SOCO International plc
("SOCO" or "the Company")

SOCO is an international oil and gas exploration and production company, headquartered in
London. The Company has continuing interests in Vietnam, Yemen, Libya and Thailand with ongoing production operations in Yemen.

SOCO announces that it has entered into a Sale and Purchase Agreement (the "Agreement") for the sale of its Mongolian interests to Daqing Oilfield Limited Company ("Daqing"), a subsidiary of PetroChina, a publicly listed company that holds interests in China and worldwide.

Key highlights:

  • Disposal of SOCO's Mongolian Assets to Daqing for total consideration of approximately US$93 million

  • The total consideration comprises:
    - a cash consideration of US$30 million payable on Completion
    - US$10 million payable in cash 18 months later (in escrow from Completion)
    - a cash payment of approximately US$53 million based on production above 27.8 million barrels from 1 January 2005

  • The Agreement is consistent with SOCO's strategy of rationalising its portfolio by monetising non-core assets, with proceeds further strengthening SOCO's ability to participate in further opportunities

  • The disposal is subject to certain conditions, including approval of SOCO shareholders

Ed Story, President and CEO of SOCO, said,

"This transaction with Daqing is particularly beneficial as it provides SOCO with additional capital to deploy toward projects that can further enhance our core portfolio and is seen as the first step in greater co-operation with a Chinese industry participant who could have further interests in expanding its international role."

1 April 2005


SOCO International plc
Tel: 020 7747 2000
Roger Cagle
Deputy Chief Executive and Chief Financial Officer

College Hill
Tel: 020 7457 2020
Ben Brewerton
Nick Elwes

Details of the Agreement
The Agreement with Daqing comprises SOCO's entire shareholding in the wholly owned subsidiaries, SOCO Mongolia Ltd ("SOCO Mongolia") and SOCO Tamtsag Mongolia LLC ("SOTAMO"). These subsidiaries hold interests in three Production Sharing Contracts ("PSCs") over Contract Areas XIX, XXI and XXII in the Tamtsag Basin of Mongolia (the "Contract Areas"). Completion is expected to take place following satisfaction of certain conditions contained in the Agreement, including the approval of the disposal by SOCO's shareholders in an extraordinary general meeting.

Pursuant to the Agreement, Daqing will acquire the whole of SOCO’s Mongolian interests from SOCO International Operations LLC ("SIOPS") and SOCO International Cayman Ltd ("SOCO Cayman") (the "Sellers") for a consideration of up to approximately US$93 million comprising a cash consideration of US$40 million (£21.3 million at an exchange rate of US$1/£0.532), plus a subsequent cash payment amount based on total crude oil produced from the PSCs subsequent to 1 January 2005 in excess of 27.8 million barrels. The cash consideration is payable in two tranches. The first tranche of US$30 million is payable, subject to certain working capital adjustments, in cash on completion. The second tranche of US$10 million will be paid into an escrow account on completion to be released to the Sellers 18 months following completion, assuming satisfaction of the condition that no material undisclosed additional liabilities are discovered in the interim from the date of completion.

The subsequent payment amount is in respect of all production of crude oil produced from the three Contract Areas in aggregate subsequent to 1 January 2005 in excess of 27.8 million barrels. This subsequent payment amount is equivalent to an amount which the Petroleum Authority of Mongolia approves as recoverable costs and expenses incurred in respect of the Contract Areas in the period to 31 December 2004. The directors currently estimate that this amount will be US$53 million. Once the 27.8 million barrels threshold is exceeded, the buyer is obliged to pay to the Sellers a monthly payment equal to the total aggregate production for that month multiplied by the average monthly posted marker price for Daqing crude oil multiplied by 20%. Based upon the directors' estimates of proven and probable reserves from the Mongolian interests and the development scenarios as discussed with the buyer, the directors believe that the full subsequent payment amount estimated to be US$53 million will be payable to the Sellers. The timescale for the production of crude oil in excess of 27.8 million barrels and the price of Daqing marker crude oil are factors that cannot be accurately predicted. The transaction is subject to normal interim period adjustments from 1 January 2005.

Working interest production to the Company from its Mongolian interests averaged 354 barrels of oil per day during the first half of 2004. SOCO’s Mongolian proved and probable reserves on an entitlement basis totaled 42 million barrels at the end of 2003. Crude oil sales from the pilot production programme in Mongolia are recorded to reflect nil gross margin. For the year ended 31 December 2003, turnover of £1.7 million was attributable to these sales. As at 31 December 2003, the net intangible asset value of the Group’s Mongolian interests was £40.4 million.

The disposal is consistent with the Company’s stated strategy of rationalising its portfolio by monetising non-core assets. The proceeds from this transaction will further strengthen the Company’s debt free balance sheet, providing additional leverage to allow it to participate in further opportunities that may arise.

otes to Editors
The Group's Mongolian interests are held directly by SOCO Tamtsag Mongolia (XIX) Ltd ("SOCO XIX"), SOCO Tamtsag Mongolia (XXI) Ltd ("SOCO XXI"), SOCO Tamtsag Mongolia (XXII) Ltd ("SOCO XXII") and SOCO Mongolia . The share capital of SOCO XIX, SOCO XXI and SOCO XXII is 100% owned by SOTAMO, which is in turn wholly owned by SIOPS. The share capital of SOCO Mongolia is 100% owned by SOCO Cayman.

Pharos Energy plc is aware of attempts to impersonate the company under its previous name, SOCO International plc, on social media. Pharos does not have a Facebook page.