Soco raises £102m to fund drilling in Congo and Vietnam

OIL explorer Soco International raised £102m in a share sale yesterday, to allow it to repay holders of a convertible bond due in May, while advancing a busy drilling programme.

The shares were placed at a two per cent discount to the market price at 1,410p and, according to those close to the placing, they were well subscribed with significant support from major shareholders.

Bank of America-Merrill Lynch and JPMorgan Cazenove (see right) were joint bookrunners on the placing.

Soco has an outstanding $250m (£153m) convertible bond which holders can redeem in May, while it also expects total capital expenditure for 2010 to be about $185m as it drills wells in the Democratic Republic of Congo and Vietnam that analysts said could be transformational for the company.

Analysts said the sale of 7.2m shares removed uncertainty about how the company would fund itself going forward.

“Today’s circa $170m equity placing alleviates concerns over funding the capital expenditure programme over the next two years,” analysts at Morgan Stanley said in a research note.

Morgan Stanley said the cash raising would enable Soco to fund the drilling of two wells in Congo by itself, potentially achieving a much higher price for a stake in the block. “The focus may now move to the potential upside in the drilling programme,” said analyst Phil Corbett at RBS yesterday.
ANDREW Osborne, managing director of Bank of America Merrill Lynch corporate broking, is something of a doyen in the UK’s energy and power (E&P) sector.
He has advised most of the mid cap E&P sector, including Tullow Oil, Cairn Energy, Imperial Energy, Premier Oil, Dana Petroleum, SOCO International, Dragon Oil, Afren, Regal Petroleum and Bowleven.
His association with Soco dates back to 1997 when he floated the firm when working for Societe Generale. Soco has remained loyal to him since then as he has subsequently changed firms.
Largely because of Osborne’s sector contacts, Bank of America Merrill Lynch has led 13 out of the last 17 E&P equity issues in the Europe, Middle East, Africa region over the last 12 months.
Bank of America Merrill Lynch has been joined on the transaction by JP Morgan Cazenove who recently took the place of Citi as joint adviser to the company.
JP Morgan’s team is led by sector specialist Colin Carscadden.
Osborne, who has more than 17 years experience in corporate broking, says there was considerable appetite for the shares since the group had not been back to the market since its listing and because investors were keen to support and bought into the group’s drilling programme.
The placing shares represent an increase of around 9.6 per cent in the group’s equity capital.