SOCO International plc
(“SOCO” or the “Company”)

PRELIMINARY RESULTS


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, Thailand, the Republic of Congo (Brazzaville), the Democratic Republic of Congo (Kinshasa) and Angola. The Company today announces its preliminary results for the year ended 31 December 2009.

HIGHLIGHTS

Financial

  • After tax profit of $51.1 million reflecting full year’s earnings from producing assets in South East Asia
  • Current exploration, appraisal and development programme fully funded with year end cash, cash equivalent and liquid investments balance of $307.6 million and an additional £99.2 million received from a share placing in Q1 2010


Operational

  • Production averaged 6,415 boepd from Block 9-2 in Vietnam and Bualuang field in Thailand
  • Received sanction of TGT field development and commenced Phase 1 development
  • 3D seismic completed over TGT and TGD – encouraging results ahead of appraisal drilling
  • Drilling programme launched with 2 well programme in Marine XI Block, offshore Congo


Outlook

  • Biggest exploration programme to date targeting over c.600 million barrels of potential recoverable reserves from 2 to 3 high impact exploration wells in the Democratic Republic of Congo (Kinshasa)
  • Appraisal and development drilling on TGD and TGT targeting reserves increase and production ramp up to 50,000 bopd by mid 2011


Ed Story, Chief Executive commented:
"2009 are our strongest results to date, marked by start up of activities on our largest development project, record cash position and successful launch of our exploration programme.
We have carried this momentum into 2010, further strengthening our balance sheet with a £99.2 million share placing and gearing towards de-risking 600 million barrels of potential reserves across our prospects in DRC.
With appraisal and development drilling also set to start in Vietnam, 2010 will be an eventful year".

ENQUIRIES:


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

Pelham Public Relations

James Henderson Tel: 020 7337 1501
Evgeniy Chuikov Tel: 020 7337 1513

CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT


SOCO enjoyed a great deal of success in 2009, delivering record profits on continuing operations, obtaining government sanctioning of the Group’s largest development project and ending with record year end cash, cash equivalents and liquid investments balances. Even with all of this, from a news flow perspective, the past year may seem to have been anticlimactic. However, the Group was gathering momentum during 2009 towards the launch of an exciting exploration campaign in both core areas, Africa and South East Asia. Even so, the activity since initiating this programme in September 2009 has been fractional compared with the significant portfolio de-risking due to occur this year. The exploration campaign will focus upon new targets in Africa. Reserve growth could also come from the appraisal programme in Vietnam where we begin our largest ever development programme in the Te Giac Trang (TGT) field and drill a promising follow-up well to the 2008 Te Giac Den (TGD) discovery well.

FINANCIAL AND OPERATING RESULTS

The 2009 financial statements report the first return to a full year of production operations since 2007, following the sale of the Group’s Yemen asset in April 2008. This resulted in record revenues, operating profits and profit after tax (excluding disposals). The Group’s balance sheet strengthened further, ending the year with a cash balance (including liquid investments) higher than at the beginning of the year. Moreover, early in 2010 we raised an additional £99.2 million net from a share placing which will, with our existing funds and operational cash flows, underwrite the current exploration and development programmes regardless of the number of bonds that may be redeemed in May of 2010.
After tax profit of $51.1 million (2008 -$30.6 million from continuing operations) demonstrates the impact of a full year’s earnings from the Group’s two new producing assets in its South East Asia portfolio. This was achieved even though production from the Ca Ngu Vang (CNV) field was curtailed in order to maintain reservoir pressure prior to the commencement of water injection. Total production net to the Company’s working interest averaged 6,415 barrels of oil equivalent per day (BOEPD) from both assets, on par with the 2008 production average over the period from start up of production operations.
Cash flows from operating activities of $77.0 million (2008 - $45.1 million) were in excess of 2009 capital expenditure of $73.9 million (2008 - $217.6 million) contributing to a year end cash, cash equivalent and liquid investments balance of $307.6 million (2008 - $303.4 million). This combined with net funds raised of £99.2 million from the share placing in January 2010 provides the Company with a strong position to fund its current exploration, appraisal and development programmes.
Due to the continuing need to finance current and future exploration, appraisal and development projects, the Board of Directors are not recommending the payment of a dividend.

2009 OPERATIONS REVIEW

SOUTH EAST ASIA

Vietnam - Block 16-1

During 2009, the 3D seismic over the TGT and the TGD fields in Block 16-1 offshore Vietnam was reprocessed, yielding encouraging results for both projects. TGT, which the Vietnamese Government sanctioned for development during the year, is targeted to come on stream in mid-2011 at approximately 50,000 BOEPD. Pre-development activities commenced during 2009 with the ordering of long lead items, commencing fabrication of the unmanned platform for Phase I development and tendering bids for appraisal drilling. A follow-up appraisal well to the TGD discovery is expected to be drilled in the second or third quarter of 2010 following Government approval of the Appraisal Area during 2009.

Vietnam - Block 9-2

The sixth and final well in the initial CNV development drilling programme was drilled early in 2009. Production has been temporarily scaled back in order to maintain adequate reservoir pressure pending the initiation of water injection following the drilling of an injector well and sidetrack to a current producer in the first half of this year. Production in 2009 from the CNV field averaged 2,848 BOEPD net to SOCO’s working interest.

THAILAND

Two horizontal wells were drilled on the Company’s Bualuang field in Thailand in the first half of the year in order to maximise oil production and minimise water production. Following this work, SOCO has booked additional reserves in line with those of the operator’s independent reservoir engineers’ assessment. Further development drilling activity is planned for 2010. A 3D seismic acquisition covering 384 square kilometres was completed in the first quarter of 2010 to further evaluate the field. Production from Bualuang in 2009 averaged 3,567 barrels of oil per day (BOPD) net to SOCO’s working interest

AFRICA

REPUBLIC OF CONGO (BRAZZAVILLE)

The Company drilled its first two wells in its Africa region in the second half of 2009, both in the Company’s Marine XI licence, offshore Congo (Brazzaville). The Liyeke Marine 1, a low cost wildcat well, targeted the Sendji Formation but was found to be water saturated and was subsequently plugged and abandoned. The second Marine XI well, the Viodo Marine 4, was a vertical well appraising the 1986, oil rich, although structurally complex, discovery. Two drill stem tests were completed resulting in a combined maximum flow rate of approximately 2,600 BOPD and 7.0 million standard cubic feet of gas per day. The results of the well and associated reprocessed 3D seismic are currently being incorporated into a model to assess the commerciality of the accumulation.
In the first quarter of 2009, SOCO received Congolese Government approval to farm-in as operator to the offshore Marine XIV Block adjacent to the Group’s operated Marine XI Block. Subsequently, a 100 square kilometre multi-azimuthal 3D seismic campaign was completed and is currently being interpreted ahead of SOCO’s first Marine XIV well.

DEMOCRATIC REPUBLIC OF CONGO (KINSHASA) (DRC)

During 2009, the Company continued interpretation of the 360 kilometre 2D seismic on the Nganzi Block that was acquired in 2008, identifying several major structures. In anticipation of drilling two or three exploration wells in 2010, the Group began construction of roads, bridges and a base camp to facilitate drilling in previously inaccessible areas.
SOCO hopes to broaden its portfolio in DRC, with its application for a licence over Block 5, in the Albertine Graben in eastern DRC, pending a Presidential Decree and an application submitted for a large interior block.

ANGOLA

Due to recent security incidents in Cabinda North the planned 2009 2D and 3D seismic campaign was suspended by the operator of the Block. The operator currently expects this to resume in the first half of 2010.

CORPORATE

Share Placing

In January 2010, the Company successfully placed 7,234,347 new ordinary shares of 20 pence each at a price of 1410 pence per Placing Share (the Placing Price). Based on the Placing Price, the gross proceeds of the Placing were £102.0 million ($166.0 million). The proceeds of the placing further reinforce the Group’s balance sheet ahead of a period of significant expenditure on the TGT development and exploration in Africa.

The Board

As previously reported, Mr John Snyder, a Director since the Company’s initial listing on the London Stock Exchange, retired from the Board at the 2009 Annual General Meeting. In June, SOCO announced the appointment of Ambassador António Monteiro as a Non-Executive Director. Ambassador Monteiro was appointed to serve on the Audit and Remuneration Committees. In August, the Company announced the appointment of Dr Mike Watts as a Non-Executive Director. Dr Watts was appointed to serve on the Audit and Nominations Committees. Ambassador Monteiro’s extensive experience in the countries in which SOCO has built its newest core area in Africa and Dr Watts’ extensive experience in the oil and gas industry has added significant and complementary skills to the Board.

OUTLOOK

There is little question of the significance of the 2010 drilling programme as the Company will de-risk a substantial portion of its portfolio. The potential for material reserves upgrades cannot be discounted assuming even modest drilling success in the exploration and appraisal programme.
Notwithstanding the risks associated with exploration drilling in our sector, we believe we have taken all of the necessary steps to maximise our success ratio for exploration and appraisal drilling, which has averaged over 60% since our listing. In the event that all of the frontier exploration proves unsuccessful, an already proven oil field in Vietnam could provide considerable upside just from the appraisal/development drilling alone.
With our most active drilling programme offering the most upside potential in terms of adding reserves just ahead for us, 2010 will be an eventful year. While past performance is no guarantee of future success, given SOCO’s track record on delivering development projects on time and to budget and its previous drilling success ratio we are confident that we will be able to report significant progress during 2010.

Rui de Sousa
Chairman
Ed Story
President and Chief Executive Officer

REVIEW OF OPERATIONS

During 2009, SOCO prepared for and launched the most active drilling programme in its history. Subject to farm-out discussions and critical equipment availability, the programme continues with a drilling campaign in the Cuu Long Basin offshore Vietnam to appraise and prove up significant additional reserves, two to three high impact exploration wells on the Nganzi Block onshore the Democratic Republic of Congo (Kinshasa) and two exploration wells in the Congo Basin offshore the Republic of Congo (Brazzaville), one on the Marine XI Block and one on the Marine XIV Block.
The potential impact on reserves and production from the current development, appraisal and exploration programme is larger than anything undertaken by the Company to date.
Total production net to the Group’s working interest during 2009 was 6,415 barrels of oil equivalent per day (BOEPD) sourced from its Vietnam and Thailand operations compared with 2,533 BOEPD produced from these continuing operations in 2008. This increase reflects a full year of production in Vietnam and Thailand compared with five and four months, respectively, in 2008.

SOUTH EAST ASIA

VIETNAM

SOCO’s Block 16-1 and Block 9-2 projects in Vietnam are in the oil rich Cuu Long Basin, which is a shallow water, nearshore area defined by several high profile producing oil fields, the largest of which has been the Bach Ho field, which is located between our two Blocks and has produced more than one billion barrels of oil to date. The projects are operated through non-profit Joint Operating Companies (JOCs) wherein each participating party owns shares equivalent to its respective interests in the Petroleum Contracts (PCs) covering the projects.
The Company’s interests are held 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 JOC (HVJOC) and holds a 28.5% working interest in Block 16-1, which is operated by the Hoang Long JOC (HLJOC). OPECO, Inc. holds a 2% working interest in Block 16-1.

Block 16-1

Reprocessing of a 3D seismic grid over the fairway that includes both the Te Giac Trang (TGT) and Te Giac Den (TGD) fields was completed during the second half of 2009. The initial interpretation was encouraging for both projects. Whereas the discovery wells on TGT were drilled based on time migrated seismic, future wells will be positioned using the newly reprocessed, depth migrated seismic.
Initial interpretation of the improved TGT pre-stack depth migration data set suggests that the structural crests of the TGT fault blocks are further east than originally mapped. Thus, the seven exploration/appraisal wells drilled to date in the field, with an average oil and gas flow of approximately 11,300 barrels of oil per day (BOPD) per well, provide greater structural control and suggest improved results in development wells drilled up-dip of the existing wells.
Early conclusions from the seismic reprocessed over TGD show improved continuity at the reservoir level over the structure and support the previous interpretation of the reservoir deposition. Detailed mapping is underway to select the appraisal well location. Drilling is planned for the first half of 2010.

Te Giac Trang
The Company was granted approval from Petrovietnam, the Vietnam national oil company, of the Field Development Area for the TGT field in May of 2009 and, subsequently, Petrovietnam assumed funding of its 41% share of development costs as of 1 July 2009. In September, the Company was informed that the Ministry of Industry and Trade, on behalf of the Vietnamese Government, had approved the Development Plan for the TGT field.
First oil is targeted for mid-2011 with production from this first phase of development expected to be approximately 50,000 BOPD. Tenders for a number of long lead items have been issued and fabrication is underway on the initial unmanned platform to be installed on the northernmost H1 fault block. Drilling of the initial development/appraisal wells will begin shortly after this platform is installed in June/July of this year.
Final negotiations for the floating, production, storage and offloading vessel—the primary critical path item for meeting the first oil date—were concluded in the fourth quarter of 2009.

Te Giac Den
The TGD Appraisal Area encompasses 150 square kilometres including the high pressure, high temperature discovery well, TGD-1X-ST1, on Prospect E and the analogous E South Prospect. This area borders the southern boundary of the TGT field.
The application for the Block 16-1 TGD Appraisal Area and work programmes was approved by Petrovietnam in January 2009 and the subsequent Vietnamese Government approval was received in April 2009. The appraisal period expires at the end of 2010. During the intervening period, the contracting parties will attempt to demonstrate commerciality of the initial TGD discovery, which would then lead to an application for field development.
A drilling rig suitable for drilling in high pressure/high temperature environments was contracted in February 2010. The well is expected to spud as soon as practicable after the end of the northwest monsoon season in Vietnam and following a site survey and sourcing of specialised wellhead equipment.

Voi Trang
The initial application for the Voi Trang appraisal area that encompassed the discovery well and several adjacent leads covering an area of approximately 100 square kilometres was approved by Petrovietnam in January 2009. However, following an assessment of the commerciality of the previous discoveries in the awarded area, the HLJOC opted to relinquish this area. Petrovietnam issued a formal approval of the relinquishment in July 2009.

Block 9-2

Ca Ngu Vang
Development on Ca Ngu Vang (CNV) continued into 2009 after first oil was achieved the previous year. The sixth and final well in the initial phase of development drilling, the CNV-6P, was drilled during the first quarter. Since the efficient exploitation of this Basement field requires early water flooding to reach a plateau production and avoid gas breakthrough, the original development concept was to water flood the eastern flank of the structure. Because the fracturing in the eastern flank of the field of the Basement reservoir is not as intense as that indicated by wells drilled in other parts of the structure, a drilling programme is being finalised to drill a well to the western part of the field to be converted to a water injector and to sidetrack a current producer to increase production. In the interim, production has been scaled back pending the initiation of water injection in order to maintain adequate reservoir pressure.
Negotiations for a rig to conduct the development drilling are currently being finalised. It is possible that the same rig could be later utilised to drill in the TGT field. Drilling is anticipated to commence on CNV late in the first quarter or early in the second quarter of 2010.
CNV production net to the Group's working interest averaged 2,848 BOEPD for 2009. Production was suspended in late December 2009 as a routine cleaning of the production line connecting the CNV platform to the Bach Ho production platform resulted in a pipeline inspection gauge becoming stuck in the line. Production resumed in early February 2010.

THAILAND

Bualuang Field

SOCO's 99.93% owned Thailand subsidiary, SOCO Exploration (Thailand) Co. Ltd., holds a 40% interest in the Bualuang field located in Block B8/38, offshore in the Gulf of Thailand.
During the first half of 2009, the operator drilled two horizontal attic wells in the Bualuang field and reported a reserves upgrade. The two wells were drilled to maximise oil production from the strong water driven reservoir, whilst minimising production of water. In the reserves upgrade, the operator reported a rise from 20 million gross proven and probable barrels of oil at 1 January 2009 to 26.3 million gross proven and probable barrels of oil recoverable.
A 384 square kilometre 3D seismic programme was acquired in the first quarter of 2010. The programme is intended to evaluate additional exploration potential within the Block as well as to enhance understanding of the field. Additional development drilling is anticipated in the upcoming year to maintain production levels and to efficiently exploit the field.
Bualuang production net to the Group's working interest averaged 3,567 BOPD for 2009.

AFRICA

REPUBLIC OF CONGO (BRAZZAVILLE)

The Group’s 85% owned subsidiary, SOCO Exploration and Production Congo SA (SOCO EPC), holds interests in and is the designated operator of both the Marine XI (29% working interest) and Marine XIV (29.4% working interest) Blocks offshore Congo (Brazzaville).

Marine XI

The Marine XI Block is located adjacent to the coast in the Lower Congo Basin, offshore Congo (Brazzaville), in shallow waters with depths ranging up to 110 metres and covering approximately 1,400 square kilometres. A two well drilling programme was conducted in the second half of 2009.

Liyeke
The Liyeke Marine 1 (LYM-1), a low cost wildcat well, was spudded on 22 August 2009. The LYM-1 well targeted and encountered the Sendji (post-salt) Formation on the previously designated S1 prospect. On reaching target depth, the reservoir was found to be water saturated. A 62 metre heavy oil column was encountered in the overlying sediments, but log and sample data indicated that the oil would not flow. Accordingly, the well was plugged and abandoned after reaching a total depth of 1,140 metres.
The outcome of this well has no bearing on the post-salt prospects to the south and west of the Liyeke Marine well where the salt is thinner and discontinuous and will allow migration from the pre-salt source rocks. More importantly, the well has no impact on pre-salt prospects where source rocks are adjacent to the prospective reservoirs.

Viodo
The second well to be drilled on Marine XI, the Viodo Marine 4 vertical appraisal well (VIM-4), was spudded in September 2009. The VIM-4 well was an appraisal of the 1986 Viodo oil discovery which lies in some 65 metres of water and contains oil in the Toca Formation, a lacustrine carbonate developed below the regional salt horizon. Three of the four existing wells drilled during the period 1986 to 1990 successfully tested oil, but also showed the accumulation to be geologically complex.
The Company’s objectives in drilling the VIM-4 well were to further delineate the field, gather data that would allow reprocessing of the 3D seismic in order to map the distribution of reservoir quality limestone and to test the effectiveness of a completion strategy that could be applied to high angle development wells.
The Company completed two drill stem tests (DSTs) resulting in a combined maximum flow rate of approximately 2,600 BOPD and 7.0 million standard cubic feet of gas per day (MMSCFD).
The first DST from the deeper carbonate section between 2,240 to 2,273 metres flowed at initial post-acid rates of approximately 2,600 BOPD and 2.5 million MMSCFD on a 3/4 inch choke. Flow rates stabilised at approximately 1,100 BOPD on a 1/2 inch choke after an approximate seven hour flow period. A test of the upper carbonate section, between 2,205 and 2,230 metres, flowed at post-acid rates of approximately 4.5 MMSCFD.
The results of the well and the reprocessed seismic are being incorporated into a 3D model that will be used to assess the commerciality of the accumulation.

Marine XIV

In March 2009, regulatory approval was received from the Government of Congo (Brazzaville) for SOCO EPC’s farm-in to the Marine XIV Block located in the Lower Congo Basin in shallow water, adjacent to the Company's Marine XI Block. The farm-in to the three discontinuous sections of Marine XIV was pursued to complement SOCO's activity, both operationally and technically. Previous exploration activity on the Block has resulted in some oil discoveries.
As operator, SOCO EPC has since completed a 100 square kilometre multi-azimuthal 3D seismic programme. The seismic is currently being interpreted ahead of SOCO’s first well on Marine XIV.

DEMOCRATIC REPUBLIC OF CONGO (KINSHASA) (DRC)

The Group’s 85% owned subsidiary, SOCO Exploration and Production DRC Sprl (SOCO E&P DRC), holds the Group's interests in the DRC.

Nganzi

The Nganzi Block covers 800 square kilometres, onshore western DRC. SOCO E&P DRC is the designated operator with an 85% working interest. Cohydro, the state owned oil company, holds the remaining 15% interest.
Initial interpretation of the processed seismic from a 2008 360 kilometre 2D seismic acquisition programme has been very encouraging. Several large structures have been identified and two or three exploration wells are planned for the second half of 2010.
Farm-out discussions are underway with other parties, who have interests in the region, but the Company has not ruled out conducting the drilling programme without additional partners.

Block 5

SOCO E&P DRC holds a 38.25% participating interest in the application for Block 5 located in the southern Albertine Graben in eastern DRC adjacent to the border with Uganda where there have been recent discoveries in the same basin. The Block, award of which is pending a Presidential Decree, covers an area of 7,105 square kilometres, encompassing part of Lake Edward.
The Company has also submitted an application for a large interior block. Finalisation of any awards appear to be awaiting resolution of the award of Blocks I and II that directly offset discoveries in the northern part of the basin in Uganda. The timing of finalising any award is impossible to determine at this time.

ANGOLA

Cabinda North

SOCO Cabinda Limited, the Company’s 80% owned subsidiary, holds a 17% participating interest in the Production Sharing Agreement for the Cabinda Onshore North Block in the Angolan enclave of Cabinda. The 1,400 square kilometre Cabinda North Block, operated by Sonangol, is bordered in the north by Congo (Brazzaville) and in the south and east by the DRC.
The contractor that conducted the seismic programme on the Nganzi Block was mobilised in late 2009 to acquire both 2D and 3D seismic in Cabinda North. However, there have been multiple security incidents in the region the latest of which, though unrelated to the project, led to suspension of the seismic acquisition programme in January 2010. No Company personnel have been directly affected thus far. No drilling is anticipated in Cabinda during 2010.

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