Soco International shocks with reserves reclassification

As it waits for an independent legal review into allegations of wrondoing in the Democratic Republic of the Congo, SOCO International warned that it had reclassified a large portion of its reserves due to the oil price slump.

Soco has reclassified 38.9m barrels of oil equivalent (mmboe) reserves as '2C' contingent resources, a 'best estimate' classification, plus a 45.4m barrel revision, which together saw its proven plus probable resources (2P) shrink by two thirds to 40.8m barrels.

The FTSE 250-listed exploration and production company also said it will have no further involvement in a controversial exploration block in the Democratic Republic of the Congo and has hired law firm Clifford Chance to carry out a review into allegations made about wrongdoing in its activities there.

Production for the year of circa 13.6 thousand barrels of oil equivalent per day (kboepd) was just below management's guidance range at the beginning of the year, and well down from 16.7 kboepd in 2013.

Nevertheless, president and chief executive Ed Story said 2014 "was a strong year for SOCO", choosing to focus on an independent study confirming the full potential of the Te Giac Trang (White Rhinoceros) field, which remains on a fast track for first production in the third quarter of 2015.

Story maintained production guidance for 2015 of 10.5-12.0 kboepd due to the reduced scope of TGT drilling, but reiterated that the company had sufficient cash flow and cash balances to meet ongoing capital expenditure, together with balance sheet capacity to take advantage of opportunities in the market as they arise.

Although revenue slipped 26% to $448.2m and profit after tax plunged 87% to $14m due to non-cash exploration write-offs of $79.5m and $60.5m impairments, cash generated from operations remained solid at $251.2m.

Having already delivered a special cash return to shareholders of $119m during the year, the board recommended a final cash dividend of 10p per share.