Soco slashes capex and production guidance
Soco International has said that its capital expenditure for 2014 should be around $90 million, down from $161 million in 2014.
The majority of the planned investment, 70 million, will go on Soco’s operations in Vietnam, while $20 million will be spent for its African operations in Congo.
Furthermore, the company has also set aside $25 million as a contingency capex budget, pending approval of additional development wells in Vietnam.
Soco’s average 2014 production of 13.6 thousand barrels of oil per day was in line with its previous guidance.
However, due to the current low oil prices, and reflecting reduced scope of the 2015 Te Giac Trang field drilling campaign and conservative estimates of initial flow rates from TGT/H5 in Vietnam, Soco has said it expects to produce between 10.5 – 12 thousand barrels of oil per day in 2015.
Break even at $20 per barrel
The company in 2014 drilled eight wells at its TGT offshore project, with 5-6 wells expected to be drilled bye the end of the second quarter this year. Soco’s production has so far this year averaged 12.9 thousand barrels of oil per day.
Explaining its position in the light of current oil prices which fell almost 60% since June 2014 to under $50 per barrel, Soco has said that it benefits from low operating costs of production.
Cash operating costs in 2014 were approximately $9 per barrel of oil equivalent and are estimated to move to just below $12 per boe in 2015, reflecting the predominantly fixed TGT cost base and lower production.
Ed Story, CEO of SOCO International plc, said: “Our business model – with strong balance sheet, low break even oil prices (in the low $20s) and capital discipline as part of our DNA – is resilient in the current oil price environment. Our capex programme is fully funded and we can continue our strategy of focusing on returns and growth, organic and inorganic, if the right opportunity comes along. Our commitment to cash returns for shareholders remains, albeit any decision as to appropriate timing and quantum will need to take into account market conditions and outlook at the time.”
In line with its peers, Soco has also revealed that it will be looking at reducing capex and opex costs to mitigate the effect of the low price. Additionaly, it said it expects to cut its General & Administrative costs in Africa by 25%.
“In light of the current oil price environment, SOCO’s Board is in the process of reviewing the Company’s overall portfolio of assets and carrying values.,” the company said in its operational update.