Sinochem to Buy SOCO Yemen for $465M

SOCO International announced that it has entered into a conditional sale and purchase agreement for the sale of its wholly owned subsidiary SOCO Yemen Ltd (Australia), the entity that holds the company’s interest in the East Shabwa Development Area in Yemen, to Sinochem Petroleum Ltd for an enterprise value of U.S. $465 million, subject to certain financial adjustments. The consideration for the disposal is payable in cash on completion.

SOCO has a track record of realizing value at the appropriate stage of an asset's life-cycle and re-investing the capital to build significant shareholder value. The Board believes that the disposal is in the best long-term interests of the company and represents an excellent opportunity to realize value from a mature producing non-core asset.

SOCO Yemen holds an indirect interest of 16.785%. in the East Shabwa Development Area of Yemen through its 58.75%. equity interest in Comeco Petroleum Inc. Comeco, in turn, has a 28.57%. interest in the East Shabwa Development Area in Block 10 in Yemen. The East Shabwa joint venture is operated by TOTAL E&P Yemen under a production sharing agreement with the government of Yemen.

As of December 31, 2006, it was estimated that SOCO Yemen's interests in Yemen had net proven, and net proven and probable reserves of 18.7 mmbbl and 29.6 mmbbl of oil respectively.

Production in 2006 from East Shabwa averaged 40,300 bopd and SOCO Yemen's working interest share was 6,766 bopd. During the first half of 2007 production, net to SOCO Yemen's working interest, was 6,341 bopd.

For the 12 months ended 31 December 2006, on an IFRS basis, SOCO Yemen generated revenues of U.S. $76 million and profit before taxation of U.S. $55 million. Gross assets of SOCO Yemen, as of December 31 ,2006, were U.S. $65 million.

Completion of the disposal is subject to, amongst other things, various regulatory approvals including the approval of the National Development and Reform Commission of the People's Republic of China. Additionally, due to the size of the transaction, the disposal is conditional upon the approval of SOCO shareholders at an extraordinary general meeting of the company. Sinochem also has the right to terminate the agreement on or prior to March 28, 2008 in the event that Sinochem has not by such date received such consents and approvals as it requires in relation to the Disposal. In the event that Sinochem terminates the Agreement in accordance with that right, Sinochem has agreed that it will pay to SOCO a fee of U.S. $3 million.

The majority of the disposal proceeds will be used to fund the company's exploration and development programs. In particular, capital will be deployed in order to further develop SOCO's assets in Vietnam, a key area of operation for the Company. The remaining proceeds will provide the financial flexibility necessary to participate in future opportunities as and when they arise.

"The Disposal will enable SOCO to generate greater long-term value by re-investing the proceeds in the development of its core assets, particularly in Vietnam," Ed Story, president and CEO of SOCO, said. "This transaction is another example of the Company's strategy of realizing value for shareholders at the appropriate stage of an asset's life-cycle and illustrates our ongoing co-operation with Chinese industry participants who have interests in expanding their international role."

"Sinochem is pleased with this transaction that diversifies its E&P portfolio with immediate production and increases its footprint in the Middle East, an area of focus for Sinochem," Han Gensheng, vice president (E&P) of Sinochem, said.