An oil company cuts its investment budget due to the low crude price and sees its shares slump.
No, this time it’s not Royal Dutch Shell, although the Anglo-Dutch group has just done exactly that.
Soco International, which focuses on African and Vietnam, has also been hit by the oil price slide and as a consequence it plans to reduce its investment budget for 2015 by more than 60% compared to last year, from $161m to $90m. It also said it was reviewing its entire asset base:
In light of the current oil price environment, Soco’s board is in the process of reviewing the company’s overall portfolio of assets and carrying values.
It also said its production guidance for 2015 was 10,500 to 12,000 barrels of oil equivalent a day, down from 13,600 a day last year.
Earlier this month Tullow Oil said it would cut investment for this year by $200m.
The news has pushed Soco shares down 19.7p or 7% to 260.3p, making it the biggest faller in the FTSE 250 mid-cap index, and Oriel Securities analyst Dragan Trajkov said:
[This is] slightly negative given confirmation of low production guidance for 2015, however we had viewed this as a strong possibility given potential for a limited... drilling programme [at the Te Giac Trang field in the south China sea] n 2015.
Soco remains one of the better placed names in our universe to survive a low oil price environment longer term with a strong net cash position and low operating cost. However we expect the generous dividend, which has been a key attraction for investors, to be reduced significantly in the near term.
