Soco says abandons Vietnam well, shares slip
LONDON - British oil explorer Soco International Plc said on Friday it had plugged and abandoned the TGX-1X exploration well in Vietnam after failing to find its target, knocking its shares.
Soco said that after encountering reservoir sands, "initial analysis indicates that it was not drilled within structural closure".
The well, located in a previously untested portion of the Clastics fairway on Block 16-1 on the Te Giac Xang (TGX) structure in the Cuu Long Basin offshore southeast Vietnam was drilled to a depth of 3,506 metres.
Shares in Soco, which have climbed steadily in the past year on the back of growing optimism over Vietnam and soaring oil prices, were 2.5 percent down at 1,475p by 0810 GMT, valuing the company at more than 1.1 billion pounds ($2.1 billion).
"The TGX-1X well encountered reservoir sands, which is encouraging for exploration in the region," Bridgewell analyst Al Stanton said in a note.
"But the company's initial analysis...has highlighted the challenge inherent in defining and estimating the size of the prospects," Stanton, who maintains his 'buy' recommendation for the stock, added. Soco, which also has interests in Yemen, Thailand, Congo and Libya, said seismic [data] over the area would be reprocessed and remapped to better define the structure for a possible second well.
"Although this well was not a commercial discovery, we did gain some positive encouragement for further exploration in the 16-1 fairway as far as reservoir development and oil source are concerned, moving away from the initial discovery," Soco Chief Executive Ed Story said.
"Accordingly, our view on resource potential is not impacted, but the well results reinforce the risk profile of exploratory drilling, even in an excellent setting," he added.
Soco raised its estimate of proved plus probable reserves at its Vietnam interests in September by 40 percent to 25 million barrels after some drilling success.
It said at the time that the Golden Tuna, or Ca Ngu Vang (CNV), oil field in Vietnam, in which it has a 25-percent stake, would start first production in late 2007.
Reuters - November 3, 2006.
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