August 29, 2013 / 8:37 AM / in 4 years

UPDATE 1-SOCO unveils higher-than-expected shareholder payout

By Andrew Callus

LONDON, Aug 29 (Reuters) - Soco International, the British oil exploration and production company focused in west Africa and Vietnam, unveiled its promised first payout to shareholders on Thursday.

Reporting record production for a third successive half-year, the company said it would pay 40 pence per share to shareholders by means of a special share scheme and target a future shareholder return of 50 percent of free cash flow.

The payout was higher than analysts had been expecting after the company's promise earlier this year to start returning capital, and accompanied a set of upbeat drilling and well testing results.

Shares in SOCO climbed 3.6 percent in early trading.

Company executives including founder and Chief Executive Ed Story will themselves be awarded around one third of the total 133 million pound ($207 million) payout, Thomson Reuters data shows.

"It's taken us 17 years (since listing) to get here but we are where we want to be now" said Chief Financial Officer Roger Cagle, also a beneficiary thanks to his 5 million share holding.

He said SOCO was now unusual among UK-listed exploration and production companies offering a significant dividend yield that sets it apart from "white knuckle explorers".

Analyst Michael Alsford at Citi said in a note: "Soco offers a differentiated strategy to the other mid-cap oils, targeting a sustainable return of 2.5-5 percent yield while still offering exploration and appraisal upside from ongoing activities in Vietnam and West Africa."

The payout is subject to shareholder approval.

For UK tax efficiency purposes, it will be delivered to shareholders through the issue of either one B share or one C share for every ordinary share held.

Under a system that has been used by other UK companies in the past, B shares can be redeemed for 40 pence in cash that is treated by UK tax authorities as capital, while C shares will pay a 40 pence cash dividend, treated as income. Shareholders who do not make their preference known will automatically receive C shares.

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