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

SOCO is an international oil and gas exploration and production company, headquartered in London. The Company has interests in Vietnam, Mongolia, Yemen, Libya, Tunisia, Thailand and North Korea with production operations in Yemen, Tunisia and Mongolia.

SOCO today announces preliminary results for the year ended 31 December 2002.

HIGHLIGHTS

• Exploration success rate of 75% on 8 wells drilled
• Three successful wells drilled in Vietnam where a new core asset base has been established
• Average daily production for 2002 at 6,203 BOPD (2001: 5,964 BOPD excluding Russia)
• Strong cash position of £51.5 million, no debt
• Operating profit £9.8m (2001: £13.3m; – excluding Russia £9.5m)

Ed Story, President and Chief Executive of SOCO, said:

"We had a very successful year, and despite an aggressive drilling programme, we were able to maintain the strength of our balance sheet. We believe that the commercial viability of Vietnam has been validated. Our focus will remain on developing the Vietnam business in the coming year with an active four to five well exploration and appraisal programme on the prospects in Blocks 16-1 and 9-2."


13 March 2003

ENQUIRIES:

SOCO International plc
Tel: 020 7457 2020 (today)
Tel: 020 7399 3300 (thereafter)
Ed Story, President and Chief Executive
Roger Cagle, Deputy Chief Executive and Chief Financial Officer

College Hill
Tel: 020 7457 2020
James Henderson
Justine Hibbert



OVERVIEW

Operations


Overall, operating results were in line with expectations. Despite wide fluctuations in the oil price, SOCO reported an approximate £0.9 million increase in operating profit before exceptional items rising to £10.4 million from production net to its working interest of 6,203 barrels of oil per day (BOPD), which compares to £9.5 million from 5,964 BOPD reported last year net of the contribution from the discontinued Russia joint venture. Net cash flow from operating activities was down only 2% from £19.3 million to £18.9 million despite the disposal of over 30% of production. Although total profitability declined from the previous year, which included contribution from the Russia operations sold in that year and the profit from that sale, it compares favourably with the adjusted net profit, decreasing only £0.9 million to £6.1 million before exceptional items.

Drilling programmes in Yemen and Tunisia resulted in additions to the Company’s crude oil reserves. Although demonstrating significant success in the Vietnam exploration drilling programme, SOCO must await the results of an appraisal drilling programme before determining any resultant impact on its proved and probable reserves. The exploration drilling successes in Mongolia require additional production testing before the full impact on reserves can be assessed.

Significant Events

Prior to the commencement of the 2002 exploration drilling programme in Vietnam, the Group finalised two major transactions impacting its operations there. In January, the Company executed a Share Exchange Agreement with the minority shareholders of SOCO Vietnam Ltd (SOCO Vietnam). Under the terms of this agreement, SOCO acquired an additional 10% stake, increasing its interest in the majority owned subsidiary from 70% to 80%. Subsequently in February 2002, SOCO Vietnam executed a farm-out agreement with PTT Exploration and Production Public Company Limited of Thailand (PTTEP) to fund SOCO Vietnam's share of drilling a four well exploration programme on Blocks 16-1 and 9-2 in Vietnam in order for PTTEP to earn one-half of SOCO Vietnam's interest.

As reported in the 2002 Interim Report, SOCO Vietnam entered into an agreement with a subsidiary of Amerada Hess (Hess) to acquire one-half, 13.5%, of the Hess total working interest in Block 16-1 in the Cuu Long Basin offshore Vietnam. The remaining one-half interest was acquired by a subsidiary of our co-venturer in Vietnam, PTTEP. With this transaction, SOCO Vietnam’s participating interest in Block 16-1 rose to 28.5%.

Outlook

As part of our drive to realise the potential of the Vietnam asset, a rig has been retained for a further four to five wells to be drilled during 2003 with the expectation of being able to quantify reserves on the discoveries of the past year. Even beyond the upcoming programme, we believe there to be significant additional potential in as yet untested leads and prospects on both Blocks offshore Vietnam. Although Vietnam is expected to be a cornerstone of our ongoing portfolio, the Company intends to progress other assets in the portfolio and will seek opportunity to add additional value and will weigh opportunities for ongoing rationalisation of some of its non-core assets.

Whilst the phase of capturing potential has not yet begun in Libya, there are a large number of opportunities in the country that we believe fit the joint ventures’ requirements. Even so, assimilation and analysis of the data on these will require a significant amount of effort. By comparison, we are just completing our first evaluation programme in Vietnam although the first project was awarded in 1999.

DETAILED REVIEW OF OPERATIONS

VIETNAM


In January 2002 the Group increased its interests from 70% to 80% in SOCO Vietnam, the entity through which the Group holds its interests in Block 9-2 and Block 16-1 in the Cuu Long Basin offshore Vietnam. Subsequently, in February 2002, SOCO Vietnam executed a farm-out agreement with PTTEP to fund SOCO Vietnam's share of drilling a four well exploration programme on both Blocks in order for PTTEP to earn one-half of SOCO Vietnam’s interest. Later in the year, in a transaction that closed in early 2003, SOCO Vietnam raised its interest in Block 16-1 from 15% to 28.5% by acquiring 50% of Hess’ interest in this Block.

The combination of these transactions resulted in SOCO Vietnam having a 25% working interest in Block 9-2 and a 28.5% interest in Block 16-1. Both Blocks are contiguous to the Bach Ho and the Rang Dong producing fields with production rates of approximately 250,000 BOPD and 150 million cubic feet of gas per day (MCFD) and 65,000 BOPD and 85 MCFD, respectively, at the beginning of 2003. The Company's capital funding requirements in Block 9-2 and its initial 15% interest in Block 16-1 were carried up to a maximum amount of US$50 million by PTTEP through the initial exploration programme under the terms of the farm-out agreement.

The initial exploration programme consisted of four wells, all of which began drilling in 2002 with three being completed during the year. All of these wells were designed as vertical tests, which would be abandoned regardless of the drilling outcome, to gauge the prospectivity of four separate and distinct prospects, two in each Block. Current development techniques throughout the Basin primarily employ horizontal or deviated wells, which typically achieve flow rates significantly greater than those seen in vertical wells.

Review of 2002 Results

The first well spudded in May on the "C" prospect on Block 16-1. The Ngua O-1X well was drilled to a depth of 3,684 metres, penetrating approximately 520 metres into Basement. A drill stem test (DST) was conducted in a Basement interval of 3,174 metres to 3,563 metres after encountering multiple fracture systems. The DST recovered oil at rates of approximately 250 BOPD over an 18 hour interval. Although an earlier well drilled on the Block had tested approximately 500 BOPD from a Miocene interval and the mud log in the Ngua O-1X well indicated the presence of hydrocarbons in this interval, it was determined that the reservoir characteristics in the upper Miocene were not sufficiently developed to warrant testing. Structure size is the primary concern as a decision to further appraise this prospect will be deferred until after the results of additional drilling on both Blocks.

The second well in the overall programme and the first on Block 9-2, the Ca Ngu Vang-1X, spudded on 23 July to test prospect "D". The well was drilled to a total depth of 4,567 metres, entering Basement at 3,717 metres. An unstimulated open hole test was conducted over an extended period from a Basement interval of 850 metres. The final Basement flow test, impeded by a collapsed section at the top of the Basement interval, yielded a maximum combined rate of approximately 4,500 barrels of crude oil equivalent per day comprised of approximately 3,100 BOPD and approximately 7.9 MCFD. Although the well was designed as a pure Basement exploration test, a minimal test without stimulation was conducted to test an oil bearing section in the lower Miocene after plugging back from the Basement interval. The test recovered a calculated rate of approximately 125 BOPD.

The Voi Trang-1X exploration well, the second exploration test on Block 16-1 and third in the programme, spudded in October on prospect "A". The well tested a maximum sustained rate of approximately 3,500 BOPD from a section that included both Oligocene and Basement intervals. The high quality 42º API crude was recovered from a bottom hole test conducted over an interval from 2,086 metres to 2,490 metres.

This well also experienced a borehole collapse near the top of the Basement interval. Information gathered from a production logging tool, was believed to indicate that the oil flowed primarily from the Oligocene section. However, due to the impediment caused by the collapsed borehole, the oil source was not definitive.

In late November, the final well of the initial exploration programme spudded on the "C" prospect on Block 9-2. The Ca Ong Doi-1X (COD-1X) well was drilled to a total depth of 4,618 metres terminating in granite wash.

The well encountered more than 1,050 metres of oil shows from inter-bedded Oligocene sands and shale source rocks. A DST was conducted over an open hole section from 3,565 metres to 4,618 metres. However, the interval was not heavily fractured and reservoir quality was therefore inadequate to yield commercial quantities of hydrocarbons.

From seismic re-interpretation, the COD-1X well appeared to be approximately five kilometres from the top of the Basement structure in a location chosen to test both Oligocene and Basement potential. On the basis of information gained from this well, the Company expects a subsequent exploration well will be drilled on the newly interpreted crest of the Basement structure.

Subsequent events and outlook for 2003

The rig used in the drilling of the first four wells in Vietnam has been retained for another four to five well programme to begin further exploration and appraisal drilling to substantiate the discoveries. The Group, which has thus far been carried except for the additional interest in Block 16-1 acquired from Hess, will fund its participating interest going forward. This includes funding its pro rata share of the Government’s interest through the remainder of the exploration and appraisal programme.

A well spudded in February 2003 as an appraisal of the Voi Trang-1X discovery on Block 16-1.


MONGOLIA

In the Tamtsag Basin in Mongolia where the Company’s wholly owned subsidiary, SOCO Tamtsag Mongolia, currently holds an approximate 85% working interest in production sharing contracts (PSCs) over Contract Areas 19, 21 and 22, drilling commenced in the second half of 2002 after the Group negotiated a new drilling contract with the Chinese company providing the drilling services, Huabei Oilfield Services (Huabei). Through reduced contract drilling rates, Huabei has earned the right to take a pro rata working interest participation of 10% and a 5% working interest is being carried by the Group through the exploration phase for Petrovietnam, the Vietnamese national oil company.

The Group has thus far conducted a minimal programme having drilled a total of only 23 exploration and appraisal wells over four original PSCs encompassing an area of approximately 53,000 square kilometres. Mongolia remains primarily an exploration venture except for the pilot production programme in the southeastern quadrant of Contract Area 19. Crude oil produced from the pilot production test is sold at world prices under a contract with China National United Oil Corporation. The crude sold is trucked under a turnkey contract to a pipeline terminal in the Aershan Oilfield in China for further transportation to a refining centre.

Review of 2002 Results

The Group had encouraging results in Contract Area 19 as it significantly expanded its area under evaluation by drilling two exploration wells 20 and 25 kilometres, respectively, outside of the pilot production area, which has been the focus in recent efforts. Both exploration wells, only one of which was production tested prior to suspension of drilling operations with the onset of the harsh Mongolian winter, encountered hydrocarbons. Notably, the 19-16 well appears to have intersected the highest quality oil bearing reservoir yet encountered in Mongolia. An appraisal well, drilled across a fault line from one of the structures drilled last year, gave additional confirmation to the reserves upgrade associated with last year’s drilling programme.

The first well drilled, the 19-15 appraisal well, spudded in August at a site approximately one kilometre east of the 19-14 well, a producing well drilled in 2001. The 2002 well reached a total depth of 2,579 metres on 28 August having encountered 27 metres of oil shows in a gross interval from 2,006 metres to 2,084 metres in the same interval, the Tsagaantsav Sands of Lower Cretaceous age, as the adjacent discovery. The well was perforated and fracture stimulated prior to being put on production in November at an initial rate of 110 BOPD.

The 19-16 well was an exploratory test located approximately 20 kilometres northeast of the Contract Area 19 development to test a large, previously undrilled structure. It was the first well to be drilled on a sparse seismic grid covering the eastern margin of the basin. The well was drilled to a total depth of 2,227 metres and encountered 31 metres of oil shows in the Tsagaantsav gross interval from 1,682 metres to 1,730 metres. Initial production testing recovered oil and formation water and indicated a good reservoir capable of sustained production.

The last well in the 2002 drilling programme and the second exploratory well was located approximately 25 kilometres north of the Contract Area 19 development. The 19-17 well was drilled to a total depth of 2,445 metres having encountered 26 metres of oil shows in the Tsagaantsav interval from 2,175 metres to 2,348 metres. The well was suspended due to the onset of winter and is expected to be tested in the second quarter of 2003.

Although wells capable of production are located in Contract Areas 19 and 21, those in Contract Area 21 are shut-in primarily due to the distance from processing and storage facilities. Producing wells are regularly taken off stream to deal with mechanical or downhole issues or to experiment with various production enhancing techniques as the operations group seeks to identify the optimum producing configuration for the field. As a consequence, it is unlikely that production will materially increase in this pilot production scheme in the near term.

Subsequent Events and Outlook for 2003

Following the results of the 19-16 well, the Group has budgeted for the acquisition of additional 2D seismic in the region northeast of the current pilot production programme. A 2D acquisition programme is also scheduled for the northern part of Contract Area 21, where little seismic has been acquired to date. This area has become of heightened interest due to the major discovery in the Hailar Basin, the China extension of the Tamtsag Basin, reported in November 2002 by Daqing Oil and Gas.

In total, the Group plans to acquire approximately 1,500 kilometres of 2D seismic during the winter and spring seasons to identify the location of exploratory tests to be drilled during 2003. Current plans call for a 2003 Mongolia drilling programme that includes the drilling of five wells in the Tamtsag Basin. The first well is expected to spud in the second quarter of the year.

Although some uncertainty remains as to the final outcome, plans for a pipeline delivering crude oil from the Russian oil fields near Irkust to the refining centers in Daqing seem to be progressing. Should these plans become reality and further exploration provide justification, there is discussion of a spur line which would extend south through the Hailar and Tamtsag Basins connecting to the refining centres near Beijing. The Group continues to be in discussion with interested parties concerning participation in the Mongolia project. Although recent drilling successes both in China and in the Tamtsag Basin have increased interest in the Group’s holdings, it is impossible to ascertain the eventual outcome of any of these discussions.


THAILAND

The Company operates and holds a 100% interest, following relinquishment by a co-venturer, in Block B8/38 located offshore in the Gulf of Thailand. Block B8/38 holds a small field discovery, which is a candidate for development, and has remaining exploration potential.


NORTH KOREA

SOCO affiliate SOCO-Koryo International Ltd. acquired interests in a PSC over an approximate 9,600 square kilometres concession, mostly offshore, in the West Korean Bay after evaluating regional geological similarities to the highly prospective Bohai Bay Basin of northeastern China. The concept was to take advantage of a relatively inexpensive opportunity in a virgin basin to forge a co-venturing team providing the Group with a carried interest.

As the political situation in North Korea continues to deteriorate, the Group believes that it is not prudent to pursue the project any further and does not envision renewing its licence, which is now in force majeure, beyond its expiry date in May 2003. A £0.6 million exceptional write off of exploration expenditures in North Korea was recognised in the period.

YEMEN

SOCO holds its interests in the East Shabwa Development Area (East Shabwa) through its 58.75% majority shareholding in Comeco Petroleum, Inc. (Comeco), which translates into a 16.785% indirect working interest in East Shabwa. A subsidiary of Occidental Petroleum Corporation, which also has an unrelated independent interest in East Shabwa, acquired the minority interest in Comeco in 2002. The East Shabwa concession is operated by TotalFinaElf E&P Yemen.

East Shabwa production is piped to crude oil transfer facilities on the neighbouring Nexen operated Masila Block which produces approximately 270,000 BOPD. East Shabwa crude oil production is commingled with Masila production and transported by pipeline to the Ash Shihr export terminal on the Yemen coast. SOCO’s share of the crude produced is currently sold under a 12 month contract benchmarked to the official Yemen selling price.

TUNISIA

The Company holds a 22.22% non-operated working interest in the Zarat permit located 75 kilometres offshore eastern Tunisia in the Gulf of Gabes. Crude oil from the Didon field is produced into a floating production storage and off-loading facility (FPSO) and is sold into the spot market. Sales of 497,000 barrels were achieved during the year through six off-loadings from the FPSO.


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