Northumbria University FN0361 Assignment | SOCO International PLC | Word count: Part A: 1884Part B: 1233Total : 3117 | | | | | 2011-2012 |
Table of Contents A. Company introduction 3 I. Company history 3 II. Company mission, vision and strategy 3 B. Part A _ Financial report analysis 4 I. Profitability 4 III. Long term liquidity 10 IV. Investment 11 V. Conclusion and recommendation 14 C. Part B_ Impression management 15 I. Colour 15 II. Graph 16 III. Language 17 Reference 20 Bibliography 23 Appendix 24
A. Company introduction I. Company history
SOCO is an international oil and gas exploration and production company, headquartered in London. It was first listed on the London Stock Exchange in 2007 and is a constituent of FTSE 250 Index. The company has interests in Vietnam, the Republic of Congo (Brazzaville), the Democratic Republic of Congo (Kinshasa) and Angola. II. Company mission, vision and strategy
The objective of SOCO international is how exploration success creates the opportunity exponential growth by reinvestment from cash inflows generated by operations and disposals creates more opportunities for exploration. In order to achieve its objective, SOCO organizes the group's strategy is to have oil and gas assets in each phase of the oil and gas cycle – production, development and exploration and as such is raising additional funds to continue its expansion. It is divided into three main strategies: * S1: Recognizing opportunity * S2: Capturing potential * S3: Realizing value
B. Part A _ Financial report analysis I. Profitability
SOCO’s revenue in 2010 is less than the revenue in 2009 because of lower production in both Vietnam and Thailand projects. In Vietnam, production was suspended due to the stuck in the production line connecting the Ca Ngu Vang (CNV) platform to the Bach Ho platform. The pipeline inspection was conducted until early February 2010. Moreover, in the third quarter 2010, the production was stopped due to infrastructure surveying for future development. Besides, in 2009 SOCO had carried production costs on behalf of Petrovietnam in CNV field. By the end of 2009, the Group had been recouped those carried costs by increasing the Group’s entitlement production volumes. This made revenue of Vietnam project in 2009 is higher than in 2010. In Thailand, lower production is associated with the scaling back of production at Bualuang. The production was delayed because sidetrack of three slant production wells were converted to horizontal production wells in May of that year. This is related to S2 of company by adding the Company’s technical expertise to progress activities through the formative stages or through periods of difficulty.
Although the revenue in 2010 was less than in 2009, profit before tax (PBT) was higher. Firstly, this is because of disposal. In September 2010, SOCO completed the sales of Thailand subsidiary for an initial value of $ 105 million. This ties in with the company’s S3 of realizing value by disposing project, regardless of the phase of the project life cycle, once the Company’s capability begins to diminish. Secondly, it is due to foreign exchange rate. In 2010, the THB/USD currency exchange rate was increased compared to 2009. This helped SOCO gain an amount of money when converting Thai Baht into Dollar realized on oil sales in Thailand.
Compared to Afren’s performance, the revenue of SOCO is much lower but profit is higher.
(Source: http://www.xe.com/currencycharts/?from=THB&to=USD&view=5Y ) Although the group’s profit increased in 2010, the Group’s ROCE declined dramatically in 2010. Melville (2011) argued that the profits from continuing operations are more reliable for future performance than overall profit. Hence, ROCE was calculated base on profits from continuing operations. In 2010, SOCO sold Thailand property, so it was classified as
