RNS Number:9234K
Roc Oil Company Limited
24 October 2006
ROC OIL COMPANY LIMITED
(ABN 32 075 965 856)
REPORT TO SHAREHOLDERS
Activities for the Quarter Ended 30 September 2006
CEO COMMENTS
During the Quarter, ROC became a different company. Daily net oil production
averaged slightly in excess of 11,000(1) BOPD, compared to virtually no
production at the beginning of the year. Gross sales revenue increased to $63.4
million compared to $5.1 million in 1Q 2006.
With a significant amount of this new production and revenue coming from two
ROC-operated fields in China and with the successful appraisal during the
Quarter of a potentially commercial, ROC-operated, oil discovery in another part
of that country, ROC's profile in China has increased significantly.
ROC's profile in Angola is also about to change. The Company negotiated a
two-year drilling rig contract which was signed post-Quarter. As a result, ROC
can move forward to deliver on its commitment to start a ground-breaking
exploration drilling campaign onshore Angola in 1H 2007, the first in more than
30 years.
In Australia, the reservoir performance at the ROC-operated Cliff Head Oil Field
performed at the higher end of expectations, thereby providing a valuable
underpinning of the Company's overall revenue stream.
As ROC emerges from a very eventful Quarter, the Company finds itself with an
array of portfolio activities that is unique among western, publicly listed, oil
companies - and one that sets the scene for sustained growth in the near, medium
and long term future.
KEY ACTIVITIES
1. PRODUCTION
* Total production of 825,039 BBLS (8,968 BOPD(2)): up 230% compared to
250,107 BBLS (2,748 BOPD) in the previous Quarter.
* Total sales revenue of $63.4 million; up 279% compared to $16.8 million
in the previous Quarter.
* Total sales volume of 788,749 BBLS; up 316% compared to 189,554 BBLS in
the previous Quarter.
1.1 Cliff Head Oil Field, WA-31-L, Offshore Western Australia (ROC:
37.5% & Operator)
Development drilling operations were completed on 16 July. Hookup and
commissioning of the remaining two designated oil producers were completed on 23
July. Gross oil production rates generally ranged between 8,000 BOPD and 12,500
BOPD reflecting intermittent downstream constraints. Production for the Quarter
averaged approximately 9,325 BOPD. See Section 6: Post Quarter Events.
1.2 Zhao Dong C & D Fields, Bohai Bay, Offshore China (ROC: 24.5% &
Operator)
Gross oil production from the Zhao Dong C & D Fields averaged 27,449 BOPD(3) for
the Quarter. Production was temporarily pared back from about 30,000 BOPD to
22,000 BOPD effective 29 September, due to a Government requirement that the
production rate adhere to the approved Development Plan.
1.3 Chinguetti Oil Field, PSC Area B, Offshore Mauritania (ROC: 3.25%)
Gross oil production averaged approximately 31,000 BOPD for the Quarter.
2. DEVELOPMENT
2.1 Blane Oil Field, North Sea (ROC: 12.5%)
Development drilling continued during the Quarter with the first of two
development wells completed on 26 September. By Quarter-end the second
development well had been drilled and was in the process of being completed and
preparations were underway to commence pipelay works for the flow line to the
Ula platform. First oil production is expected 2Q 2007.
2.2 Enoch Oil and Gas Field, North Sea (ROC: 12.0%)
The drilling of the single development well and pipelay works for the flow line
to the Brae platform were completed by Quarter-end. First oil production is
expected 1Q 2007. See Section 6: Post Quarter Events.
2.3 Zhao Dong C & D Fields, Bohai Bay, Offshore China (ROC: 24.5% &
Operator)
In-fill drilling continued during the Quarter with five wells being completed.
Three of these wells were designated oil producers while the other two wells
were intended to be water injectors. Both designated water injection wells
encountered oil, not water, in the targeted water zone which resulted in a
lowering of the respective oil-water contacts; one was completed as a water
injection well while the other was completed as an oil producer. These latest
wells bring the total number of production wells to 31 and water injection wells
to 20.
3. EXPLORATION AND APPRAISAL
3.1 Perth Basin, Offshore Western Australia (ROC: 7.5% - 50% &
Generally Operator)
On 31 July, the Moondah-1 exploration well in TP/15 was plugged and abandoned
without encountering significant hydrocarbons. Due to adverse weather conditions
it was not possible to commence drilling the next scheduled well, Frankland-1 in
WA-286-P, prior to the expiry of the drilling rig contract. As a result the
ENSCO 67 rig was released on 11 August and the 2005 Perth Basin Offshore
Drilling Programme concluded. The remaining wells in the 2006 programme,
Frankland-1 and Perserverance-1 in WA-325-P, have been deferred to 2007, subject
to securing a suitable rig.
3.2 Wei 6-12 South Oil Field, Block 22/12, Beibu Gulf, Offshore China
(ROC: 40% & Operator)
Appraisal of the Wei 6-12S-1 oil discovery continued during the Quarter with the
drilling of two side-track wells:
* the first sidetrack well, Wei 6-12S-1Sa, reached a Total Depth of 2,530
mBRT on 4 July with initial analysis indicating that the five cores (78
metres) cut displayed similar reservoir quality to the discovery well;
* the second sidetrack well, Wei 6-12S-1Sb, reached a Total Depth of 2,950
mBRT on 26 July. The well was designed to intersect all the reservoir
intervals in the upper part of the discovery well in the oil zone, downdip
from that well. Preliminary appraisal results are encouraging, confirming
oil in the expected target horizons.
On 22 September, government authorities in China extended the term of the
Production Sharing Contract for Block 22/12, for a further two years with a two
well drilling commitment to 30 September 2008.
3.3 Mauritania (ROC: 2.0 - 5.0%)
The 2006 Mauritanian Offshore Drilling Programme commenced on 21 July with the
Atwood Hunter rig drilling the Woodside-operated Colin-1 exploration well in PSC
Area A. The well was plugged and abandoned without encountering any significant
hydrocarbons. On 13 August, the rig commenced drilling the Dana-operated
exploration well, Flamant-1 in Block 8 which was also plugged and abandoned
without encountering any significant hydrocarbons. See Section 6: Post Quarter
Events
3.4 Equatorial Guinea (ROC: 18.75% & Technical Manager)
The drilling of the Aleta prospect in Blocks H15 & H16, offshore Rio Muni Basin
continues to be dependent on contracting a suitable rig. Discussions with the
potential rig contractor suggest that the well may be drilled in 1H 2007.
3.5 Angola (ROC: 60% & Operator)
The 2006 2D and 3D seismic programme commenced on 2 July in the onshore Cabinda
South Block. The 254 sq km 3D component was completed on 20 September. At
Quarter-end approximately 24% of the 217 km 2D component was completed. See
Section 6: Post Quarter Events
On 7 September, a Letter of Intent was signed with regard to a rig contract for
the multi-well exploration drilling programme expected to commence between March
and May 2007. See Section 6: Post Quarter Events
4. CORPORATE
On 8 August, ROC completed its acquisition of a 24.5% operated interest in the
Zhao Dong Block, Bohai Bay, offshore China for US$260 million/$354 million plus
working capital.
On 27 September, ROC paid CAD$1.8 million to terminate a 3% Net Profit Interest
applicable to production from the Blane Oil Field and Enoch Oil and Gas Field.
On 27 September, ROC exercised its option to acquire an additional 3% from Dana
Petroleum (E&P) Limited in Block 8, offshore Mauritania. The acquisition of the
3% interest which would take ROC's total equity in Block 8 to 5%, is subject to
normal government and joint venture approvals.
5. FINANCIAL
At Quarter-end ROC had approximately $49.3 million in cash and debt of $387.7
million.
To fund the Zhao Dong purchase, the Company established a 12-month loan facility
for US$275 million and a working capital facility for US$30 million with the
Commonwealth Bank of Australia. At Quarter-end US$18 million was undrawn on the
working capital facility.
5.1 Production
+----------------------------------+-------------+-------------+-------------+
| | 3Q 2006 | 2Q 2006 | Change |
| | BBLS | BBLS | % |
+----------------------------------+-------------+-------------+-------------+
|Australia - Cliff Head | 321,721| 126,409| 155 |
+----------------------------------+-------------+-------------+-------------+
|China - Zhao Dong C & D Fields | 410,225| -| N/A |
+----------------------------------+-------------+-------------+-------------+
|Mauritania - Chinguetti | 92,687| 123,055| (25) |
+----------------------------------+-------------+-------------+-------------+
|Other | 406| 643| (37) |
+----------------------------------+-------------+-------------+-------------+
|Total Production | 825,039| 250,107| 230 |
+----------------------------------+-------------+-------------+-------------+
Notes: 1. Production for Zhao Dong C & D Fields is reported for August and
September only. This is because, despite ROC acquiring the asset effective 1
July 2006, and having economic ownership from that date, the acquisition was not
completed until early August.
2. Production quoted is ROC's working interest share of total production.
5.2 Sales
+----------------------------+-----------------------+-------------------------+
| | 3Q 2006 | 2Q 2006 |
+----------------------------+-----------+-----------+-----------+-------------+
| | BBLS | $'000 | BBLS | $'000 |
+----------------------------+-----------+-----------+-----------+-------------+
|Australia - Cliff Head | 320,604| 28,789| 126,409| 11,397|
+----------------------------+-----------+-----------+-----------+-------------+
|China - Zhao Dong C & D | 405,036| 29,334| -| -|
|Fields | | | | |
+----------------------------+-----------+-----------+-----------+-------------+
|Mauritania - Chinguetti | 62,740| 5,268| 62,093| 5,261|
+----------------------------+-----------+-----------+-----------+-------------+
|Other | 369| 34| 1,052| 94|
+----------------------------+-----------+-----------+-----------+-------------+
|Total Sales | 788,749| 63,425| 189,554| 16,752|
+----------------------------+-----------+-----------+-----------+-------------+
5.3 Expenditure
+----------------------------------+--------------+--------------+
| | 3Q 2006 | 2Q 2006 |
| | $'000 | $'000 |
+----------------------------------+--------------+--------------+
|Exploration | | |
+----------------------------------+--------------+--------------+
|Angola | 14,882| 7,056|
+----------------------------------+--------------+--------------+
|China | 4,306| 9,543|
+----------------------------------+--------------+--------------+
|Mauritania | 4,643| 485|
+----------------------------------+--------------+--------------+
|Australia | 1,863| 4,201|
+----------------------------------+--------------+--------------+
|UK | 694| 4,284|
+----------------------------------+--------------+--------------+
|Equatorial Guinea | 51| 124|
+----------------------------------+--------------+--------------+
|Other | 558| 763|
+----------------------------------+--------------+--------------+
|Total Exploration | 26,997| 26,456|
+----------------------------------+--------------+--------------+
+----------------------------------+--------------+--------------+
|Development | | |
+----------------------------------+--------------+--------------+
|Cliff Head | 9,926| 17,173|
+----------------------------------+--------------+--------------+
|Zhao Dong C & D Fields | 4,155| -|
+----------------------------------+--------------+--------------+
|Blane | 13,723| 12,689|
+----------------------------------+--------------+--------------+
|Enoch | 5,239| 1,939|
+----------------------------------+--------------+--------------+
|Chinguetti | 545| (312)|
+----------------------------------+--------------+--------------+
|Total Development | 33,588| 31,489|
+----------------------------------+--------------+--------------+
| | | |
+----------------------------------+--------------+--------------+
|Total Exploration & Development | 60,585| 57,945|
+----------------------------------+--------------+--------------+
5.4 Hedging
In conjunction with closing the Zhao Dong acquisition and in addition to
previous oil price hedging at 30 June, further Brent oil price swaps of 2.327
MMBO were executed for the period 1 July 2008 to 30 June 2011 at a weighted
average Brent oil price of US$72.80/BBL. At Quarter-end, ROC's hedging exposure
for the period through to 30 June 2011 was:
+------------------------+---------+----------+----------+----------+----------+
| | BBLS | Weighted | BBLS | Weighted |TOTAL BBLS|
| | | Average | | Average | |
| | | Brent | | Brent | |
| | |Price USD/| | Price | |
| | | BBL | | USD/BBL | |
+------------------------+---------+----------+----------+----------+----------+
|Oil Price Swaps | 576,000| 49.58| 3,226,956| 72.47| 3,802,956|
|October 2006 - June 2011| | | | | |
| | | | | | |
+------------------------+---------+----------+----------+----------+----------+
|Oil Price Puts | 420,000| 50.00| 240,000| 67.00| 660,000|
|October 2006 - December | | | | | |
|2007 | | | | | |
+------------------------+---------+----------+----------+----------+----------+
6. POST QUARTER EVENTS
6.1 On 10 October, ROC reported that recent gross oil production rates from the
Cliff Head Oil Field, Perth Basin, offshore Western Australia (ROC: 37.5% &
Operator) ranged between 11,000 BOPD and 12,500 BOPD with a high of 15,800 BOPD.
This variability reflects intermittent downstream constraints relating to
trucking capacity which have been addressed. On 15 October, production was
temporarily shut-in due to electrical problems at the offshore platform.
Production resumed on 21 October.
6.2 Production testing of the single development well at the Enoch Oil and Gas
Field, North Sea (ROC: 12.0%) was in progress as of 18 October. The well
recorded several flow rates on various choke sizes and results appear to be
generally in line with expectations.
6.3 On 19 October, ROC signed a two-year contract with Simmons Drilling Overseas
Limited for the Simmons 80 Rig to commence drilling in the onshore Cabinda South
Block between March and May 2007. The 1,200 horsepower rig which is currently
being upgraded in Dubai is capable of drilling to 4,000 metres in conventional
holes sizes.
6.4 On 18 October the 217 km 2D seismic programme was completed in the Cabinda
South Block, onshore Angola marking the end of an 18-month seismic acquisition
phase which acquired a total of 416 sq km of 3D and 722 km of 2D in two separate
surveys.
6.5 The Dana-operated Aigrette-1 exploration well in Block 7, offshore
Mauritania (ROC: 4.950%) commenced drilling on 7 October and as at 23 October
was at a depth of 2,809 metres with the current operation drilling ahead to a
planned Total Depth of 4,925 metres.
7. FURTHER INFORMATION
For further information please contact ROC's Chief Executive Officer, Dr John
Doran on:
Phone: (02) 8356 2000 Email: jdoran@rocoil.com.au
Facsimile: (02) 9380 2066 Web Site: www.rocoil.com.au
Address: Level 14, 1 Market Street, Sydney, NSW 2000, Australia.
Dr Kevin Hird
General Manager Business Development
Tel: +44 (0)207 586 7935
Fax: +44 (0)207 722 3919
Email: khird@rocoil.com.au
Nick Lambert
Bell Pottinger Corporate & Financial
Tel: +44 (0)207 861 3232
--------------------------
(1) Includes production from Zhao Dong C & D Fields from 1 July 2006
(2) Production from Zhao Dong C & D Fields for August and September only. This
is because, despite ROC acquiring the asset effective 1 July 2006, and having
economic ownership from that date, the acquisition was not completed until early
August.
(3) Production from Zhao Dong C & D Fields is reported for August and September
only. This is because, despite ROC acquiring the asset effective 1 July 2006,
and having economic ownership from that date, the acquisition was not completed
until early August.
For a complete copy of this report please see ROC's website:
http://www.rocoil.com.au/Public/Announcement/2006/Report_for_Quarter_Ended_30_September_2006.aspx
This information is provided by RNS
The company news service from the London Stock Exchange
END
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