SOCO International, the oil and gas firm, has entered into a 'conditional' agreement with Lizeroux Oil & Gas to acquire the 20 per cent minority interest in SOCO Vietnam that the group does not already own.
The deal is set to cost $95m, which will be paid out of existing cash resources.
The situation is complicated by the fact SOCO "carried" Lizeroux's share of all costs at the Vietnamese operations and is already entitled to receive 100% of any distributions from the project.
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As at December 31st 2011, the costs and expenses remaining to be recovered were approximately US$155m. As a result of the acquisition, SOCO will acquire the right to receive all of the future cash flows that the minority interest is entitled to receive, namely the remaining 20% of distributions made by SOCO Vietnam post the so-called "carry recovery".
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SOCO believes the acquisition "represents a unique opportunity to acquire the minority interest at an attractive purchase price, especially when compared to other recent transactions in Vietnam."
It will also allow SOCO to assume complete management control of operations.
At the end of last year, the group reported proven and probable reserves in Vietnam of 121.1m barrels of oil equivalent. SOCO Vietnam had gross assets of US$839.1m as at December 31st and generated profit before tax of $157m during the whole of last year.
Ed Story, President and Chief Executive of SOCO, said: "The acquisition represents a unique opportunity to consolidate our interests in SOCO Vietnam, enabling the group to generate greater long-term value by capitalising on the production growth and upside potential of the TGT and CNV fields. The acquisition will be significantly value accretive, generating substantial future return for SOCO shareholders."
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