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Interim results from oil explorer SOCO International saw profits grow despite both existing production in Yemen and realisations per barrel declining slightly. This is because the company's entitlements there under cost-recovery provisions increased.
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But, as ever with SOCO, the real focus was on its undeveloped but very promising acreages offshore of Vietnam. Chief executive Ed Story says the recently-drilled 'E' prospect, which looks the company's largest discovery yet, could contain 350m barrels of gas condensate - as valuable as oil - and 3.5 trillion cubic feet (tcf) of gas. But high reservoir pressure means appraisal drilling is taking longer than anticipated.
Gas is always harder to monetise than oil, but if another suspected gas-rich prospect to the south of 'E', seen as two-thirds its size, also comes in successfully, Mr Story says Vietnam would have grounds for its first liquefied natural gas (LNG) project. Going forward, oil production from the CNV field on another offshore Vietnamese block should begin in the second quarter next year, which will give a material boost to earnings.
KBC Peel Hunt is anticipating full-year 2007 EPS around 50¢ (25p).
| SOCO INTERNATIONAL (SIA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,164p | MARKET VALUE: | £ 1,574m | |
| TOUCH: | 2160-2165p | 12-MONTH HIGH: | 2,194p | LOW: 1185p |
| DIVIDEND YIELD: | na | PE RATIO: | 100 | |
| NET ASSET VALUE: | 431¢ * | NET DEBT: | 26% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Net div per share (¢) |
|---|---|---|---|---|
| 2006 | 38.8 | 25.1 | 21.5 | nil |
| 2007 | 50.4 | 28.9 | 24.1 | nil |
| % change | +30 | +15 | +12 | - |
* £1=$2.02, includes intangible assets of US$189m, 260¢ per share |
||||
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SOCO still has material prospects to prove up before its Vietnamese exploration rights expire. But it is definitely entering the difficult phase of asset development rather than discovery. Trading at an all-time high, the shares are high enough.
Last IC view: High enough, 1,807p, 6 June 2007
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-IC-1.6.1b-prod - 17/12/2008 12:46:12 - jonathan.furseftb
