LONDON (Alliance News) - Vietnamese-focused oil producer SOCO International PLC on Wednesday reported a sharp rise in profit for 2018 and also announced it will not be making an offer for peer Ophir Energy PLC despite believing a merger would create "significant long-term value".
SOCO tabled an all-share combination offer for Ophir in January but Ophir unanimously rejected the proposal several days later.
Ophir, later that month, then agreed to be taken over by Indonesian firm PT Medco Energy Internasional Tbk. PT Medco agreed to pay 55 pence per share in cash to Ophir's shareholders, valuing the company at approximately GBP390.6 million.
As a result of that arrangement, SOCO said a share-based combination with Ophir would be "challenging to execute" and would represent an "unacceptable level of risk" for SOCO shareholders. SOCO, therefore, does not intend to make another offer for Ophir.
In 2018, SOCO's pretax profit more than tripled to USD80.1 million from USD22.7 million on a revenue increase of 12% to USD175.1 million from USD156.2 million in 2017.
The company's administrative expenses increased 55% to USD28.4 million from USD18.3 million but saw a USD37.8 million reversal of an impairment charge booked in 2014.
SOCO upped its dividend by 5% to 5.25 pence.
"A year of opportunities and achievements, but 2018 has also had its challenges, including operational issues and delays which impacted on production from Vietnam," said Chief Executive Ed Story.
Story continued: "Upon completion, the Merlon acquisition will mark a significant turning point for SOCO, as we double our production, open up a whole new region of potential future opportunities and welcome key members of the Merlon team with a track record and proven ability to create value in Egypt. We look to deliver on increased production in Egypt and on our exploration plans in both Egypt and Vietnam. We have repositioned SOCO to support further growth in the wider Middle East and North Africa region, both organically and through additional mergers and acquisitions."
During 2018, SOCO's net production average was 7,274 barrels of oil equivalent per day compared to 8,276 barrels in 2017, a 12% decrease, in line with revised guidance.
The company's average realised crude oil price increased 32%, however, to USD74 per barrel from USD56 per barrel.
SOCO's operating expenditure per barrel decreased to USD13.63 from USD13.73 the year before.
For 2019, SOCO is guiding for production between 6,500 barrels of oil equivalent per day to 7,000 barrels. The company's capital expenditure is guided to around USD34 million, which will be fully funded from SOCO's existing cash.
Shares in SOCO International were down 0.2% Wednesday at 68.40 pence each. Ophir shares were down 0.4% at 54.90p.