poorly developed reservoir sands in the primary targeted Clastic sequence at the LBH 5.2 horizon. The well did have good oil shows in several Oligocene sands when the well was deepened. However, after analysis of the logs, it appeared that these lacked sufficient permeability.

Following the TGV well, the rig was moved to drill the sidetrack to the Ca Ngu Vang (CNV) 4X well on Block 9-2 that was temporarily suspended late in 2005 after encountering unexpected high pressures in the Oligocene sequence above the Basement. We were back on track when the sidetrack of the appraisal well, CNV-4XST, tested at 7,050 BOEPD from Basement. This result provided final confirmation that CNV was ready to move into development. All regulatory approvals were received and the pilot development plan was approved in December 2006. From that point forward, Petrovietnam has funded its full share of costs on Block 9-2.

With a new rig, activity once again focused on Block 16-1. The third 2006 appraisal well on the TGT structure, the TGT-4X, was drilled on the H3 fault block between the initial discovery well, TGT-1X, and the TGT-3X. The primary target, a lower Miocene trap, was breached due to late movement on a fault located south of the TGT-4X well. The Oligocene "D" interval, a new reservoir on the TGT structure, flowed at a rate slightly over 600 BOPD on a short test.

The rig then moved to drill the first exploration well on the Te Giac Xang (TGX) structure on Prospect "K", approximately 15 kilometres west of the TGT structure. Although the TGX-1X encountered reservoir sands, it was abandoned after initial analysis indicated that it was not drilled within structural closure.

To close out the 2006 drilling campaign, the rig moved back to drill the fifth well on the TGT structure as a final prelude to seeking a declaration of commerciality on the field. The TGT-5X had a total combined maximum flow rate of approximately 16,430 BOEPD from the LBH 5.2 and Oligocene "C" intervals.

Thus, sandwiched between clear success with the TGT appraisal programme, there were inconclusive results when looking for repeatability on the Clastics fairway elsewhere on Block 16-1. The 3D seismic acquired during the year is expected to be a critical tool in leading to drilling success in 2007 outside the proven TGT structure.

YEMEN
During 2006, the East Shabwa Block 10 consortium continued its programme to further appraise the Kharir field and increase production capacity from the Block. Drilling results and the addition of a self-contained production facility enabled the fields to exceed all previous production records averaging more than 40,000 BOPD.

A number of successful development wells were drilled in the Kharir field (KHA) during 2006. These include the KHA-1-12 well in the western part of the structure, the KHA-1-14 well in the southern flank of the structure, the KHA-1-07.G1 sidetrack, which was drilled as a water injection well but completed as a producer based on drilling results and the KHA-1-16 drilled on the last 3D line on the eastern extension of the field. These wells are all connected to the production facilities and were tested at rates between 5,500 and 8,400 BOPD. Significantly, the highest rate was from the eastern extension well. This portends further extension of the field in that direction.

The consortium also had a very active exploration programme in the northern part of the Block that yielded one discovery, but overall proved inconclusive as to the additional potential in that area.

WEST AFRICA
The Group added to its West Africa portfolio when its 85% owned subsidiary acquired an 85% working interest in the 800 square kilometre Nganzi Block, onshore the Democratic Republic of Congo (Kinshasa). As operator, the Group carried out a reconnaissance aeromagnetic and gravity survey over the onshore extension of the coastal basin in order to delineate prospective areas for hydrocarbon generation and migration delineating several leads, interpreted as large horst blocks.

In September, the Group's 85% owned subsidiary signed an agreement to farm-out a 37.5% interest in the Marine XI Block, offshore the Republic of Congo (Brazzaville), whilst retaining a 37.5% working interest. As operator, the Group began evaluation of the Marine XI Block when it acquired an approximate 1,200 square kilometre 3D seismic programme in the fourth quarter of 2006.

THAILAND
In April, the Group's Thai subsidiary signed a Participation Agreement that could accelerate the development of the project in the Bualuang field in the Gulf of Thailand and provide meaningful production as early as the first half of 2008.

The assignment of interest, predicated on meeting certain work requirements and subject to the appropriate regulatory approval by the Government of Thailand, enables the Farmee to earn up to a 60% working interest, whilst allowing the Group to focus resources on higher profile projects in Vietnam and Yemen.

CORPORATE


CONVERTIBLE BONDS
Primarily to fund the impending development of its Vietnam projects, in May of 2006, the Company was the guarantor of an offering of $250 million in guaranteed bonds convertible into preference shares of the issuing subsidiary (Bonds), which are exchangeable for fully paid ordinary shares of SOCO. The size of the offering was increased from $200 million due to strong institutional demand, but was still six times oversubscribed upon issue. The Bonds will pay a coupon of 4.50% per annum and will initially be convertible into an aggregate of approximately 6.238 million ordinary shares. The initial conversion price is £21.847 per ordinary share, a premium of 42%. The Bonds will be repaid at 100% of their principal amount on 16 May 2013 unless previously converted or redeemed.

INCREASE IN VIETNAM INTERESTS
In June, the Group seized the opportunity to increase its interest in the promising Clastics play in the Cuu Long Basin of Vietnam by acquiring OPECO Vietnam Ltd., which holds a direct 2% interest in Block 16-1. The purchase price was $22 million.

BOARD CHANGES
In December, the Company's Non-Executive Chairman, Patrick Maugein, died after a long illness. Patrick was a friend, a tireless worker on behalf of SOCO and a champion of the Company. The Company benefited significantly through its relationship with Patrick and he will be missed. At the December Directors' meeting, the Board voted unanimously to accept the Nominations Committee recommendation to appoint Rui de Sousa to succeed Patrick.


OUTLOOK


As active as we were in 2006, we will be even busier on the operations front in 2007. The development programme on Block 9-2 in Vietnam will be in full swing leading up to expected first oil in 2008. With only the rest of this year before licence expiry to explore Block 16-1 in Vietnam, barring an extension, we expect to drill up to eight exploration wells. We have prioritised an exploration well on a TGT "look-a-like" structure, Prospect "S", identified from the 2006 3D seismic programme. This is expected to be followed by a high potential Oligocene/Basement target in the deep "E" prospect that essentially underlies the shallower "L" prospect. A declaration of commerciality on the TGT field is imminent.

We should see the initial results from the water flooding that began last year in the Kharir field in Yemen. The combination of the water flood, additional infill drilling and expanded production capacity should allow considerable growth in oil sales in Yemen, albeit after an early 2007 cutback due to additional facilities installation.

While evaluation of our West Africa portfolio is in its infancy, indeed, even the portfolio itself is evolving, 2007 will be a busy year in terms of pre-drilling activity. We are processing and will soon be interpreting the 3D seismic acquired last year on Marine XI offshore Republic of Congo (Brazzaville). It is conceivable that we could be ready to drill in the latter part of the year, but more likely in 2008. We expect to be acquiring 2D seismic on the Democratic Republic of Congo (Kinshasa) Nganzi Block.

We know that not every well drilled in 2007 will be a success. We understand that even on the highly prospective Vietnam Block 16-1 Clastics play, the chances of drilling success are only in the 25% range. However, we have positive indications for further good news from the Vietnam exploration programme. There certainly will be an abundance of news. We trust that you share our enthusiasm for what is in store.

Rui de Sousa Chairman
Ed Story President and Chief Executive




REVIEW OF OPERATIONS


The high impact drilling programme in Vietnam continued apace throughout 2006 whilst production in Yemen experienced a major uplift and significant progress was made in the development of the Kharir field. The drilling success ratio in Vietnam exceeded 70% as five of seven exploration/appraisal wells were discoveries.

Results from the Yemen appraisal programme and production capacity expansion translated into an immediate economic impact as production net to the Group's working interest was up approximately 20% averaging 6,766 barrels of oil per day (BOPD) versus 5,684 BOPD in 2005.


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 (HVJOC) and holds a 28.5% working interest in Block 16-1, which is operated by the Hoang Long Joint Operating Company (HLJOC). OPECO, Inc. holds a 2% interest in Block 16-1.

Both Blocks are on trend with several major Basement and Tertiary discoveries in the Cuu Long Basin. Both are also contiguous to the Bach Ho field, where 2006 production reportedly averaged approximately 191,000 BOPD and 150 million cubic feet of gas per day (MMCFD), and the Rang Dong field, where production reportedly averaged approximately 42,000 BOPD, primarily from the Basement.

Review of 2006 activities
Block 16-1
In March 2006, the TGT-2X appraisal well on the Te Giac Trang (TGT) structure, an up-dip follow-up well to the previous year's TGT-1X discovery well, tested with a total combined flow rate of approximately 17,500 BOEPD from the Miocene Lower Bach Ho 5.2 (LBH 5.2) and Oligocene "C" intervals.

Two main pay zones were tested within the LBH 5.2 interval, one between 2,763 and 2,817 metres and the other between 2,666 and 2,726 metres. A total of 89 metres of pay was confirmed by log analysis in this reservoir horizon.

The combined stabilised flow rate from the two Miocene zones was 14,053 BOEPD comprising 12,615 BOPD of 38 degree API gravity crude and approximately 8.63 MMCFD through a one inch choke size. Flow rates were limited due to mechanical restrictions in the surface separation equipment.

The drill stem test over the Oligocene "C" interval tested water-free at a stabilised rate of 3,300 BOPD of 37.5 degree API gravity crude and approximately 0.88 MMCFD through a 52/64 inch choke size.

As was expected from the log analysis, water was produced from the lower set of perforations in the Miocene. The approximate 8% water cut provided evidence of the presence of an aquifer, which will be factored into plans for the field's depletion management.

A third reservoir horizon, the LBH 5.1 which is considered to be oil-bearing and productive, was also identified, but not tested as this would limit the ability to retain the well as a future producer, as originally designed. This horizon had 18 metres of net pay and, from the analysis of logs and oil samples from wireline formation tests, is considered to be oil-bearing and productive.

Following the temporary suspension of the TGT-2X well, the rig moved immediately to drill a follow-up appraisal well, the TGT-3X, approximately 10 kilometres to the south on a separate fault block on the structure. A drill stem test was conducted in the LBH 5.2. The tested interval, perforated between 2,827 and 2,887 metres, flowed at a combined maximum rate of 9,908 BOEPD comprising 9,008 BOPD of 40.5 degree API gravity crude and approximately 5.4 MMCFD through an 88/64 inch choke size.

Log analysis of the well indicated approximately 68 metres of net pay were present in the LBH 5.2. Additionally, approximately six metres of net pay in the Lower Oligocene "C" interval were also identified but not tested.

The LBH 5.2 reservoir sands encountered in the TGT-3X well are the same as those tested in the TGT-1X and TGT-2X wells. This proved the presence of a laterally extensive reservoir sand in the Block, further reducing the risk of the other prospects and leads along the play fairway.

The third well drilled on Block 16-1 during 2006 was the first exploration well on the "L" prospect approximately 30 kilometres south of the TGT-3X discovery. The Te Giac Vang 1X (TGV-1X) spudded on 2 May and reached a total measured depth (MD) of 3,926 metres in the Upper Oligocene. The well was deepened from its original prognosis due to the presence of encouraging hydrocarbon shows continuing below the original target depth. It was primarily positioned to test a closure at the LBH 5.2 level, the main productive horizon at the TGT discoveries.

The well intersected a clastic sequence at the LBH 5.2 horizon, however the reservoir sands were poorly developed at the location and no pay was encountered. The sediments encountered suggested that the well was located outside the LBH 5.2 play fairway and that this fairway is to the north and west of the TGV-1X location.

The well was also drilled into the Oligocene, however the location was down-dip on the flank of the structure. Despite being in a flank position, good oil shows were encountered in several sands. After analysis of the logs, although the sands were confirmed to be hydrocarbon bearing, it appeared that these lacked sufficient permeability to produce at commercial rates and were therefore not tested.

These overall encouraging well results are being evaluated and the seismic re-interpreted prior to drilling a follow-up well to fully test the Oligocene in a more prospective up-dip position. The well also penetrated the source rock section at the top of the Oligocene validating the geological interpretation and confirming the potential of the deep Oligocene and Basement prospect underlying the shallower closures.

The 2006 drilling campaign continued on the Block 16-1 play fairway when the Transocean Trident 9 jack-up rig spudded the TGT-4X well on the "H3" fault block in the TGT structure on 31 August. This third appraisal well on the TGT structure, was drilled on a separate fault block between the initial discovery well, TGT-1X and the TGT-3X. The well intersected the hydrocarbon bearing Lower Miocene reservoir interval as predicted. However, the trap had been breached and only residual oil was encountered. The well also encountered hydrocarbons in the Oligocene "D" interval, a new reservoir on the Block, and flowed at a rate slightly over 600 BOPD on a short test.

Subsequent detailed review of the seismic identified that the breaching of the Lower Miocene trap was due to late movement on a fault located south of the TGT-4X well. This appears to be the only such fault on the TGT field and the effect is considered to be local to this well.

The following well, in October, was a test of Prospect "K", a subtle closure to the west of the higher amplitude TGT structure. After encountering reservoir sands, the first exploration well on the Te Giac Xang (TGX) structure on Prospect "K" was plugged and abandoned when initial analysis indicated that it was not drilled within structural closure. Located in a previously untested portion of the Clastics fairway on Block 16-1, the TGX-1X well was drilled to a depth of 3,506 metres. Finding reservoir is the main risk in drilling in this fairway, so the presence of reservoir in TGX-1X is a positive indicator for future success as drilling locations step out from the initial TGT discovery. The seismic over the area is being reprocessed and remapped to better define the structure for a possible second well.

The final well drilled in 2006 and the fifth appraisal well on the TGT structure was drilled on the "H2" fault block. The TGT-5X had a total combined maximum flow rate of approximately 16,430 BOEPD from the LBH 5.2 and Oligocene "C" intervals.

The first drill stem test, over the 32 metre Oligocene "C" interval, tested water-free at a maximum rate of 7,098 BOPD of 36.5 degree API gravity crude and approximately 2.07 MMCFD through an 80/64 inch choke size. The most prolific interval in the other successful wells drilled on TGT, the LBH 5.2 pay zone, was perforated and tested separately between 2,841 and 2,866 metres with a maximum flow rate of 8,987 BOEPD comprising 8,104 BOPD of 41 degree API gravity crude and approximately 5.3 MMCFD through an 80/64 inch choke size.

On the TGT structure, only the southern most fault block in the five fault block structure remains to be drilled. The LBH 5.2 and Oligocene "C" reservoirs encountered in the TGT-5X well appear to be the same as those tested in the previous TGT wells. With an 80% drilling success rate on the TGT structure and tests ranging from approximately 9,000 BOEPD to approximately 17,500 BOEPD, activities are now focussed on early approval for development of the field.

The rig was moved to Block 9-2 to drill the initial Clastics well on the Ca Ong Doi (COD) structure after a long delay due to inclement weather.

Block 9-2
Drilling operations recommenced on 5 June 2006 into the "D" fault block of the Ca Na Vang (CNV) structure to drill the sidetrack to the CNV-4X well on Block 9-2 that was temporarily suspended in 2005 after encountering unexpected high pressures in the Oligocene sequence above the Basement. The re-entry and sidetrack of the appraisal well, CNV-4XST, tested at a maximum combined rate of approximately 7,050 BOEPD comprised of approximately 5,333 BOPD and approximately 10.3 MMCFD. The open hole test was conducted over a 13 hour period from a Basement interval of approximately 1,350 metres.

Log analysis of the Oligocene "E", penetrated by this well, indicated that the interval lacked permeability. The CNV-4X ST was drilled to a MD of 6,330 metres making it the longest MD well to be drilled in Vietnam, exceeding the previous record set by the HVJOC when it drilled the CNV-3X appraisal well in 2005. The well was suspended as a producer.

Preparations for development of the CNV field picked up momentum in April of 2006 following the unanimous approval of the Declaration of Commerciality on the field by the shareholders of the HVJOC. Petrovietnam officially approved the Pilot Development Plan in December. Subsequent to this approval, Petrovietnam has become a full paying participant in its 50% interest in Block 9-2.

Vietnam has become a participant in the World Trade Organisation (WTO). Following its admission into the WTO, portions of the state operated enterprises, including Petrovietnam, are expected to be privatised. This portends a change in negotiating certain aspects of the development programme, particularly a gas sales agreement as the gas group is expected to be an early candidate for privatisation. However, discussions on the sales agreement for the associated gas produced from the CNV field have continued. Equipment and materials are being ordered and fabrication of various structures will begin soon in anticipation of having first oil in the first half of 2008.

The rig, which had been conducting the Group's Vietnam drilling programme since the beginning of 2005, moved out of Vietnamese waters after completion of the CNV-4XST. However, the drilling campaign continued uninterrupted with the Trident 9 drilling rig, which the JOCs had contracted in 2005, commencing operations back on Block 16-1. A further two rigs were put under contract during the year to conduct an even more extensive 2007 drilling programme.

Subsequent events and 2007 outlook
The drilling rig that began operations on Block 16-1 in the third quarter of 2006 was delayed from moving to a Block 9-2 drilling location on the COD structure after completing the TGT-5X well due to inclement weather that prevented the rig from being safely towed. Accordingly, the COD-2X Clastics target well did not spud until 16 February 2007. Although the well encountered sands in the Oligocene and Lower Miocene, there was no significant oil pay encountered and the well was subsequently plugged and abandoned and the rig moved back to Block 16-1.

Although the rig currently working is only available into the second quarter of this year, the JOCs have already contracted two other rigs – one of which is expected to be available late in the first quarter or early in the second quarter and the other later in the second quarter. The prognosed drilling programme calls for eight wells on Block 16-1 and three to five development injector/producer wells on the Block 9-2 CNV field as it prepares for first oil in the first half of 2008.

Efforts are underway to obtain a declaration of commerciality for the TGT structure. The front-end work required to transition operations from the exploratory phase to the development phase is in progress with the hopes to allow first oil from Block 16-1 sometime in 2009.

The exploration phase on both blocks is set to expire at the end of 2007 unless further extended by agreement with the Vietnamese Government. Thus the 2007 drilling campaign is extremely important in terms of fully evaluating the blocks and securing areas for longer term development.


YEMEN


Throughout the year, the East Shabwa Block 10 consortium continued its programme to further appraise the Kharir field and to increase production capacity from Block 10. The East Shabwa Block 10 consortium comprises Comeco Petroleum, Inc. (28.57% interest), in which SOCO holds a 58.75% interest, TOTAL E&P Yemen (28.57% interest and operator), Occidental Yemen Ltd. (28.57% interest) and Kuwait Foreign Petroleum Exploration Co. (14.29% interest).

Drilling results and the addition of a self-contained production facility have enabled the fields to exceed all previous production records. For the second consecutive year, production increases were significant—circa 40% and 22% for 2005 and 2006, respectively. During the year, production exceeded 40,300 BOPD, up almost 7,400 BOPD from the 32,937 BOPD year average the previous year, despite having to curtail production due to safety and production management reasons below the 45,000 BOPD plateau reached earlier in the year.

Production from the East Shabwa Development Area (ESDA), approximately 80% of which originates from the Kharir field, is transported by pipeline and commingled with production from the neighbouring Masila Block before transportation by pipeline to the coastal Ash Shihr export terminal. SOCO's crude entitlement is sold under a 12-month spot market contract.

Review of 2006 activities
A number of successful development wells were drilled in the Kharir field (KHA) during the first half of 2006. These include the KHA-1-12 well in the western part of the structure, the KHA-1-14 well in the southern flank of the structure and the KHA-1-07.G1 sidetrack, which was drilled as a water injection well but completed as a producer based on drilling results. These wells are all connected to the production facilities and were tested at rates between 5,500 and 8,000 BOPD.

The KHA-1-16 well, drilled on the eastern most 3D seismic line as part of the continuing appraisal and development of the Basement reservoir in the Kharir field, tested at over 8,400 BOPD. The implications of the results of this edge of field are that the field could have a substantial eastward expansion.

Most of the drilling activity in the Kharir field in the second half of 2006 was spent on the drilling of water injection wells to provide pressure support for the Basement production. These include the KHA-1-15, KHA-1-17, KHA-1-19 and the KHA-2-18 wells. In addition, the gas injection well, KHA-1-11 was completed with two open hole sections to maximise the injection capacity of the well.

The appraisal of the Kharir North area has continued with the KHA-3-08 drilled to the very northwest of the mapped area of the structure. Testing operations on this well are ongoing.

Activity to enhance the recovery of the Biyad reservoir horizons at both Atuf and Kharir are also ongoing. At Atuf the ANW-012 and ANW-013 infill production wells encountered the reservoir horizons higher than expected. These have provided encouragement for more efficient reservoir recovery.

The thrust of the exploration programme in 2006 was in the northern part of Block 10 in the Jathma/Wadi Taribah area. The first Jathma exploration well, the JAT-01 that tested early in the year over 1,900 BOPD, was placed on long term production in the third quarter of the year. The oil produced is trucked to the existing Kharir facilities for processing and export.

Two other exploration wells in the Jathma area, the JAT-02-ST and the exploration well on the eastern side of the Jathma area, JAT-04, encountered significant oil columns, but did not flow commercial volumes of hydrocarbons when tested. An evaluation of the results of all the Jathma area wells drilled to date is underway.

Subsequent events and 2007 outlook
Drilling of development and injector wells in the Kharir field to increase Basement productivity will continue throughout the year. In particular, delineation of the eastern end of the field will be a priority in 2007. Additionally, the KHA-1-20 and KHA-1-22 Biyad oil production wells are being drilled currently to accelerate and improve the recovery from the Clastics horizon.

The additional surface facilities required to provide injection capacity are being installed and the predrilled water injection wells will be connected during the middle of 2007. Currently, the final elements of the commissioning of the gas injection equipment are being completed prior to commencing gas injection to provide pressure maintenance in the crestal area of the Basement.

Production capacity is expected to continue to increase during the year as various initiatives progress. Together with adding water injection capability to improve pressure maintenance in the Basement reservoir, considerable productive capability should be added throughout the year, albeit after an early 2007 cutback pending the installation of these facilities.

Three drilling rigs are expected to continue operating throughout the year. As at the date of this publication three rigs are under contract on Block 10 and are drilling in the Kharir field. One rig is expected to be used for exploratory drilling in the southeast corner of the Block later in the year.


REPUBLIC OF CONGO (BRAZZAVILLE)


SOCO Exploration and Production Congo (SOCO EPC), the Company's 85% owned subsidiary was initially awarded a 75% interest in the Marine XI Block, offshore the Republic of Congo (Brazzaville) in 2005. The terms of the Production Sharing Agreement signed by the Société Nationale des Pétroles du Congo (SNPC) and SOCO EPC was approved during the Congolese Parliament and the Senate extraordinary session in the first quarter of 2006. The law became effective 30 March when signed by the President of the Republic.

The Block, located in the Lower Congo Basin, is in shallow water adjacent to the coast with water depths ranging up to 110 metres and covers approximately 1,400 square kilometres. There has been previous exploration activity on the Block resulting in four oil discoveries, the largest of which has initial recoverable reserves estimated to be in the 30 to 60 million barrel range.

Review of 2006 activities
In September, SOCO EPC entered into an agreement to farm-out an 18.75% interest in the Marine XI Block, offshore the Republic of Congo (Brazzaville), to each of a subsidiary of Lundin Petroleum AB and to Raffia Oil SARL. SOCO EPC retained operatorship with a 37.5% working interest in the Block. The regulatory authorities of the Government of the Republic of Congo (Brazzaville) ratified the farm-out on 4 January 2007.

Acquisition of an approximate 1,200 square kilometre 3D seismic programme was completed in the fourth quarter. By employing the modern seismic techniques that the Company successfully applied in Vietnam to map the Basement reservoir, SOCO EPC expects to exploit the potential of the pre-salt section.

Subsequent events and 2007 outlook
Processing and interpreting the 3D seismic acquired in 2006 will be the priority. Although it is possible that SOCO EPC could be ready to drill in the latter half of this year, it is more likely that drilling will commence in the first half of 2008.


DEMOCRATIC REPUBLIC OF CONGO (KINSHASA)


In July, the Company's 85% owned subsidiary, SOCO DRC Limited (SOCO DRC), signed subject to presidential decree, a Production Sharing Contract with the Government of the Democratic Republic of Congo (Kinshasa) and La Congolaise des Hydrocarbures (Cohydro), the state owned oil company, wherein it acquired an interest in the Nganzi Block. The Block, onshore the Democratic Republic of Congo (Kinshasa), comprises an area of approximately 800 square kilometres. SOCO is the designated operator with an 85% working interest in the Block.

Review of 2006 activities
Most of the activity during the year was focused on detailed analysis of a reconnaissance aeromagnetic and gravity survey over the onshore extension of the coastal basin in order to delineate prospective areas for hydrocarbon generation and migration. The survey indicated the presence of a deep pre-salt source graben in the northern part of the basin in the Nganzi Block. Regional mapping shows the graben to be on trend with the source basin for the M'Boundi field in the southern part of the Republic of Congo (Brazzaville). Several leads, interpreted as large horst blocks, have been identified on the Block.

Subsequent events and 2007 outlook
Prior to acquiring a 2D seismic survey, the Company expects to conduct a geochemical survey to further define the prospectivity of various identified structures. Initially, the plan is to acquire some 300 to 500 kilometres of 2D seismic. Dependent upon the timing of the seismic acquisition, processing and interpretation could be substantially completed this year. Any meaningful work programme is conditional upon obtaining the presidential decree.


THAILAND


SOCO's 99.93% owned Thailand subsidiary, SOCO Exploration (Thailand) Co. Ltd. (SOCO Thai), holds a 100% interest in Block B8/38 located offshore in the Gulf of Thailand. An application and development plan was approved in 2006 by the Thailand Department of Mineral Fuels to convert the concession into a production licence on the Bualuang discovery on the Block.

Review of 2006 activities
Upon securing approval from the Thailand Department of Mineral Fuels to convert the field from an exploration to a production licence in the first quarter of 2006, SOCO Thai signed an agreement to allow a two group consortium to earn up to a 60% working interest in the licence. If the earn-in terms of the agreement are fulfilled, SOCO Thai would retain a 40% working interest in the field. The assignment of interests in the agreement is subject to approval of the appropriate regulatory authorities of the Government of Thailand.

During the year, the farmee's efforts were directed toward the planning and contracting of several frontend activities precluding the start-up of development operations in 2007.

Subsequent events and 2007 outlook
In January, the farmee group was consolidated with GFI Oil and Gas Corporation (GFI) becoming the sole farmee. GFI expects to conclude a high resolution 100 kilometre 2D seismic programme during the second quarter of 2007 in preparation for drilling the initial commitment well and completing the milestone to earn a 20% interest in the Bualuang field.

Further, GFI has already entered into a contract with a floating production, storage, and offloading vessel with the expectation of concluding the work programme to earn an additional 40% interest by funding 92% of the costs to take the project to first oil. GFI estimates first production would be achieved in the first half of 2008.


OTHER AREAS OF INTEREST


CABINDA
In October, the Company was informed by Sonangol, the national oil company of Angola, that it would have a participating interest in the contractor group of the Cabinda Onshore North Petroleum Concession. The Group anticipates formal completion of the assignment in the first half of 2007. Preparation has begun for the acquisition of a high resolution aeromagnetic and gravity survey over the Block.

LIBYA
The Group maintains its shareholding in the ODEX Exploration Limited (ODEX) joint venture. The ODEX shareholding comprises SOCO North Africa Ltd. (34%), and subsidiaries of Oilinvest (Netherlands) B.V. (46%) and Joint Stock Bank of the Gas Industry Gazprombank (20%). From SOCO's standpoint, the niche for ODEX was to participate with one or more indigenous Libyan companies in exploiting existing but problematic development opportunities. While the focus in the past two years of the Libyan National Oil Company has been on open exploration bid rounds, it announced in late 2006 an initiative to negotiate for participation in production and development projects.

Accordingly, the Group will continue to assess its participation in the consortium in light of reasonable expectations of success. It is anticipated that ODEX will continue to be the vehicle through which the Group will explore various opportunities that may arise in Libya and certain parts of Africa as the consortium is well placed to take advantage of its strong regional relationships.




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