Soco International Plc, a U.K. oil explorer focused on Africa and Asia, plans to to pay a dividend yield of as much as 10 percent in future as it pumps more oil in Vietnam.
The company today announced its first dividend of 40 pence a share, or about 10 percent of its 1.3 billion-pound ($2 billion) market value. It expects to return about 50 percent of annual free cash flow to shareholders in the future, Chief Executive Officer Ed Story said in a statement.
Soco shares advanced 3.3 percent to 398.70 pence in London, the highest value since May 22.
“The production will only increase for the next several years, not decline,” Chief Financial Officer Roger Cagle said in a phone interview. “We expect to be somewhere in the 5 to 10 percent range” for the dividend yield.
The company expects to pump 16,000 barrels net of oil a day this year after extraction in the first half rose 40 percent from the same period last year. It plans to drill at least three exploration wells in Africa in the next year and invest about $150 million in projects in 2014, Cagle said.
The proposed dividend “is a surprise even versus our optimistic forecast of 25 pence a share,” Alexander Holbourn and Rafal Gutaj, Bank of America Corp. analysts, wrote in an e-mailed report. Soco is “offering superior cash returns versus oil majors, whilst simultaneously offering upside potential through both development and exploration.”
Soco needs to increase the Te Giac Trang field’s floating production, storage and offloading vessel capacity to 70,000 barrels of oil a day to accommodate its volumes and output from Talisman Energy Inc.’s nearby field off Vietnam.
First-half earnings climbed 8 percent to $105.4 million, the London-based explorer said today. The Lideka East Marine 1 well discovered oil and gas in the Republic of Congo, while the Te Giac Trang 10X appraisal well in Vietnam tested at an average 6,179 barrels of oil per day.