SOCO To Sell Its Interest in Permtex
SOCO announces that it has entered into an agreement to dispose of its 50% interest in the Russian joint venture, Permtex, which holds various production and development licences in the Volga-Urals Basin of European Russia. SOCO holds its interests through its wholly owned subsidiary SOCO Perm Russia, LLC (SOCO Perm). The interests have been acquired by Acont Enterprises Limited, a wholly owned subsidiary of Lukoil Overseas BVI Ltd, a subsidiary of OJSC Lukoil, one of Russia's largest oil and gas companies. Acont has acquired the whole of SOCO's interest for a total cash consideration of US$50.0 million payable on completion. Additionally, Acont assumes all obligations of SOCO as guarantor regarding SOCO's share of long term debt associated with the European Bank for Reconstruction and Development amounting to approximately US$11 million. Following completion, OJSC Lukoil will indirectly own the entire issued share capital of Permtex.
Completion is to take place following the satisfaction of the conditions contained in the disposal agreement including, the approval of the disposal by SOCO's shareholders in general meeting. The shareholders' meeting is expected to be held on September 6th.
The transaction adds further strength to SOCO's debt free balance sheet bringing its free cash balances to approximately £64 million, approximately three quarters of its total market capitalization of £86m as of August 15, 2001.
As of December 31, 2000, SOCO's share of Permtex's net assets was approximately £22.3 million. For the year ended December 31, 2000, SOCO's share of Permtex's profit before tax was £5.7 million representing approximately 23% of SOCO's total pre-tax profit of £24.1 million.
Working interest production to the Company from its Russian interests averaged approximately 3,212 barrels of oil per day (BOPD) during the first half of 2001 (approximately one third of SOCO's total working interest production of 9,362 BOPD during this six month period), up from a 2000 year average of approximately 2,665 BOPD (8,810 BOPD total).
At the time of the Company's flotation in May 1997, the Company stated that it intended to investigate other exploration and development opportunities. In view of the current oil price environment the Directors believe that the disposal is an excellent opportunity to realize value and raise funds for application in other projects currently under appraisal.
In addition to seeking new investment opportunities, following the disposal of its Russian assets SOCO will continue to develop and exploit its remaining asset base in Vietnam, Mongolia, Yemen, Tunisia, Thailand.
Ed Story, CEO and President of SOCO, said:
"This transaction with Lukoil is mutually beneficial as it provides SOCO additional capital to deploy toward other more advantageous exploitation and development projects and places these assets with Lukoil, a group who have the expertise to maximize the value of the assets while continuing to consolidate its former joint ventures."