Soco International has struck a deal to sell its interests in Congo Brazzaville to a Norway-based company, Coastal Energy Congo. The price agreed is US$10 million, with an over-riding royalty interest in future production, although most of this amount only comes due when the assets are being developed. The deal was announced on June 25.
“This is a step that will deliver an exit from a material portion of [our] non-core African business”, said Soco’s president and CEO, Ed Story. He went on to say the company was focused on its core Vietnamese portfolio, while “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”. The company decided to sell off its Congolese assets in January.
Soco Congo has a 40.39% operated stake in the shallow-water Lidongo, Viodo, Lideka and Loubana production and exploitation licences (PELs), which previously made up the Marine XI block. Soco has an 85% stake in Soco Congo. The remaining 15% is held by Quantic, of which one of Soco’s board – Rui de Sousa – has a 50% beneficial interest.
Coastal Energy will pay the first US$1 million within 10 days of a reckoning of Soco’s Congo assets. The next US$5 million will come within 10 days of formal approval of a development plan, while another US$4 million will come with first commercial production – or by the end of 2019.
Soco also keeps a royalty, of US$0.5 per barrel when Brent is at or below US$52.25 per barrel, rising to US$1 per barrel when the price exceeds this. The company held no value for the Congo Brazzaville assets as of the end of 2017. Last year, the company took an impairment charge of US$104 million before tax. Soco’s Africa director, Serge Lescaut, is expected to go to work for Coastal Energy.
The sale of the Congolese assets leaves Soco with only one African interest, a 22% stake in the Cabinda North block, in Angola. Soco Cabinda – which is 80% owned by Soco – increased its stake in this block, from 17%, in November 2017. Despite this move, the company describes Angola as being not a “core priority”.
Soco drilled a well, the Lidongo X Marine-101, on the Marine XI block in 2014 and, after stimulation, this flowed at 5,174 bpd of oil, with a stable flow rate of 4,800 bpd. Talks on developing the Lidongo field dragged on, although Soco secured a 20-year PEL on this in the second half of 2016, with 25-year PELs on the three other areas in early 2017.