Soco International profits rise; to buy Egypt-focused Merlon

Soco International reported a rise in first-half profit and revenue on Thursday and said it has agreed to buy privately-owned Egypt-focused oil and gas company Merlon for around $215m.

In the six months to 30 June, pre-tax profit increased to $28.2m from $12.1m in the same period a year ago, as revenue rose 26% to $93.2m. The average realised crude oil price pushed up to $74.08 a barrel from $53.90 in 2017, which is a $3.46 premium to Brent.

Meanwhile, gross production in the period rose to 26,773 barrels of oil equivalent per day from 29,600, although net production dipped to 7,748 from 8,606.

President and chief executive Ed Story said: "The first half of the year has seen the team focused on execution of our strategy of portfolio rationalisation and finding new growth projects, whilst returning cash to shareholders and strengthening the board.

"The new debt facility and the proposed acquisition of Merlon are exciting steps forward for SOCO and provide the platform to expand and diversify the company's resource base to create a full-cycle, growth orientated E&P company. As we look to the future, we are well positioned financially and, with a dedicated and capable team, continue to look for opportunities to grow the business."

Soco also announced the acquisition of Merlon, the consideration for which will be satisfied through the payment of approximately $136m in cash and the issue of around 66m new Soco shares. As part of the deal, Soco will also arrange for the repayment of Merlon's net debt, which was approximately $22m as at 31 December 2017.

Merlon has a 100% operated working interest in the onshore El Fayum concession in Egypt, which is located in the Western Desert, around 80km south west of Cairo.

Soco said the acquisition is a significant step forward in its stated objective of expanding and diversifying its resource base to create a full-cycle, growth orientated E&P company of scale.

Story said: "We have high regard for the business that Merlon has established in Egypt and are excited that Jason and his team are joining Soco. In addition to providing a high quality, free cash flow generating oil concession with significant development upside and exploration optionality, Merlon creates a new hub for our business in Egypt, which we will utilise to support further growth not only in Egypt but also the wider MENA region, both organically and through additional M&A."

At 1030 BST, the shares were up 0.1% to 86.70p.