LONDON (Alliance News) - SOCO International PLC Thursday reported a huge reduction in profit in 2014, after its revenue fell due to lower oil prices and lower production and it took significant impairments, causing the company to slash its dividend nearly in half.
The FTSE 250 oil and gas company also warned that production will fall again in 2015, and it is expecting oil prices throughout the year to be below what it achieved in 2014, suggesting the company will have a difficult year ahead of it.
SOCO reported a profit after tax of USD14 million in 2014, down over 86% from the USD104.1 million profit it recorded in 2013. The significant reduction was caused by a substantial drop in revenue and by higher impairments and write downs of its assets.
Revenue for the year ended December 31 fell by over a quarter to USD448.2 million from USD608.1 million a year earlier, primarily down to a combination of the fall in oil prices since the middle of 2014 and lower production throughout the year.
"The dramatic fall in the oil price in the latter part of 2014 after a long period of stability introduced significant uncertainty and challenging conditions for the industry, bringing into focus the importance of substantial financial flexibility and strong capital discipline," said the company.
The company recorded USD79.5 million in exploration write-offs to costs associated with the Albertine Graben Block V in eastern Congo, which is lower than the USD92 million reported a year earlier. However, the company also reported a USD60.5 million impairment on its CNV asset. SOCO did not record any such impairments in 2013.
That led to an operating profit of USD152.6 million, less than half the USD333.8 million in 2013.
Profit after tax but before exploration write-offs and impairments totalled USD131.7 million, down over 30% from USD196.1 million.
As a result of the decline in profit, the company slashed its full-year dividend to 22.0 pence per share, nearly half the 40.0 pence per share paid for 2013.
At the end of the year, SOCO reported a strong cash balance of USD166.4 million, with no debt.
The company said its capital expenditure for 2014 was at the lower end of its guidance at USD161 million. It expects its 2015 firm capital spending budget to be around USD90 million, with USD70 million to Vietnam and around USD20 million to Africa.
Production for the year totalled 13,600 barrels of oil equivalent per day, below the company's guidance of between 13,300 and 13,800 barrels for the year and significantly down from 16,700 barrels of oil equivalent per day in 2013.
In 2014, the company achieved an average realised oil price of USD103 per barrel for the year, but warned that the price will fall during 2015, as will production. Production in 2015 is set to be between 10,500 to 12,000 barrels.
In January, SOCO said the cut in guidance reflects the reduced scope of the company's drilling programme at the Te Giac Trang field in Vietnam and a conservative flow-rate estimate for the H5 field at the project.
SOCO had said the drilling programme for Te Giac Trang is on schedule, with eight wells drilled during 2014 and a further five to six expected to be completed by the end of the second quarter of 2015. It said the development of the H5 field is progressing well and is ahead of schedule for the first oil to be produced by September-October this year.
"As in the past, we remain value driven. We see the current environment as an opportunity to plan for future growth rather than a time for questioning the viability of the industry, and we believe SOCO is well positioned to continue to execute its strategy in this environment," said Chairman Rui de Sousa on Thursday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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