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

SOCO is an international oil and gas exploration and production company, headquartered in London, with operations in Mongolia, Vietnam, Yemen, Thailand, Tunisia and Libya.

SOCO today announces interim results for the six months ended 30 June 2002.

• 2002 focused on the most significant drilling programme since listing
• Increased position in Vietnam with one well currently testing
• Production maintained at 6,153 BOPD (1H2001: 6,150 BOPD excluding Russia) with significant increase in Tunisia
• Maintained strong cash position of £56.3 million despite extensive drilling campaign

Ed Story, Chief Executive of SOCO, said:

"In 2002, SOCO has focused on its most ambitious drilling programme in the last five years. We expect to have test results of our second well in Vietnam within the next several days. Importantly we have maintained a strong balance sheet while increasing our interests in Vietnam and experiencing positive drilling results in Mongolia and Yemen. SOCO remains focused on generating growth through our commitment to realise early value from our portfolio."

19 September 2002

SOCO International plc
Tel: 020 7457 2020 (today)
Tel: 020 7399 3300 (thereafter)
Ed Story, Chief Executive
Roger Cagle, Chief Financial Officer

College Hill Tel: 020 7457 2020
James Henderson
Andree Taylor


As we indicated at the time of announcing our 2001 preliminary results in March, this year will be defined for the Company through its drilling programme. In 2002, SOCO has embarked on the most significant drilling endeavours since the Company’s listing in 1997. The primary focus is in Vietnam where the minimum four well drilling campaign began in May. Additionally the Company is participating in exploratory and appraisal drilling in Mongolia and Yemen, an appraisal well in Tunisia and an ongoing development drilling programme in Yemen. Although embarking on an ambitious drilling campaign, the Company protected its strong cash position by farming-out 50% of its interests in Vietnam to PTT Exploration and Production Company Limited of Thailand (PTTEP), as was announced in February.

Turnover from continuing operations was almost flat at £12.4 million for the first half of this year versus £12.2 million for the first half of 2001 (excluding disposed Russian interests at approximately £9.2 million) despite a decline in average Brent crude oil prices and average per barrel realisations net to the Group. Group realisations dropped to US$22.32 from US$24.71 for the same period last year.

Profits before tax on continuing operations declined from £6.6 million (£9.0 million including Russia) reported for the first half of 2001 to £5.5 million for the first six months of 2002. Reflecting a significant increase in tax on profit primarily due to a low capital work programme in Tunisian operations, net profits from continuing operations were also down from the prior period to £3.0 million versus £5.0 million (£7.0 million including Russia).

Production costs in Mongolia, recorded to reflect zero gross margin on the pilot programme, and higher production in Tunisia increased total operating costs from continuing operations excluding depletion and abandonment from £2.4 million (£8.2 million including Russia) to £4.1 million. Direct production costs, which were substantially increased by Mongolian pilot production, were approximately US$4.60 per barrel reflecting a rise over first half 2001 (approximately US$3.30 per barrel, excluding Russia at approximately $14.00 per barrel). Both total and per barrel depletion and abandonment costs from continuing operations decreased, overall dropping to £2.4 million from £3.1 million (excluding Russia at £0.9 million) and per barrel declining approximately $0.50 from $3.90 (excluding Russia at approximately $2.70) to approximately $3.40.

Corporate cash balances show a slight decline from December 2001 dropping from £58.6 million to £56.3 million. Ignoring foreign exchange translation losses resulting from the strengthening of the British pound against the US dollar, cash balances, which are primarily held in US dollars, were essentially level with those at year end largely as a result of the Vietnam drilling costs being carried due to the farm-out of 50% of the Company’s Vietnamese assets.




SOCO Vietnam Ltd (SOCO Vietnam), the Company’s 80% owned subsidiary, initiated a major drilling campaign in Vietnam in May of 2002 when the first well of a minimum four well exploration drilling programme was spud on Block 16-1. The Ngua O well, a vertical exploration well on the "C" prospect, was drilled to a depth of 3,684 metres, penetrating approximately 520 metres into Basement. Mud logging indicated substantial oil shows in both the upper Miocene and Basement sections. It was determined that the reservoir characteristics in the upper Miocene were not sufficiently developed to warrant testing.

A drill stem test (DST) was conducted in a Basement interval of 3,174 metres to 3,563 metres after encountering multiple fracture systems. The DST recovered oil at rates of approximately 250 barrels of oil per day (BOPD) over an 18 hour interval. A decision regarding a horizontal or deviated well, which typically increases flow rates substantially, to further appraise the "C" prospect will be deferred until after the data gathered from this first well has been thoroughly analysed. The well was abandoned, as will be the case with each of the vertical exploration wells in this programme, which are designed to test rather than exploit the prospects.

Indications are that the results from this well have positive implications for prospect "A", the largest prospect identified on Block 16-1. There is clearly an active hydrocarbon system on the Block. With the data gained from the Ngua O well, it appears that both the "source" and "seal" risks on the larger prospect are lower than previously projected.

The second well in the overall programme and the first on Block 9-2 was spud on 23 July. The well, the Ca Ngu Vang, encountered oil shows in both the Tertiary and granitic Basement intervals en route to a total depth of 4,567 metres. Although inconclusive, mud log analysis has been encouraging. Preparations are underway to flow test the well prior to abandonment.

SOCO Vietnam recently increased its working interest in Block 16-1 from 15% to 28.5%. SOCO’s working interest in Block 9-2 is 25%. The Company’s interest in Block 9-2 and its initial 15% interest in Block 16-1 are carried up to a maximum amount of US$50 million by PTTEP through the initial exploration programmes under the terms of a farm-out agreement announced earlier this year (further details below in the Corporate Transactions section). Both Blocks are contiguous to the Bach Ho (approximately 250,000 BOPD) and the Rang Dong (approximately 55,000 BOPD) producing fields.

The additional interest in Block 16-1 is not covered by the previously announced farm-out with PTTEP. PTTEP-HL and SOCO Vietnam will each fund their respective higher participating interests in the second well to be drilled on the Block.

A new drilling contract was recently signed for this year’s multi-well campaign. The first well in the drilling programme, the 19-15 well, spudded on 10 August to test a new fault block offsetting the 19-14 well drilled last year. The well reached target depth of 2,579 metres on 30 August having encountered more than 100 metres of oil shows in a gross interval of 500 metres in the Lower Cretaceous Tsagaantsav sands.

The second well, the 19-16, a rank exploration well, spudded on 3 September at a location about 20 kilometres northwest of the currently producing wells and penetrated the Upper Cretaceous Zuunbayan and Tsagaantsav intervals. The well was drilled to a depth of 2,227 metres and had oil shows in the lower interval, which is the currently producing reservoir in the Contract Area. Both wells will be tested when a workover rig is released from remedial work on the 19-3 well. Should the test results on the 19-16 well prove interesting, the Company will likely follow it up with an areal seismic programme in the winter.

Concurrent with the drilling of new wells, the Company is conducting workovers on several of its previously drilled wells in order to increase the flow rates of the producing wells or to induce production. Change out of some production equipment is anticipated to alleviate flow restrictions.

Petrovietnam, the Vietnamese national oil company, has a 5% interest, carried through the exploration phase, in each of SOCO's Mongolia production sharing contracts. Huabei Oilfield Services, a Chinese company providing the drilling services to the Company in Mongolia, has earned the right to a pro rata working interest participation of 10%.

In Yemen, the Amani exploration well was drilled in the first quarter which indicated additional potential from both Basement and Biyad intervals in the East Shabwa Development Area (ESDA). Subsequent testing in Basement yielded some gas, but the well was plugged back and tested heavy oil from the Biyad reservoir. Despite the lack of success of the initial exploration well, recent drilling results on the neighbouring Masila Block suggest the need to drill additional appraisal wells on several untested prospects which may offer considerable upside in the ESDA.

The consortium has now drilled four development wells in the Kharir Field as part of Phase III. Initial gross production rates have ranged from 2,000 BOPD to 4,000 BOPD and field production levels have recently approximated 26,000 BOPD. Phase III drilling operations are expected to continue throughout this year and next, with a tentative plan to drill several more exploration wells in addition to development wells at Kharir and Atuf fields and several injector wells.

An appraisal well spudded 26 July on the Didon field in Tunisia. The well, with an objective depth of 2,835 metres, was drilling above the target El Gueria formation at circa 2,750 metres as this report went to press. The well will test the areal extent of the Didon reservoir and identify the current oil/water contact. Positive results could justify a significant reserve increase and lead to additional development locations.

SOCO Thailand acquired a 1,000 kilometre 2D seismic programme over Block B8/38 in the Gulf of Thailand in February. With the new seismic acquisition, Block B8/38 is essentially now covered with a two kilometre grid. The programme was to fulfil the seismic commitment of the Block and signalled the Company’s intent to extend its exploration licence over the Block.

The Petroleum Committee of Thailand has very recently granted another three-year extension of Block B8/38 to October 2005. Another 25% of the original acreage of the Block will be relinquished according to petroleum regulation by this October, bringing the acreage to 2,396 square kilometres. The retained areas include all of the Pornsiri discovery and the remaining three prospective areas.

Production net to the Group’s working interest in continuing operations was essentially level at 6,153 BOPD for the first six months of the year compared to an average of 6,150 (9,362 BOPD including Russia) for the same period last year.

Production was up significantly in Tunisia, climbing from 1,040 BOPD to 1,856 BOPD, primarily as a result of reduced downtime and improved production equipment that allowed the single well field to be produced at much higher rates without increasing operating temperatures beyond acceptable levels. The increase was offset in Yemen where, due to the increasing production of water and a delay in the development drilling programme, which was to have begun late last year, production net to the Company’s working interest from the ESDA declined to 3,905 BOPD from 5,110 BOPD for the same period during the previous year. In Mongolia, where a pilot production programme continues on Contract Area 19, production for the first half of this year averaged 392 BOPD compared to nil production for the same period last year.

In 2002, SOCO entered into three separate transactions involving its Vietnamese interests. The first occurred in January when the Company executed a Share Exchange Agreement with the minority shareholders of SOCO Vietnam. Under the terms of this agreement, SOCO acquired an additional 10% stake, increasing its interest in the majority owned subsidiary from 70% to 80%. The consideration for the exchange was £1,753,153 paid for by issuing 926,124 ordinary shares of £0.20 each (valuing each share at £1.893) in the share capital of SOCO.

In February, SOCO Vietnam executed a farm-out agreement with PTTEP, subject to approval of the Government of Vietnam. Under this agreement, PTTEP agreed to fund SOCO and PTTEP’s share of drilling four wells on Blocks 9-2 and 16-1 in the Cuu Long Basin offshore Vietnam to a maximum of US$50 million in order to earn 50% of SOCO Vietnam’s interests in Vietnam. In August, SOCO announced that it had entered into an agreement with Amerada Hess (Vietnam) Limited (Hess) to acquire one-half, 13.5%, of the Hess total working interest in Block 16-1. As a result of these transactions, post farm-out SOCO Vietnam retains a 25% interest in Block 9-2 and a 28.5% interest in Block 16-1.


In July, the Trustees of the SOCO Employee Benefit Trust (the Trust) acquired on the open market 325,000 ordinary shares in the Company (0.456%) at an average purchase price of £1.86 per share. Following this transaction, the Trust holds 2,125,000 ordinary shares representing 2.98% of the issued share capital of the Company.

Following the vacancy created when the Company’s prior auditors ceased trading in the UK, the Board conducted a rigorous review of proposals from a majority of the leading accounting firms. At the conclusion of the process the Board appointed Deloitte & Touche to serve as the Company’s auditors until the next Annual General Meeting at which time the shareholders will have an opportunity to vote on the appointment of the auditors.


The Company expects to continue a very active drilling programme throughout the remainder of the year. The primary focus will be in Vietnam where a minimum of two additional exploration wells will be drilled in the Cuu Long Basin, one in Block 16-1 and the other in Block 9-2. Additionally, the exploration programme in Mongolia will continue until the onset of winter, at which time drilling will be suspended, and the development programme in Yemen will continue into next year.

Work will continue in Libya where SOCO, through its 43% interest in the Libyan joint venture ODEX, expects to progress towards negotiation and finalisation of several exploitation/exploration projects.


Following the exit from Russia in the last half of 2001 as part of SOCO’s strategy to dispose of its mature producing assets, the Company has focused its initiatives in two areas - Vietnam and Libya. There has been substantial progress on both fronts and we expect positive results throughout the rest of the year. The farm-out in Vietnam earlier in the year gave SOCO the balance sheet flexibility to advance in both areas.

SOCO remains committed to the two major focus areas of Southeast Asia/Far East and the Middle East/North Africa. We believe that we are just beginning our first important steps to establishing very strong asset bases in these regions.

Patrick Maugein (Chairman) Ed Story (Chief Executive)

19 September 2002

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