Soco International sells Congo interests to Coastal Energy

Soco International has sold its Congo operations for up to $10m in cash to Coastal Energy.

In addition to the cash consideration, Soco will retain the right to an overriding royalty interest on all barrels of oil or condensate produced and sold from any of the four exploitation permits.

The cash component will be received in three tranches based on various operational milestones. The first is the agreement of the net assets/liabilities of Soco Congo, then the formal approval of the first field development plan and finally the earlier of first commercial production or 31 December 2019.

Soco plans to use the proceeds from the sale and the potential future royalty revenue from the exploitation permits to invest in its growth plans and to support the commitment to paying an annual dividend.

For the 12 months to the end of December 2017, the Congo interests generated a pre-tax loss of around $104m, mostly comprising an impairment charge announced in January, which reduced the carry value of the assets to zero.

President and chief executive officer Ed Story said: "I am delighted that the agreement for the sale of Soco's Congo (Brazzaville) interests has been signed. In January 2018, the company announced that its assets in Africa were no longer a core strategic priority, and this is a step that will deliver an exit from a material portion of the non-core African business.

"The company continues to focus on creating value from the core Vietnam portfolio and on evaluating acquisition opportunities in a disciplined manner to grow and refocus our business in line with the strategy that we have outlined to the market."

Peel Hunt said: "We carry $0 in our net asset value for Soco's West African portfolio and any disposal of these assets is therefore accretive. However, due to the relatively small and phased nature of the cash component, combined with the uncertainty around timing of the receipt of any overriding royalty revenue, we do not anticipate a material impact on NAV or our financial forecasts.

"Disposal of the Congo (Brazzaville) portfolio has been a strategic goal for Soco for some time and, on completion, will enable management to focus on securing the acquisition/s required to generate meaningful NAV growth."

At 1440 BST, the shares were down 1.7% to 93.80p.