Soco International Plc (SIA) rose in London on plans to buy out the minority partner in its main oil subsidiary in Vietnam.
The U.K. explorer advanced 6.9 percent to 309.4 pence. It earlier jumped as much as 10 percent.
It plans to pay $95 million for the 20 percent it doesn’t already own in Soco Vietnam from Lizeroux Oil & Gas Ltd., London-based Soco said today in a statement. Soco and its partners plan to boost output 38 percent to 55,000 barrels a day from the Te Giac Trang fields (TGT) by starting the second platform off Vietnam in August.
“It’s a great asset and we basically, if you look at the metrics of what people have been paying for things in Vietnam, we’ve paid about half as much for this interest because of our majority interest,” Chief Financial Officer Roger Cagle said today in a phone interview. “It’s a sweet deal for us.”
Investors are concerned that the production target at TGT may not be met, Tao Ly, a London-based analyst at Nomura International Plc, wrote in an e-mailed report. If output targets are met, Soco will generate $780 million in cash by the end of 2015 on its balance sheet at $95 a barrel oil price.
It plans to expand exploration in Vietnam and is examining opportunities in West Sub-Saharan Africa and Southeast Asia.
The company is reviewing possible projects in at least four new countries and has a $25 million exploration budget for new ventures this year, Cagle said.
“We have a number of projects for exploration opportunities,” he said. “They are just not mature to the drilling stage this year. On the exploration side this is a light year for us.”
Directors will consider paying a special dividend in the second half with production ramping up in Vietnam. Soco has already begun a buyback program to return funds to shareholders.
“Many of the managers and directors of this company have a number of shares and we’ve never taken any money off the table,” Cagle said. “We are not an investment company. The cash builds up and if we can’t increase the value of our portfolio, then we will distribute back to shareholders.”
Lizeroux is majority-owned by former Soco manager Hai Hoang Nguyen, who helped the company to set up business in Vietnam.
“One time, early on, initially he was one of the managers of one of the joint operating companies, but he is no longer,” Cagle said. “He had a lot of contacts, so we got to the front of the line, met the people, worked the deals.”
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