FINANCIAL RESULTS
First half 2015 revenue, profits and cash flows were in line with the Company's expectations, albeit significantly different from the first half of 2014. Results were impacted by lower production and oil price compared to the same period last year. Income statement profits were also impacted by an increase in non-cash depreciation, depletion and decommissioning ("DD&A") associated with the revision of the Company's reserves as announced in the 2014 year end results.
Operating cash flow was in line with expectations, however, lower production and oil price combined with first-half weighted H5 development expenditure resulted in negative free cash flow for 1H 2015.
Cost savings are underway both at the Vietnam JOC level and across SOCO's cost base. Capex and opex savings of c.10% have been reflected in this year's Vietnam expenditure programme. The Company continues to implement G&A cost savings - mostly in the African region and associated with the new ventures activities - amounting to c. 25% of the associated G&A. Further cost savings are being targeted across the organisation and at the JOC level.
Despite the challenging environment, first-half weighted capital expenditure programme and paying the $51 million dividend to shareholders during the first half, SOCO remains well financed with no debt on the balance sheet and $96.6 million of cash and cash equivalents as at 30 June 2015. This, along with SOCO's low operating costs and attractive Vietnam production economics with operating cash flow break-even oil price per barrel in the low $20s, affords the Group financial flexibility in the current challenging environment.
The financial asset related to the expected earn-out payment of $52.7 million from the disposal of the Company's Mongolia interest in 2005 has been re-classified as a current asset at the estimated fair value of $50.0 million as at 30 June 2015 with the expectation of receipt within 12 months.
Dividend
Following approval at the AGM, in June, the Company paid a final dividend of 10 pence per share (c.$51 million). The Board will decide on the level of future cash returns in light of the oil price, cash flow generation from Vietnam and expected capital expenditure at the time.
