In common with industry peers, Soco International (SOCO) is furling its sails in anticipation of a prolonged slump in crude oil prices. The driller, which has commercial interests in both Vietnam and Africa, retains a strong balance sheet. But any future returns to shareholders will now be determined by the oil price.
The prevailing downcast industry view is reflected in Soco's half-year returns: revenue more than halved from 2014, while depreciation, depletion and decommissioning costs doubled. As a consequence, Soco turned in a gross profit of just $35.3m (£22.6m), against $180m a year earlier.
Average production, at 11,856 barrels of oil equivalent per day, was 15 per cent down on the 2014 half-year result, but Soco upgraded the lower end of its production guidance for the full year. Initial production from the H5 platform on the company's key Te Giac Trang (TGT) site in Vietnam is now imminent, having been brought forward from the original September to October target.
Over the next 12 months Soco's shareholders can expect to benefit from a long-overdue payment of $52.7m from the sale of Mongolian assets in 2005. Nearer-term, a production licence application linked to the Lidongo X Marine-5 well in the Republic of Congo is likely to galvanise attention.
Bank of America Merrill Lynch gives an adjusted EPS of 12¢ for the full year, against 4¢ in 2014.
| SOCO PETROLEUM (SOCO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 158p | MARKET VALUE: | £523m | |
| TOUCH: | 156-158p | 12-MONTH HIGH: | 426p | LOW: 134p |
| DIVIDEND YIELD: | 6.3% | PE RATIO: | na | |
| NET ASSET VALUE: | 281¢* | NET CASH: | $96.6m | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 246 | 175 | 24.3 | nil |
| 2015 | 117 | 32.7 | 1.8 | nil |
| % change | -53 | -81 | -93 | - |
£1=$1.56 *Includes intangible assets of $215m, or 65¢ a share. NB: A cash return dividend of 10p was paid to shareholders on 19 June 2015 | ||||
