Soco International tanks as 2016 output guidance disappoints

Soco International tanked after its 2016 guidance left investors disappointed.

The company lifted its full year production guidance to between 11,800 and 12,000 barrels of oil equivalent per day from a previous range of 11,000 to 12,000 and said output for the 10 months to the end of October was 12,000 barrels of oil equivalent per day.

Soco said its H5 wellhead platform at the Te Giac Trang field in Vietnam started up on 10 August, earlier than planned, and is currently producing around 9,000 barrels, which is slightly below expectations and the initial production rates of around 11,000 to 12,000 barrels.

In addition, the company said work on the revised field development plan for Te Giac Trang is ongoing, with the formal submission to the Vietnamese government now expected to take place in the first quarter of 2016.

Soco set preliminary guidance for 2016 group production at between 10,000 and 11,500 barrels of oil equivalent per day, which was around 6% below consensus expectations, weighing on the shares, which were down 17% to 148.12 at 1026 GMT.

Jefferies cut its rating on Soco to ‘underperform’ from ‘hold’ and trimmed the target price to 135p from 150p after the trading and operations update.

It pointed out that while 2015 production guidance has narrowed to the upper end of the range, the preliminary 2016 guidance signals another year-on-year decline.

It said next year’s production guidance leads it to cut its 2016 production estimate by 16% to 11,200 barrels of oil equivalent per day.

The principal reason is that new H5 block production of around 9,000 gross "is below the c.11-12kb/d originally targeted" and, secondly, the 2016 work programme has yet to be agreed among the partners, said Jefferies.